Ministers have made tackling hospital infections and hitting waiting targets as key priorities for the coming year.
The NHS is facing a challenge waiting time target
It comes as hospitals face two high profile targets in 2008 - halving MRSA rates and ensuring patients are treated within 18 weeks.
Improving patient experience, cutting inequalities and planning for pandemic flu were also highlighted as key areas.
Local health bosses will also be given a greater proportion of NHS funds now the problems with deficits have eased.
The MRSA target is perhaps the most difficult for the health service.
In 2004, the then health secretary John Reid said infection rates should be halved by April 2008.
Latest trends show MRSA is falling - but they are only likely to have been reduced by a third.
Hospitals are fairing better on waiting times - with most specialities on course to hit the 18-week target for GP referral to treatment.
The 5.5% rise in primary care trust allocations to £74.2bn for 2008-9 is above the 4% rise in the overall NHS budget.
It means a greater proportion of funds will be directed to the front-line after cash was held back in recent years to stockpile reserves to combat deficits.
Health Secretary Alan Johnson said: "Local PCTs now control more of the NHS budget than ever before, giving organisations the freedom and flexibility to spend according to the needs of local people."
And NHS chief executive David Nicholson added the priorities set a "truly ambitious programme".
Gill Morgan, chief executive of the NHS Confederation, which represents health managers, said: "The national priorities in the operating framework reflect what matters to patients and the public and NHS management is clear it must deliver on this agenda."
But Liberal Democrat health spokesman Norman Lamb said: "Creating new priorities will amount to little without real action on the causes of these problems.
"The government is set to miss its MRSA targets, while health inequalities have shamefully widened under Labour.
"Hospital infections cannot be effectively tackled unless bed occupancy levels are reduced, while health inequalities require urgent action to deal with the escalating public health crisis."