There is one aspect of competition the Department of Health has yet to grasp - the competition for management talent.

The rules controlling pay for very senior managers - chief executives and those who report to them - in primary care trusts, ambulance trusts and strategic health authorities are beginning to collapse.

As HSJ reveals this week, they are routinely bent in a bid to hold on to the best performers. Manipulation of bonuses and job descriptions are just two of the wheezes employed.

The centrality of leadership to service quality is now understood throughout the health service; Lord Darzi's next stage review is peppered with references to it, and NHS chief executive David Nicholson is establishing a leadership council.

But although the DH talks a good game on leadership, it is stifling its growth by imposing irrational constraints on top managers' pay. Trusts have no choice but to find ways round these restrictions.

As the union Managers in Partnership has pointed out, world class commissioning is the most striking example of where pay restraint derails service quality. Managers in hospitals and PCTs admit in private that there is not enough management talent in PCTs to deliver the ambition of becoming truly world class. But the pay controls mean many top flight staff in the acute sector are discouraged from taking their expertise to where it is most needed.

Local government has unashamedly driven up senior pay. Fourteen years ago the first£100,000-plus chief executive was announced; nine years later the first£200,000 appointment was made. Rewarding executive talent has been integral to transforming the fortunes of cities such as Manchester, Birmingham and Sheffield.

Foundation trusts are following a similar pattern. First class board-level leadership is one of the defining qualities of hospitals such as Salford, University College London and Addenbrooke's, and they have the freedom to attract and reward the best. The salaries and bonuses at foundation trusts are still far less than their best people could earn in the private sector, but generous enough to keep talent in public service.

The rest of the NHS needs the same freedom. The Department of Health should take the advice of MiP and rip up its rule book.