The BBC's James Westhead: "It may save the NHS money"

The government says that the National Institute for Clinical Excellence (NICE) will help end "postcode prescribing", in which a treatment is available in one area but not in another.

NICE will produce guidelines on which treatments should or should not be available on the NHS, and has been assigned 10 key areas to look at.

Click here for details of areas to be studied

Among these are the use of beta interferon, the treatment for multiple sclerosis denied to many sufferers, taxol, an expensive drug used for ovarian cancer, and a new drug to treat 'flu, Relenza, which will be available this winter and could potentially cost the NHS millions.

But it will also be scrutinising the effectiveness of the smear testing programme in England and Wales.

Secretary of State for Health Frank Dobson says NICE will improve patient care by making sure the best treatments are available across England and Wales.

Frank Dobson: 'good practice'

And the new body will make sure that old, outdated treatments, or those which modern medicine has found simply do not work, will not be still available in NHS hospitals.

In that vein, NICE has been told to question whether wisdom teeth should be routinely taken out by dentists, as there is some evidence that it is not beneficial in all cases.

Best methods for back pain

Mr Dobson also wants NICE to work out which is the best way of treating back pain, which costs the economy billions every year.

NICE will begin looking at the key areas in the autumn, and will start examining even more clinical areas and drugs next year.

But there is no place on the schedule so far for any scrutiny of the cost-effectiveness of impotence treatments, which the government decided to restrict earlier this year.

Mr Dobson said: "By identifying which new developments most improve patient care, NICE will help spread good practice and new treatments quickly across the NHS.

"It will help protect patients from out-dated and inefficient treatment and ensure that the NHS gets the best possible value for money."

Get-out clause

However, even though NICE can recommend that an expensive new drug should be used in the NHS, Mr Dobson can still choose to place restrictions on its use or rule it out entirely.

NICE was launched on 1 April but is only now getting up and running. It is expected to set out 10 to 15 sets of guidelines a year on best treatments and appraise some 30 to 50 drugs and medicines for cost effectiveness and clinical efficiency.

Dr Vivienne Nathanson: 'funding needed'

NICE is made up of a team of 12 professionals, chaired by Sir Michael Rawlins, professor of clinical pharmacology at Newcastle University.

The British Medical Association's Head of Science, Ethics & Health Policy, Dr Vivienne Nathanson welcomed the announcement.

But she added: "It is vital that the guidelines are backed up with adequate funding.