Today, the New Zealand Initiative launches a new report on a powerful social services innovation: personal budgets.

The idea is simple. Give money directly to individuals so they can hire their own support staff.

The most significant application of this funding model so far is in disability support. There are 8,000 people on Individualised Funding, or “IF”, a type of personal budget.

That is about 20% of the 43,000 people who receive disability support. However, most disability support remains under the traditional services model, delivered by providers contracted to the Ministry of Health.

Each personal budget is set based on an assessment of an individual’s needs. An assessor determines the required hours of support each week, then multiplies by a standard hourly wage to set the budget.

With their budget, recipients hire staff, pay their wages and taxes, even settle personal grievances. In some cases, budgets can also be used to buy equipment.

Today’s report compares the performance of traditional services to IF based on research and the experience of people we spoke to.

Consider Lisa and her daughter Sarah, who has Retts Syndrome. When Sarah turned 12 or 13, the physical demands on Lisa began to take their toll. Lisa secured a few hours of support each week. But she found traditional services inflexible and unreliable. No support on weekends. Workers failing to turn up. Often a different person each time.

That all changed when Lisa and Sarah moved to IF. With her personal budget, Lisa hired the people she wanted and got support when Sarah needed it, including weekends.

Lisa says, “I want Sarah to be able to purchase her care. If they don’t provide a good service, she has the power to purchase elsewhere.”

That power is crucial. Academic research from New Zealand and overseas overwhelmingly confirms personal budgets deliver more flexible, more reliable services, with high reported satisfaction compared with traditional support.

But IF is not easy. Becoming an employer and managing a budget is onerous. “IF is more complicated than you might think,” John, another IF recipient, told us.

It is nearly 30 years since personal budgets first appeared in this country. It has scaled up only recently. IF might be the oldest new idea in social services.

The question now is where else can personal budgets be used. In principle, any service delivered in-home can be funded by personal budgets. Aged Care, mental health and drug rehabilitation seem prime candidates. This is only the start.

You can read our report, The Power Of Freedom, here.