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Last Updated: Wednesday, 30 May 2007, 14:43 GMT 15:43 UK
In full: George Osborne speech
The full text of a speech given by shadow chancellor George Osborne.

Thank you for inviting me to speak today. Policy Exchange has been a wellspring of new ideas throughout this decade and it is ideas that I want to talk about today.

Too often, in the day to day bustle of politics, the importance of ideas is underplayed.

Of course personality and character are important.

But across the ages, politics has been driven by those who combine character with compelling ideas that equip us for the challenges of their times.

And it is in leadership contests that character and ideas come together.

That is why they tell you so much about a political party.

Take the Conservative leadership contest two years ago.

I was involved as the chair of the Cameron campaign.

It was clear from the start the question that Conservatives were asking: how, after three election defeats, are we going to change to win?

And by the time the Party Conference was over it was clear what direction they had chosen: a move into the political mainstream; a move that would involve ditching some of the lazy arguments that had emerged in opposition; a move that included accepting we couldn't turn the clock back.

This wasn't an easy decision for the party to make - but it was the right one.

It has provided the springboard for our success since then, most recently in the local elections earlier this month.

Contrast that with the leadership election now taking place in the Labour Party.

There is only one candidate for the top job and almost three weeks after he launched his campaign he has all but disappeared from view.

We were promised a set of speeches mapping out the Chancellor's personal political philosophy.

Instead we have had a dribble of reheated, bite-size policy announcements and even that dribble has now dried up.

There is no new compelling vision of government; no new store of ideas.

Check out the Brown campaign website. The latest blog is a week old. The last video was uploaded over a fortnight ago.

He offers no change - nothing to take the country forward - just a retreat into the dogma of the past.

The best the supporters can say is that - autocue screens apart - the chancellor has not made any clunking mistakes.

That's hardly a ringing endorsement.

And so we have to look to the deputy leadership contest to take the pulse of the governing party.

If you watched yesterday's Newsnight hustings then one thing is abundantly clear: we are seeing Labour lurch to left and abandon the centre ground.

I am not talking about John Cruddas.

You would expect him to demand higher taxes and more union power.

I am talking about the members of the Cabinet and frontbench.

Listen to Hilary Benn telling Labour to be 'unapologetic about our socialist values'.

Or Harriet Harman attacking what she calls 'excessive ridiculous' City bonuses.

Then there's Peter Hain arguing that 'we must be clear about the limits of reform' in public services and even Hazel Blears telling us we need 'more public ownership'.

Alan Johnson, the front runner, is campaigning on a platform of more union power, an end to successful private equity and a limit on the number of new city academies.

This, remember, is the education secretary.

Labour is retreating into its left wing comfort zone - and the chancellor has said nothing in public to distance himself from it.

That is not leadership.

Were the rhetoric of the Labour hustings translated into the reality of government policy, our financial services industry would be crippled and our labour market would become more uncompetitive.

The prospect of genuine public services reform would also be abandoned - and it is the emerging battle over that reform I want to focus on today.

For all the legitimate charges levelled against the government on public services - the chronic waste of money, the demoralisation of staff, the incompetence of junior doctor training appointments and the NHS computer, the growing truancy problem in schools - there are things that the current Prime Minister and the Conservative Party agree on about the nature of public services reform.

First, we agree that in large part public services need to be publicly funded out of general taxation.

The British public are rightly attached to taxpayer-funded health care and education that is free at the point of use.

Most Conservatives have always understood this.

As Nigel Lawson put it: the NHS is the closest thing the British people have to a national religion.

That is why David Cameron has made it clear from the start that we are having no truck with ideas for some alternative funding mechanism like social insurance.

Nor are we looking to help fund escape routes from public services for the few who can afford it, which is why we have moved away from the idea of the patients' passport.

The goal of the Conservative Party is to improve our public services for all.

The second thing both ourselves and the current Prime Minister would agree on is that public services need to be well funded.

Leave on one side the moral argument for education.

In a global economy where knowledge is at a premium, investing in education makes good economic sense.

And with an ageing population, good health care becomes even more important.

That is why as shadow chancellor I have pledged to match three years plans for current and capital education spending set out in the recent Budget.

It is plainly ridiculous to ask us to set out our health spending plans for 2009 or 2010 - as the chancellor regularly does - when he has not even set out his plans for 2008.

We will set out our NHS spending plans once we see the baseline the present government will leave to us; but be in no doubt that we will make sure that the NHS receives the funding it needs.

The third thing that the Conservative Party and the current prime minister agree on is more controversial: we both believe in user choice as a powerful tool for improving public services.

Of course, for the majority of his time in power the prime minister presided over the greatest centralisation of power in our public services since the Attlee government.

And Blair's idea of choice is still one handed down from on high by central government through bureaucratic target-driven initiatives like 'Choose and Book'.

That is why his policies have often failed to deliver real power to the consumer.

So while we agree on the importance of 'choice' as a driver of reform, we disagree on the methods of bringing that choice about.

The fourth and final element of public service reform which the Conservatives and the current prime minister agree on is also controversial: we both agree about the need for a diversity of provision.

Choice is only truly meaningful when it sits alongside contestability: the ability to contest, or challenge, poor performance by turning to an alternative that is able to deliver the service more effectively.

That cannot happen in monopolistic and monolithic public services.

By the time Tony Blair understood this, his government had already done much to destroy diversity in public services.

Grant maintained schools had been abolished in an act of educational madness.

GP fund-holding went the same way.

You now hear the most Blairite of the education ministers privately berating Conservatives for not making every school a grant maintained school before Labour could get in to dismantle the system.

So as the prime minister leaves office, there is agreement between him and ourselves on the essentials of the way forward - if not on the methods of achieving it.

We both agree that the country needs taxpayer funded public services that are free at the point of access, and which are exposed to consumer choice.

And we also both agree that this choice should include, with certain proscriptions, the ability to receive that service from an alternative provider.

While Tony Blair believes that this is best driven through by central diktat and rigid targets, in the teeth of opposition from the public service professionals, our approach will be different.

We will work with doctors, nurses, teachers and other professionals because we recognise that they want to be able to respond to the individual needs and choices of their patients and pupils, but central targets and top-down control are preventing them from doing so.

The goal is what Oliver Letwin recently described as a 'framework theory of the state' - or to translate, that the state offers a framework in which things like education and healthcare are paid for by the taxpayer but not always delivered by the state itself.

However, this growing consensus between the current prime minister and the Conservative Party does not appear to include the next Prime Minister.

And therein lies the political battle ahead.

For Gordon Brown rejects the very idea that there should be alternative providers of taxpayer funded public services.

He said so most clearly in a speech to the Social Market Foundation in 2003: "The very same reasoning which leads us to the case for the public funding of health care on efficiency as well as equity grounds also leads us to the case for public provision of healthcare."

That is a model of healthcare that precludes the independently provided NHS Treatment centre.

Some claim the chancellor's views have changed.

They should have watched his interview on the Andrew Marr programme two weeks ago.

He deployed exactly the same arguments as he did in 2003 to assert that 'healthcare is quite different from any other activity in the economy' and that 'you've got to organise it in such a way that you recognise that'.

In the last few weeks the people around Gordon Brown have started making the case against choice and diversity.

It is not just Peter Hain who now talks about the 'limits of reform'.

Listen to Ed Miliband who recently called for an end to the "obsession with choice".

Or Liam Byrne, who said last week that choice was a 'fetish' and that in a Brown government "there will be a little less said about choice in public services - instead there will be more emphasis on control".

Not only has choice become a bad word in the Labour Party again, but the forces against greater diversity of provision are marshalling too.

The chair of the Chancellor's Council of Economic Advisers, Dan Corry believes that "even if there is a view that the private sector could do things a bit better, we do not want them".

Ed Balls says that he sees no desire for schools to set themselves up as independent trusts.

Trust schools abandoned.

Diversity rejected.

Choice - the very heart of reform - now dismissed as a 'fetish' and an 'obsession' by those closest to the next Prime Minister.

The roadblocks to reform are being put into place.

Of course, that is not how the new prime minister will put it.

Let me make a prediction.

We will be told that instead of 'choice' what the public wants is 'voice'.

The public want a say in how their child's school is run, will go the argument, not a choice between schools.

Patients want a place on their local hospital board, we will be told, not a choice between hospitals.

So we will hear a great deal about citizen juries, tenants forums, community councils that will give voice to a 'participatory citizenship'.

There is nothing wrong with these mechanisms.

But voice is only really meaningful with choice.

The power to walk away, to choose an alternative, is what makes your voice heard.

Gordon Brown's plans for public services are like giving citizens of East Germany a greater say in the colour of their Trabant.

It's not a real voice because it is not a real choice.

It is clear that, with the arrival of Gordon Brown, the Conservatives are the only party that wants to offer real choice.

What will the mechanism be? Not the top-down directives and targets which have been such a feature of the Blair years.

They have led to the depersonalisation of public services and the collapse in morale of those who work in them.

As the former senior Treasury official, Sir Steve Robson puts it: 'National targets get in the way of local decision making based on local needs'.

So instead of trying to deliver choice from on high, we should bring choice and power over budgets closer to patients and parents.

For there is nothing like control of money to give a person voice and choice.

And we have to give them different providers to choose between.

That is the challenge in education.

We want to give parents choice by giving them control over education funding.

We want to make sure the money follows the pupil more clearly than it does today.

But that is not enough.

As David Willetts has powerfully argued, we need to free up supply.

Otherwise choice becomes meaningless because there are no schools for parents to choose between.

So we want to move on from Labour's ongoing debate about how best to ration the current school places, and instead focus on how best to create more good school places.

Of course, we don't want schools choosing parents.

We want parents choosing schools.

So while the existing grammar schools are safe with us, we will not promote the opening of new ones.

Nor would it be fair to let better off parents take taxpayers' money and top it up with their own resources.

We believe each child, whatever their background, should have access to same opportunities in a state-funded system.

As we have made clear, our objective is to improve the performance of all Britain's state schools, and offer all children the opportunity to receive an excellent education.

Unfortunately, Labour have all but given up on this challenge.

Opening a new school is all but impossible.

Planned Admission Numbers limit good schools from expanding.

No school has been allowed to open, or expand, where places are available in nearby schools.

This rule has been enforced even where parents simply don't want to send their children to those schools that happen to have spare places.

As you'd expect, parents want better.

A poll by YouGov has shown that 76% of parents with children at state schools say that choice is very or fairly important to them.

Our approach is designed to give parents a genuine choice.

Let us reduce the many barriers to entry, so we can encourage educational groups, charities and other organisations to set up new schools.

More school providers will mean more places, more innovation and higher standards.

That is why we wholeheartedly support the academies programme.

Labour are in retreat on educational reform.

Alan Johnson said he wants to limit the number of Academies.

It is another example of the drift to the left and I think it is wrong.

We should be attaching superchargers to the academy programme, not holding it back.

We would place no limit on the number of Academies that could be created.

We want to help more people start new schools, acting as an engine for social mobility in every region of the country.

Not only will parents have a voice, but if they aren't happy with the school's performance, they can choose to take their child - and their funding - to a new school.

That is real voice with choice.

Healthcare is a little different.

Few doubt that a parent usually knows what is best for their child; but when it comes to health we don't always know what is the best treatment.

We need to make our choices with the advice of the professionals.

That's why the model in health is to devolve personal health budgets to the GP and the patient together.

Let them commission services.

For the independent sector can work for the NHS, not against it, if deployed correctly.

That means adhering to NHS standards, allowing NHS and independent providers to compete on a more level playing field, delivering value for money and above all providing care for NHS patients that is free at the point of use, based on need, not the ability to pay.

We know that patients respond positively when they're offered this kind of choice.

67% of patients in a London patient choice pilot, 75% in a Manchester pilot and 50% in a national cardiac pilot took up the option to choose their healthcare provider.

Analysis of the London pilot showed no correlation between wealth and the take-up of choice, which suggests that choice is not something that can be enjoyed by the middle classes alone.

Even those who don't exercise choice benefit from the added information choice brings.

So everyone stands to benefit.

With funding following the patient, innovation is increased and standards are improved.

Giving people choice through control over their own budget is an approach to public service reform that does not have to be limited to health and education.

Our shadow minister for disabled people, Jeremy Hunt, has been working with our policy groups to see how personal budgets could transform the delivery of disability benefits and the choices available to those who receive them.

The current system for providing disability services is based on the traditional assumption that the state knows best what's good for you.

Not only are disabled people forced to endure multiple intrusive assessments about their disability, but having been assessed, they have little or no say over what care they should receive.

Less than 1% of all social care funding currently goes directly to the individual.

Not surprisingly, many disabled people resent this.

As one respondent to a recent Mencap survey said: 'I thought we had the right to live our own lives as we want to live them but we have no autonomy.'

There is another approach.

Trust the people.

Under a pilot scheme taking place in some parts of the country, a single assessment results in a cash allocation that is given to the user or their family directly - in the form of a personalised budget.

This personalised budget provides a clear and transparent statement of exactly how much funding someone will receive.

Even more significantly, it gives individuals control over how they spend this money.

This is a significant step towards independent living and ensuring dignity for disabled people.

Many people welcome the principle of choice, but are frankly sceptical that it will ever be given to them.

These pilots show what can be done.

Not surprisingly they have been extremely popular amongst the disabled.

97% of disabled people involved in the pilot schemes reported that they were quite or very happy with the newfound control they had over their own lives.

Learning from the lessons they teach us, we will be announcing our plans shortly.

As David Cameron has set out, putting these budgets in the hands of disabled people will lead to real personalisation, as new providers and new forms of provision emerge in response to their needs.

Each public service is different.

Each person who uses that service is different too.

How can the gentleman in Whitehall know what is best for them? How can personalisation of public services mean anything if you take the 'personal' out of them? Yet that is the route Gordon Brown appears to be about to embark on.

Public services that are only provided by the state.

Public services that treat choice as a 'fetish' and an 'obsession'.

It is a retreat into the past.

It condemns our public services and those who work in them to be shut out from the forces shaping our modern world.

There is an alternative.

Our out-going prime minister saw the outlines of it, but his party and his own centralising instincts prevented him from achieving it.

So the challenge of improving our public services passes to the Conservatives.

Parents choosing the best schools for their children and driving forward the academy programme.

Health bureaucracy swept away as commissioning power is devolved to GPs and their patients.

Disabled people empowered to make decisions about their own lives.

These things become possible when voice is harnessed to choice, and when power is given back to the people.

These things are achieved when we stay in the mainstream of the political debate.

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