Here is the full text of Liberal Democrat leader Nick Clegg's speech on reforming public services:
Today is a crucial step in the creation of a new liberal manifesto for Britain.
Gordon Brown's bottling of the autumn election has handed us a tremendous opportunity - time to think, to discuss - and to listen to the British people.
So that our next manifesto genuinely offers the change Britain wants, and needs.
I want our manifesto to be bolder, clearer, and stronger, than ever before.
Our ambition must be to break apart forever the two-party system that has corroded British political life for too long.
Our ambition must be to make Britain the liberal country the British people want it to be.
So I'm starting today by setting out some ideas on our public services.
We should never advocate change for the sake of it. But neither should we just be defenders of the status quo, and under my leadership we will not be.
We are the only radical force in British politics.
We must be the champions of new ideas: new ideas that will make our public services fairer, better - more liberal.
As 2008 begins, we stand at a political crossroads.
Gordon Brown's government, barely six months old, already feels tired. More 10 year plans. More knee-jerk legislation. More command-and-control from a Government that really believes the Man from the Ministry knows best.
Tony Blair's reform agenda was deeply flawed - timid in parts, misguided in others. But under Brown - there is no reform agenda at all. He's quietly burying many of his predecessor's policies without spelling out what comes next.
David Cameron hopes to persuade us that his party is changing. But among the mixed messages and half-promises, it seems to me their instincts on the big issues haven't changed a bit.
They claim to care about poor families - but their only spending commitment is still a tax cut for the richest people in the country. They still want to use the tax system to make moral judgements about whether people should get married or not. They're still devoted to school selection. They're still focused on escape routes for the lucky few - not real opportunities for the many. So much for social mobility.
So there's a gap in politics for a strong, progressive, liberal voice. We must fill it. And make the public services agenda, our agenda.
But that means we need to challenge ourselves as much as we challenge others.
We have long advocated more money and more local control. With good reason too - ten years ago we were right to identify the crisis of underinvestment in our public services. We are right to condemn the pattern of over-centralisation in Britain.
But times change. The last ten years has shown that money isn't everything. The big questions now are these: how do we make Britain a fairer place without raising the overall tax burden? How do we promote real social mobility without relying on the discredited politics of Big Government? In seeking to make Britain fairer, we need to stop just asking "how much", and to start thinking hard about "how".
Marrying our proud traditions of economic and social liberalism, refusing to accept that one comes at the cost of the other. On that point, if not all others, the controversial Orange Book in 2004 was surely right.
This also means embracing a wider understanding of empowerment: not just of local authorities and politicians, desirable though that is, but of pupils, patients and parents too.
Individual power must be an everyday thing, not just reserved for the moment a vote is cast in the ballot box.
I want this to be a year of thinking daringly for the Liberal Democrats.
It speaks volumes about the Government's record that Britain is still the sick man of Europe when it comes to public services. We must look to Europe, to Canada, to New Zealand and beyond, to find ways of improving our schools, hospitals and transport.
Be under no illusion: if we do not shape the debate on the future of our public services in our own image, we will be squeezed to the sidelines of British politics and frozen out of the public debate.
There are two crucial dividing lines in British politics. First - the dividing line between progressives and conservatives - between those who believe in tackling inherited disadvantage and removing the scars of poverty, and those who don't. And second - the dividing line that splits liberals from the advocates of big government solutions - a dividing line that splits the progressive cause.
Our party will always be on the progressive side of the argument. No-one in this room believes it's acceptable that in Britain today your chances in life are more determined by your parents' income than anywhere else in the developed world. That a poor but bright child is now overtaken at school by a less bright but richer child by the age of seven. That if a child born in the poorest ward in Sheffield will die a full fourteen years earlier than a child born in the richest ward a few miles away.
The split within the progressive cause is not about whether we wish to overcome social injustice, but how we want to overcome it. Socialism believes that Government knows best. Liberalism believes people know best.
As John Stuart Mill warned in 1859: "A state which dwarfs its men...even for beneficial purposes, will find that with small men no great things can be accomplished."
Gordon Brown may have rejected the old nationalization which put the commanding heights of industry into government hands. But he still believes that command and control from the centre is the answer to the problems of public services and social justice. In place of nationalized industries we have nationalised education, nationalised health, and nationalised welfare: run by inflexible, centralised monopolies. It adds up to the nationalisation of our whole lives.
Just earlier this week, he was designing a "deep clean" initiative for every hospital in the country. What next? A central Government "lights out" policy telling all patients when to go to sleep?
By contrast, I stand for these simple principles:
The state must intervene to allocate money on a fair basis.
The state must intervene to guarantee equality of access in our schools and hospitals.
And the state must oversee core standards and entitlements.
But once those building blocks are in place, the state must back off and allow the genius of grassroots innovation, diversity and experimentation to take off in providing an array of top-class schools and hospitals. This alchemy of clear but circumscribed central direction combined with liberalised bottom-up provision is exactly what underpins the best health and school systems in Europe, and the world.
So we must challenge monopolies. Give real power and responsibility to people who use public services and people who work in them. And change those services so they're human in scale and personal in nature - bringing an end to the faceless bureaucracies that alienate and confuse us all.
Let me give you a sense of the direction I want us to take. The first step is to scale back the vast monster of Whitehall. Whitehall should get out of the business of the day to day running of public services in Britain. That strategy doesn't work.
We will draw up plans for radically shrinking the size of all our public service departments - to re-focus them on setting broad objectives for the local agencies and people who deliver on the ground.
This new approach does not, of course, mean replacing thousands of targets with none at all. On health and education, we need minimum standards. Like a charter of healthcare entitlements guaranteed for all. And minimum standards for the results schools achieve.
There is nothing in principle wrong with the Government target that schools should get at least 30% of pupils achieving 5 good GCSEs - except that it's much too low. What's wrong is when government dictates exactly what schools have to do to achieve it.
Government should step away from daily management, and instead make sure that public services are held clearly to account through effective, independent systems of inspection. We should consider merging the Qualifications and Curriculum Authority, OFSTED and parts of the Schools department into a new Educational Standards Authority, independent of ministers, accountable to Parliament - and active in promoting innovation and best practice.
I don't think it should be acceptable for any school to have over half of young people leaving without 5 good grades.
And it shouldn't be acceptable that we have such low standards for GCSE pass scores that the Government reports as "passes" some grades which we know are in reality of no value in today's labour market. What value exactly should an employer place on a G or F grade? You can get a G, in some cases, for a mark of about 20%. It's time to call a fail, a fail. And raise expectations by abolishing the two lowest pass grades for GCSEs.
Downscaling national government's role will also require a revitalisation of local government. Our country is absurdly centralised. More centralised than any other country in Europe except Malta, which has a population only slightly larger than Bristol.
Labour and Conservatives alike see our local government as a Whitehall delivery agency. Almost every big policy being delivered at present in our town halls has a "Made in Whitehall" stamp on its base.
No wonder so many people don't bother to vote in local elections.
This is just daft. You can't run thousands of schools from an office in Whitehall, and you can't innovate effectively on a national scale. More powers must be devolved from central government, and with them more power to raise and spend money.
I want our party to draw up a new Charter of Freedoms and Responsibilities for Local Government - a bold document that will spell the end to the centralised state. But with more freedom should come higher expectations. Where local government acts as a purchaser of services it must insist on high standards.
I know some people might want me to stop right there. But I didn't come into politics just to transfer power from a set of national politicians to a set of local politicians. That's a necessary first step, but it is not an end in itself.
We need to empower people who use and people who deliver public services every day. We know central government gets in the way of that happening. But let's not pretend that local government is blameless. Councils too can impose bureaucracy, insist on unnecessary control.
One of the outstanding qualities of the best Liberal Democrat councils is precisely our willingness to give power away directly to local people and communities. In Sheffield, in Islington, in Eastleigh, we are pioneering the idea of local area panels whilst Labour wants to keep power hoarded within the Town Hall. Having national or local government responsible for the day to day running of so many schools may not be the best way to get innovation, change and improvement.
There is no liberal reason why those who deliver public services must always work directly for the government, central or local - so long as we are absolutely clear about the principles under which those services operate.
Government funding mechanisms must work to deliver social justice. That is why I will make it an absolute priority to find the money for a Pupil Premium that will raise school funding for the poorest children up to the level of private schools. This already happens in the Netherlands. Schools have a financial incentive to take on disadvantaged children - and the extra resources needed to support those children. And it works.
All new schools must also be open to all. So we must end selection. Pupils and parents should pick schools - not the other way round. If new schools only improve results by selecting the cleverest pupils, one form of educational segregation will merely be replaced by another. That is why the Liberal Democrats would remove the powers to select from Academies, Specialist Schools, Trust and Foundation Schools.
With these sound principles of social justice and opportunity for all governing our public services, government, including local government, can move to become a purchaser, not simply a provider.
Let's look at Academies. There is plenty wrong with the government's Academies programme - from the selection rules to the absurdity of trying to run schools all over the country at the behest of one Minister in the House of Lords.
But there is nothing wrong at all with allowing schools the freedom to innovate. Nothing wrong with bringing committed people and organisations into our education system. And nothing wrong with allowing schools to exist outside direct daily local government management - as long as they are under local government oversight.
And it makes me angry when I hear people attacking new schools which have replaced old, failing, local authority schools many of which consigned generations of children who could have done much better to the educational scrapheap.
So, with these principles in mind, I want us to look at establishing a new liberal model of schools that are non-selective, under local government strategic oversight but not run by the council, and free to innovate to drive up standards for all our children. They could be established by any suitable sponsor, including parents, educational charities, voluntary and private organisations with the right credentials. Sponsors should be independently assessed for their expertise, with no ministerial involvement.
This new generation of schools - let us call them Free Schools - will have the funding to help those children who need the most support; the obligation to be accessible to all; and the freedom from unnecessary political and bureaucratic interference to innovate in the best interests of their pupils.
Freedom. Innovation. Diversity. Yes, choice too. These are liberal words. Let us take them back. If we yield liberal language and liberal values to our opponents we do nothing but damage to our liberal cause.
This is the 21st century - the age of Youtube, and Facebook, and Wikipedia. The age not of top-down management, but of people taking control of their own lives, creating the tools to deliver services to each other. We no longer want to be treated as if we should be grateful recipients of inflexible, and sometimes second rate, state services delivered from on high.
I am totally committed to the National Health Service. It must always remain free at the point of use, accessible to all. But people need to be able to take more control both of its management, and their own health care.
I want it to become a People's Health Service. So every patient should have a guarantee of treatment within a specified waiting time - and to drive the NHS to deliver that, everyone should have the right to receive private treatment, paid for by the NHS, if the waiting time's not met.
That's the way it works in Denmark - not to undermine the public health system, but to guarantee individual patient entitlements - and there's no reason it shouldn't work here. And patients should have more control over their care - where possible with budgets devolved to individuals for long term and chronic conditions.
In particular, these rights are crucial for people with mental health problems. Today, there aren't even any targets on mental health waiting times - let alone entitlements. In many places people wait months and months for access to treatments - if they get anything at all. Mental illness affects 1 in 4 British families: it can no longer be neglected just because it doesn't make a good photo opportunity.
Thousands of patients, especially those with non acute mental health conditions, would benefit enormously if they had greater control over their own care budgets, and greater say over how their care is organised and delivered.
So, in conclusion. An end to controlling central state management. More power and responsibility for local government. More power and responsibility for public servants. More power and responsibility too for the people who use our public services. And greater space for real grassroots innovation in who provides our public services, and how they do it.
This is the way to deliver a fairer Britain, and give every man, woman and child in Britain today a fair chance, and an equal stake in our society.
It is not only a liberal agenda, it is what the British people want. We live in an era where people want individual freedom, not big faceless government. People are unconvinced by Gordon Brown, and baffled by the Conservatives.
What Britain needs is a party which is liberal both economically and socially. A party which is passionate about building a fairer society, but understands that freedom is the ally of fairness - not its enemy.
That is what I want our manifesto to offer the British people. I hope all of us will work hard together today and in the crucial months ahead to deliver it.