This was the message delivered by the secretary of state for Wales, Paul Murphy, in a speech to the Wales TUC at Llandudno today.
Mr Murphy said: 'In health we have increased funding substantially, but activity levels have grown at a much slower pace.
'I know that some of that gap is because money has to be invested in long projects such as staff training, but that is not a sufficient answer.
'And that is why we need reform as well as investment.
'And for those who say that reform is some sort of code word for private finance, let me say this.
'Where working with the private sector will bring in more investment and increase capacity, of course we will examine it. We have made that clear in the United Kingdom government and it has been made clear by my colleagues in the assembly also.
'Nobody in Westminster is forcing the assembly to use PFI or PPP schemes. When they are used it is because they offer the best value to taxpayers and the public.
'But that is only one aspect of reform. In something like the NHS the drive for reform will not come primarily from the private sector. How can it? The private sector is tiny in comparison with the NHS and - as I think the funding announced in the budget shows - that is not going to change.
'Far more important for reform are issues such as empowering nurses to take more clinical decisions, about extending the outreach of the NHS through NHS Direct and similar initiatives and about ensuring shorter waiting times. In parliament we are legislating for a new reform structure for the Welsh NHS.
'If investment fails to deliver the goods - and it will fail unless we reform - the arguments about the need to roll back the state and dismantle the public services will be once again triumphant.
'There will be no second chance this time. We will have been judged as failures and that judgement will fall on our children - they will be the ones who pay the long-term price for any lack of will on our part.
'Let me put it bluntly. The choice is between a reformed health service or no health service. It's as simple as that.
'If we fail to deliver the world class public services we have promised then the price we pay will be a hard one. Devolution will offer no protection from a government determined to cut public spending.
'Yes, we can deliver it in our own Welsh way. But the Welsh way has to lead to better services that deliver for everyone in Wales.'
Earlier Mr Murphy set out the government's achievements in Wales after five years in power.
He said: 'This day - five years ago - was the last day of Tory rule in the 20th century.
'Since then we have achieved a great deal:
- Over 30,000 more people are in work in Wales
- We have announced record investment in our public services
- We have given working people their first ever rights to join a union and have that union recognised
- We have given employees new rights to information about their employers' plans
- We have given employees involved in an industrial dispute their first ever rights to employment protection - as well as increasing employment protection for employees generally
'And, of course, there is plenty more - I haven't even mentioned the minimum wage that is benefiting 80,000 people in Wales and devolution which has given us an opportunity to decide upon Welsh domestic matters here in Wales.
'Or that unemployment is at a 27 year low and thousands of long-term unemployed people in Wales have been given hope and opportunity through the new deal.
'Or the achievement of Objective 1 status for West Wales and the Valleys, coupled with the necessary finance from the UK government to make full use of its potential.
'Or the lowest interest rates for a generation.
'Or a budget that is taking 6,000 small companies in Wales out of the corporation tax net, or - just as the Wales TUC requested - providing tax credits for research and development