The Department of Health has improved the quality of its leadership over the past two years, a Cabinet Office review has found.

The capability review also concluded the DH must address concerns that it lacks a coherent vision.

The review, published two years after a critical report in 2007, praises the DH’s improved leadership and staff morale.

“Good work” is under way to prepare the healthcare system for the tighter fiscal environment after 2011, and communications to NHS chief executives on this have been well received, the review says.

But it also highlights concerns that the pace of DH achievements is “too reliant on certain individuals and could be lost in the face of significant future challenges”.

Its mission statement - “better health and wellbeing, better care and better value” - is not consistently understood by staff and outside parties, who feel there is “no coherent view across the department’s range of strategies”, meaning they are “left to form one for themselves”.

The review calls on the DH to determine how it will respond to the tighter financial climate.

It says: “In a tighter fiscal environment, the department will face tough strategic choices around what future outcomes should be prioritised across its full remit.

“[The] DH should determine what it needs to make these strategic choices in line with its vision, on which it can advise ministers and inform the next comprehensive spending review.”

The DH is given the highest possible rating - strong - for the categories of “plan, resource and prioritise” and “manage performance”.

It is deemed well placed to build common purpose and take responsibility for leading delivery and change.

But six out of the 10 assessment areas are classed as needing further development. These included the ability to set direction, build capability, focus on outcomes, base choices on evidence, develop clear roles, responsibilities and delivery models and ignite pace, passion and drive.

DH permanent secretary Hugh Taylor said: “I am delighted to see that, as a result of the capability re-review, the DH is now placed among some of the best departments in Whitehall.

“The department has improved on delivery, leadership and strategic capability. It has firmer control over its own and NHS finances, it is delivering on targets; and public satisfaction with the NHS is at a record high of 74 per cent.

“We now need to sustain these improvements in the difficult financial climate ahead. To do this, we are putting in place a new development programme so that we can continue to improve as an organisation.”