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Individual Budget

An Individual Budget is a system for organizing individualized funding where the person is told, up-front, how much they are entitled to spend. It was innovation because previous forms of individualised funding (at least in the UK) were only calculated after a plan had been developed and costed. It is a needs-based approach to setting budgets, instead of a service-based approach.

Before the development of Individual Budgets resource allocations were implicit rather than explicit. Even when someone wanted to manage their individualized funding as a direct payment they would find that their budget could only be calculated on the basis of a care plan which would specify hours of support and salary levels.

The disadvantages of this service-based approach to budgeting were:

  • Professionals had to maintain control over the planning of care and support in order to ensure that the final package was affordable.
  • Rationing was carried out indirectly by trying to limit the kinds of services that could be purchased, this stripped out opportunities for innovation and encouraged institutional, backward-looking service delivery - it was easier to get funding for what was most prevalent, not what was most effective.
  • The obscurity of the eligibility process encouraged crises, the erosion of natural support from family and friends and the exaggeration of need - when people really need help, but feel uncertain about eligibility, then these strategies are the most rational.
  • Support is treated, not as a right, something which we are entitled to receive because of our citizenship. Instead support becomes a gift, which we are ‘lucky’ to get and for which we must be grateful.

On the other hand when people use Individual Budgets there seem to be several benefits:

  • People see their budget as an entitlement and this encourages increased self-confidence, creativity and improved outcomes.
  • People can integrate their paid and unpaid support confidently, not fearing that any unpaid support will be counted against them.
  • Systems ration resources directly and can do away with destructive forms of rationing though regulation, panels or fixing price elements (e.g. salary rates).
  • Systems can plan more coherently, on the basis of needs and outcomes, not just by promoting or protecting particular service models or organisations.
  • Services focus on their accountability to the person and are encouraged to innovate and improve responsiveness.

Of course these benefits depend upon intelligent and coherent application of the concept, not just using the name ‘Individual Budget’ in particular there have been examples of:

  • Individual Budgets being offered at an indicative level and then when people say how they want to spend their budget the budget has been pruned of all those elements of which the authority does not approve - this inevitably leads back to service-centred defensive planning and the gaming of the system.
  • Individual Budgets being treated as ‘public money’ and being monitored and tracked, at great expense, reinforcing the idea that some forms of expenditure are legitimate and some not and encouraging defensive behaviour.

Some of these problems of implementation are created by the inadequate legal and policy framework for Individual Budgets. It is not clear that Individual Budgets can be used as a coherent tool for promoting citizenship and improved outcomes unless there is a clear legal framework to underpin their application and the development of the necessary resource allocation systems that are required to make them work.

Note on terminology

In the UK the term Individual Budgets has been confused somewhat by the Individual Budget Pilot Programme which took over the concept of an Individual Budget from the In Control project and then redefined it to make its integration of diverse funding streams its defining property, and forcing In Control to relabel ‘Individual Budgets’ as ‘Personal Budgets’ in all their literature. Had the government been successful in integrating different forms of individualized funding in this way this additional defining criteria may have had some merit, but given the difficulties government found then this distinction become somewhat barren. The Centre for Welfare Reform therefore uses the original term, with its original meaning, while also demonstrate how funding integration could be made to work in practice.


The publisher is The Centre for Welfare Reform.

Individual Budget © Simon Duffy 2010.

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.