NHS leaders are set to face both a 'carrot and stick' in a new performance drive.

Failing leaders will have annual pay rises docked, while top performers will receive bonuses of up to 10 per cent.

The new measures are an attempt to improve NHS performance and cut waiting lists.

The government is looking to learn from some some of the most effective businesses in the country to recruit top talent to struggling trusts. Leadership vacancies in badly performing areas will come with a temporary pay increase of 15 per cent.

Pay bands for senior managers will also be refreshed to attract and retain effective leaders within the NHS.

Health and social care secretary Wes Streeting said: "Some of the best businesses and most effective organisations across Britain and the world reward their top talent so they can keep on delivering. There’s no reason why we shouldn’t do the same in our NHS.

"We will reward leaders who are cutting waiting times and making sure patients get better services. But bonuses and pay rises will be a reward and not a right - because I’m determined that every penny we invest through our Plan for Change is money well spent.

"Our carrot and stick reforms will boost productivity, tackle underperformance and drive-up standards for patients."

Sir Jim Mackey, NHS England chief executive, said: "If we are to consistently reach the standards of care the public rightly expect, it is clear that we need to reward those who are delivering for patients.

"An important element of driving improvements must be strengthening the link between pay and operational performance at a very senior level – this happens in almost every other sector and there is no reason for the NHS to shy away from it, particularly when we rely on money that comes directly from taxpayers’ pockets.

"We will be working together with local leaders to improve transparency and ensure progress is recognised, while offering sufficient flexibility to attract talented candidates to the most challenging roles and organisations."