Simon Stevens on the spending review's hidden shallows

You wait three months for the Brown government to make any substantive announcements on health and then - like the 159 bus - two come along at once.

Of this week's twin NHS pronunciamentos, the Darzi report probably ranks as more significant than the comprehensive spending review. This may seem counter-intuitive given that Lord Darzi's is an interim statement of intent, whereas the CSR is backed by hard cash.

But seasoned Kremlin watchers will point out there is usually less than meets the eye to a CSR, while the junior health minister's missive is the first time the new government has shown any leg on the extent of its commitment to seeing through the Blair health reforms.

Let's start with the CSR. Having been a participant in the last four of these exercises (in 1998, 2000, 2002 and 2004) I can reveal the sad truth: although these negotiations consume hundreds of person years of effort by some of the brightest civil servants in Whitehall, the effort is largely pointless for two reasons.

First, the departmental bids and ministerial negotiations have practically no impact on the outcome - when push comes to shove it is the prime minister and chancellor who make the decisions, and that's that.

Second, once funds are announced, there is then only the haziest of relationships between what a department's CSR bid said the money would be used for and what it is actually used for.

This disconnect between the CSR and on-the-ground reality has a number of explanations. One is that now public spending is set on a multi-year rather than annual basis, the ability of the Treasury to meddle midway through a spending period is greatly reduced.

The more important explanation for the plan-reality disjunction is that, as part of the negotiation charade, at Treasury insistence, spending departments have to include in their bids all kinds of assumptions that in practice they either lack the desire, or intrinsic ability or managerial competence, to bring about.

Two classic examples are the pay assumptions and efficiency targets embedded in the plans. So the Treasury is likely to be (privately?) budgeting the NHS on the basis of pay rises of no more than 2 per cent a year - whereas the Department of Health probably believes the pay review bodies will push for rises in the 2.3-3.5 per cent range.

Similarly, the Treasury is probably telling the DoH that big chunks of its bid should be met from cash-releasing efficiency savings (remember them?) of 2-3 per cent a year, whereas the DoH will be counter-offering all sorts of hard-to-measure 'quality' improvements and 'implied' productivity gains from 'skill-mix' changes.

On top of that, there are four 'fudge' factors that often emerge from the small print.

• First, within the overall spending uplifts, the split between revenue and capital matters more than ever (now that it is hard to transfer from the latter to the former, it is the revenue growth number that is key).

• Second, look out for 'adjustments' to the current baseline from which the growth rate is measured.

• Third, beware of hidden cost pressures embedded in the DoH settlement arising from 'cross-cutting' financial commitments to other government departments. These often run to hundreds of millions of pounds of disguised resource transfer from health to education, culture, environment and so on.

• And fourth, pay attention to the local government spending settlement: if it is too low it puts pressure on adult social care, which in turn undermines NHS performance.

So while the headlines associated with the CSR are all well and good, the bigger question in the minds of most commentators is: how well will the resources be used? And lying behind this is a broader concern: is the new government still serious about seeing though the NHS reform programme that managers are two-thirds of the way to implementing?

That's where the Darzi report comes in, providing the first real insight into what Brownian motion on health will bring.

And there, once you strip away various layers of innovation councils, MRSA checks and some new health centres, are some fairly explicit instructions to NHS managers to drive the Blair reforms through.

His analysis starts with the view (probably shared by most managers) that 'the majority opinion is that the current set of reforms should be seen through to its conclusion', noting that there is 'little enthusiasm for doing something completely different'.

The report's nuanced analysis goes on to observe that 'patients lack clout'; that staff alienation is sometimes 'because greater power for patients is challenging old ways of doing things'; that new alternative providers are needed to cut inequalities and improve GP responsiveness; and that the NHS must 'make it easier for new entrants to start providing primary care on contract to the NHS as of right in under-doctored areas without a slow and bureaucratic procurement process'.

It also for the first time gives a green light to extending direct payments from social care to NHS services. It opens the door to an NHS constitution and it unambiguously directs NHS managers that the government says there must be 'extensive use within every strategic health authority of the new framework for procuring external support for commissioners'.

Commentators will be looking long and hard to see if those reform commitments are delivered. Any stalling or equivocation on the part of Mr Brown will be seized on by the press and his political opponents as proof that he is an obstacle to NHS reform. He clearly needs to prove them wrong.