Proposals to give elderly and disabled people personal budgets to commission their own care will go out to local consultation with staff from all sectors and service users.

The proposals outlined in a paper, Putting People First, call for “authentic partnership working” between local government, local NHS services, other statutory services, third and private sector providers and the wider local community.

The plans are backed by a pledge to spend an extra £520m to “transform care for older and disabled people.”

Health secretary, Alan Johnson, said: "One of my top priorities is to develop a new care system which gives people maximum control over their own support services.

"This is a groundbreaking concordat because it is the first ever attempt by central government to co-produce a major public service reform in this case with local government, the NHS, people who use services and their carers.

"Our commitment that the majority of social care funding will be controlled by individuals, through personal budgets, represents a radical transfer of power from the state to the public. Everyone, irrespective of their illness or disability has the right to self determinations and maximum control over their own lives."

The radical proposals potentially create a huge challenge in sharing and co-ordinating information between agencies and with service users.

Denise Harrison, director of collaborative software provider, Liquidlogic, said the announcement was a positive step in the right direction, but cautioned that elderly people who are vulnerable to abuse could be taken advantage of with money assigned to them siphoned off by an abuser.

The proposals say that care and protection will always be provided for those genuinely unable to express needs or wants or exercise control, but that the right to self-determination will be at the heart of the reforms. Protection should be “responsible but not risk averse.”

Engagement and consultation is the next step; the proposals include a call for local authorities to create forums, networks and task groups bringing together staff from all sectors, service users and carers.