Sir Derek Wanless: Banker who headed NatWest and advised the government on the NHS

The banker Sir Derek Wanless was was the author of the seminal 2002 report on National Health Service funding which advocated the need for substantial investment. For this and other reports on health and social care he was rightly lauded. However, Wanless, the softly-spoken, intellectual Geordie, was eventually tarnished by his chosen profession.

Although as the youngest chief executive in NatWest's history he had presided over a wave of changes, including a more professional approach to management, his had was on the tiller when losses of £90m were unearthed, and proposed mergers with Abbey National and Legal & General came to naught. This forced the share price down and allowed Fred Goodwin's RBS to table a hostile takeover bid, which eventually prevailed. All this contributed to Wanless's removal in 1999.

A year later he was a non-executive director of Northern Rock, the building society-turned-bank, and head of the audit and risk committee at the time of its collapse, leaving it owing the Bank of England £24 billion after misjudgments in the derivatives market. Following an investigation by the Commons Treasury Select Committee Wanless, as one of the most experienced bankers on the Northern Rock board, was singled out for heavy criticism, accused of failing to ensure that the bank "remained liquid as well as solvent, to provide against the risks that it was taking and to act as an effective restraining force on the strategy of the executive members".

The report observed that he had "held all the levers" necessary to avert the disaster. Lord McFall, the head of the Treasury Select Committee, aligned Wanless's weaknesses at Northern Rock, with similar failings identified at NatWest under his stewardship. Wanless resigned in November 2007 with a reported £3m pay-off. In the banking crisis that followed, he would prove to be one of many within the banking sector who had grossly miscalculated the risks being undertaken.

Throughout a mixed banking career, Wanless had forged links with Labour Party figures. Commissioned five years earlier by the then Chancellor, Gordon Brown, Wanless had already produced his ground-breaking 2002 report, "Securing Our Future Health: Taking a Long-Term View," which advocated the case for significant and sustained investment in the NHS, the like of which had not been seen since the service was created in 1948. The fatal run on Northern Rock came days after he had completed an update to his report. One person who worked with him on that review described the him as "immensely decent, with a lot of integrity," adding, in an allusion to Goodwin, "He was no Fred the Shred."

Brown had sought the health report to justify the huge increases in NHS spending he was about to announce following Tony Blair's pledge toget spending up to the EU average.Subsequently, the NHS enjoyed huge funding increases under two Labour administrations.

The report's most telling calculation was that the UK had been spending insufficiently and inefficiently on healthcare; it underspent by a cumulative £220bn compared with the average over the previous 25 years, producing a gap in capital equipment and IT capability that has still not been closed.

In 2006, Wanless produced an equally damning report, "Securing Good Care for Older People" for the King's Fund, a health think-tank. It broke new ground in examining ways to fund social care that did not involve switching from the current means-tested system to an entirely tax-funded one. His conclusions injected life into a debate that led to last year's recommendations from the Dilnot Commission for a cap on lifetime contributions to social care costs. David Cameron and his ministers are still deciding what to do.

With, "Our Future Health Secured?" (2007) Wanless carried out a five-year review of his first NHS report. The new report offered the sort of critical assessment of the impact of Brown's NHS spending increases which the government itself had been reluctant to undertake.

Derek Wanless was born in 1947, the son of a storeman at a Tyneside cement works. A talented arithmetician, he won a scholarship to Newcastle's Royal Grammar School. He took a Saturday job at his local NatWest branch, which helped secure him a bank bursary to read mathematics at King's College, Cambridge, where he breezed to a First.

Graduating in 1970, he joinedthe bank, beginning work in Darlington. He was quickly identified as arising star and at 35 became the North East Area Director. After anotherregional directorship, in 1986, he moved to London as Director of PersonalBanking, during which time he headed the team that developed Switch, the UK debit card scheme – and approved the introduction of a series of ceramic pigs, Annabel, Maxwell, Woody, Lady Hilary and Sir Nathaniel Westminster – given to children each time they deposited £25 into their account for at least two years.

He was appointed Chief Executive, UK Financial Services in 1990 and in the aftermath of the 1987 Blue Arrow rights issue, which had been mishandled by County NatWest, the group's investment bank, he became Deputy Group Chief Executive in 1992. He oversaw the reorganising of NatWest into four divisions, UK, Commercial, Markets and Coutts. Wanless, however, wanted to close down much of the loss-making investment arm, but lost a board vote on the issue early in his tenure; instead, it continued to expand, buying a collection of boutique businesses – a poor decision, it proved. His last major corporate role was as chairman of Northumbrian Water from 2006-11.

Wanless, who died from pancreatic cancer served on numerous committees: he was President of the Chartered Institute of Bankers and Vice-Chairman of the Statistics Commission. In his free time, he enjoyed music, gardening and many sports, including supporting his boyhood football team, Newcastle United; he was also a high-level chess player.

Martin Childs

Derek Wanless, banker and public policy adviser: born Newcastle upon Tyne 29 September 1947; Kt 2005; married 1971 Vera West (one son, four daughters); died 22 May 2012.