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Politics & Economics of Personal Budgets

Author: Simon Duffy

Simon Duffy explores the political and economic implications of personal budgets. While there is an overwhelming moral case for personal control and freedom there are important issues to resolve both in designing an affordable system and defending such a system over time.

This is the first of a series of short reflections on my work in Finland at the beginning of 2016. I currently have the honour of working with the Finnish NGO, KVPS, as they try to persuade Finnish law-makers of the benefits of personal budgets. My role is to help share research and learning on personal budgets, not just from England and Scotland, but also from the 50 years of progress towards personal budgets from around the world.

Partly my role is to help people understand the benefits of personal budgets. This part is not too hard. Many different countries have implemented personal budgets in many different ways, and every system has improved outcomes and satisfaction. Sometimes a lot and sometimes a little; and there is still much to learn about how to make a system of personal budgets as good as possible.

Of course it should not surprise us that personal budgets work, for personal budgets are just a form of freedom and freedom works. When people with learning disabilities gain freedom they improve their lives, their family’s lives and they can become full and active citizens. Finns know better than most that freedom is worth fighting for and that once you achieve freedom you do not want to give it up. In the same way we find that once people start to use personal budgets they never want to give up the freedom to direct their own life or get the right support for themselves.

However, the international experience also tells us that even if personal budgets may always be better for people, they do not always work economically. Some programmes of personal budgets have even been closed down because they are seen as too expensive. For example, the Dutch recently had to radically cap their personal budget system and in England the first Independent Living Fund was closed to new claimants from 1992 because the Government had not expected so many people to want freedom.

Of course this does not mean that personal budgets are inefficient. Often the problem is that personal budgets are much more efficient, but the system has been set up to fail because it only spends ‘new money’. If personal budgets are not used to transform how the ‘old money’ in the ‘old system’ is being used then even their initial success will lead to eventual failure. People will queue up to get money from the new and improved system, but nobody will reduce spending in the old institutional system. 

So this then must be an important principle for Finland - to create a system of personal budgets that transforms how money from the old system is used and to shift it into the control of people.

A similar problem occurs if the funding is not controlled in the right way. Although it may seem good to leave funding uncontrolled, and to give whatever people whatever they ask for, this is impractical. In the end any system like this will fail because Governments always needs to control spending.

Government can control funding in two ways either by using bureaucratic rules or by managing fixed budgets. The bureaucratic solution is to create rules which try to limit spending. For instance, you can use rules to control eligibility for funding, the level of funding and how the funding is used. For instance, in Australia, at the moment, the NDIA (National Disability Insurance Agency) is trying to create a system of personal budgets that uses this first method. It is employing assessment workers, using a standardised assessment system, and setting funding by national rules. This is an ambitious project and it may work; but it is certainly made somewhat easier for Australians because they have agreed to pay extra taxes to pay for the new national system.

In England we used a different approach. Funding is delegated to the control of local authorities (municipalities) and they then set personal budgets for individuals. This is a managed system where the overall level of spending is controlled and where each local area gets its own pot of funding (although it can also add to that pot using local taxation). In this model there is no incentive for local areas to bid for extra funding from central Government. All the funding has already been committed and this makes the overall level of spending highly controlled.

Although I think the Australian system has many advantages it will be very challenging and expensive to develop a system like that and there are risks that the system will still be unaffordable. It may be better for Finland, at least to begin with, to try and create local systems where each communities gets a fair share of the available funding. You certainly do not want a system that allows for big differences in funding between communities, because this will often harm rural communities and harm smaller community organisations.

There are two other things necessary for an efficient system of personal budgets - openness and flexibility. By openness I mean that the system should not limit itself to just one method of managing funding. For instance, in the USA many systems rely on a new class of professionals, service brokers, to manage people’s personal budgets. This kind of professional control can ends up being very expensive and limits creativity. It is much better if the system is open so that people can manage their personal budgets in the way that suits them - managing it themselves or asking another person or organisation to manage it for them.

Finally, and most importantly, personal budgets need to be flexible. The huge economic advantage of personal budgets is that they allow people to make the best possible use of the available funding - with no restrictions. When people are allowed this freedom then they can use the budget to build on and strengthen their own real wealth - their own gifts and goals, their family, friends and connection, their community and their other assets. This is what economists Hagel and Seely Brown call ‘pull economics’. instead of Government ‘pushing’ money into services that they hope will add value people are empowered to use budgets to pull together resources into their own lives - guaranteeing better value [my thanks to John O’Brien for pointing out this model]:

Freedom is efficient - it allows people to be creative, to find local solutions and to meet the own needs in ways that are better. So - if designed right - a system of personal budgets will be much more efficient. This then make it very attractive to policy makers: better outcomes and higher efficiency.

But that is just the beginning and there are many other important things to think about.

First many people will be frightened of change. Increased power for people with learning disabilities may feel like less power for professionals. Professionals and organisations will need to change how they work and who they work for. This is never easy and it is natural for people to resist change. It is very important to help professionals to see that they can change and there will still be a positive role for them. In fact, they may find that using personal budgets makes their own work more rewarding.

However one extra reason to move to personal budgets in Finland is that this would bring to an end the dreadful era of tendering for services which has led to so many services being replaced by private sector organisations. In England many organisations are starting to realise that personal budgets are better because it means letting people with learning disabilities choose who provides support, instead of going through expensive and bureaucratic tendering exercises every few years.

The second big challenge created by personal budgets will be to change how we advocate for and defend the rights of people with learning disabilities. In England central Government has severely cut funding for social care. So far local government, NGOs and advocacy organisations have failed to stop these cuts.

In the past people fought for services and defended services. These services may have been good or bad, but they were easy to talk about: day centres, care homes, institutions, respite beds are simple things to advocate for even if they are not good things. It is easy to defend the visible, much harder to defend the invisible and personal budgets can seem invisible.

I think this means we must change how we advocate for people’s rights.

We must make sure people themselves are visible, so that they can explain why their budgets matter and they can show people by their presence in community what they can contribute. We must also try and create more unity between people, families and professionals (as the Australians achieved with their campaign Every Australian Counts). We must become better informed about the economics of the system so that we can make the invisible visible and challenge unfairness.

In England we are still very divided, different groups of disabled people are divided from each other and people, families and professionals are still very divided. This is lack of unity creates great weakness. This is why we recently created Learning Disability Alliance England and why we are now working to create a new umbrella organisation for England which puts people at the centre. This is not easy and the work will take several years.

Personal budgets, like freedom itself, is not an easy road. But once you are on the road of freedom you do not want to get off, even if you much face new challenges ahead. My hope is that on this shared journey towards greater freedom and stronger citizenship, Finland will learn from and go further than some of the countries upon whose experience you can build.

This article has been translated into Finnish and is available to read on KVPS's website here.


The publisher is The Centre for Welfare Reform.

Politics & Economics of Personal Budgets © Simon Duffy 2016.

All Rights Reserved. No part of this paper may be reproduced in any form without permission from the publisher except for the quotation of brief passages in reviews.