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That is why Building Capacity and Partnership in Care, published in 2001, was so important. And this event is another step in taking forward the principles set out in that agreement.

A follow-up report 'Implementing Building capacity and Partnership in Care' was published recently. It has many examples of illustrative practice demonstrating how the principles in Building capacity and Partnership in Care can be transformed into better working practices. Today's event allows us to emphasise the messages in that document and stress once again the importance of imaginative commissioning frameworks and their central role in improving services.

That is why I am pleased that you have felt it important to take time out to attend. I'm only sorry I can't be with you in person but I wanted you to know that I am grateful for your help and commitment.

I'm delighted to help launch today a new Learning and Improvement Network for better commissioning. It brings together senior managers from local authority social services, primary care trusts, independent sector care and housing providers. People, who are interested in forging better working relationships in order to commission better care and support for older people.

So, what are we here today to do? We are here to begin the process of learning and sharing best practice in commissioning services for older people, to consider carefully the methods and tools that might be used in shaping and planning for a future of which we will all be a part.

We will have to carefully and honestly consider whether those services available can do the job that people need them to do, and if not, what job they should be doing. We will have to consider the views of those who use and provide services now, but more challengingly, make decisions about those who will need services in the future. My view is that we need to transform how we think about older people and how we support old age positively rather than reinforce it as a time of loss.

That means building a commissioning process that will pass four tests of fairness. It has, above all, to be fair to people using services and to ensure they get good quality care, in the right place, in the right quantity, at the right time. Inevitably that will almost always mean they have been involved in designing the package of services they are receiving.

Secondly, it has to be fair to tax payers and ensure that the services they are supporting are giving value for money and being targeted at the right priorities.

Thirdly, and this is the part we sometimes forget, it has to be fair to providers, ensuring that they receive a fair return for their services and they have not been set impossible objectives or given tasks for which they are not funded.

Last but not least it has to be fair to commissioners, councils and primary care trusts who are entitled to choose between the services on offer and pay a price that they can afford, to get the quality that they need. 

I wonder, if you are being self critical, how many of you could truly argue that the commissioning practice in your area meets those four tests of fairness?

By developing and publishing 'Building Capacity and Partnership in Care' in 2001 we signed up to creating a genuine partnership between the independent and statutory, health, housing and social care sectors. Can any of you genuinely claim to have met our obligations under that agreement until we have established commissioning practices that meet my four tests of fairness?

So my challenge to you, as a part of the Learning and Improvement Network for better commissioning, is to measure yourselves against my tests and if you fall short, to commit your organisation to change, to rise to my challenge and to put in place the best practice that you will learn about, develop and share during the next year. 

It won't be easy and won't happen overnight. Change can hurt. Making these changes will require all your managerial and organisational will and capacity. But make these changes, rise to these challenges and you will be delivering real quality of life improvements for people using your services.

So, how do we get started on this journey?

Step one. Make sure your services are fair to the people who use them. Change your services to put the people who use your services at the heart of them.

That means we have to move away from dependency models of care where 'professionals always know best' to building a high quality, well regulated system that makes independence a real option and puts individuals in control of their own care.

I want to see you 'commissioning for choice' with, at its centre, recognition of older people as citizens with the same hopes and aspirations for the future as all of us here today.

People want to be able to choose from a full menu of care services  - from being able to receive care in their own homes, through to extra care housing and residential accommodation. Frankly very few people would choose residential care as one of their first options and yet so much commissioning activity has been, and still is, preoccupied with this type of care. It should be one, but just one, of a range of options.

And once you have ensured you are commissioning the right range of services, you must ensure that choice becomes a practical reality by giving people full information on all of the care options available to them so they can fully exercise that choice. Your commissioning and planning must never stand still, you need to constantly review and change what you commission in line with changing needs and aspirations. Accept change as on-going and inevitable not an obstacle in the way of some mythical fixed point in the future.

Step two. Make your commissioning practices fair to tax payers and the providers. That means finding a system of commissioning that encourages fair competition to ensure best value, while always allowing providers to be properly rewarded.

Commissioning organisations must understand their local markets and do their share to create a level playing field on which businesses can compete to provide services. Once that is achieved commissioners are entitled to take the best price on offer, if it provides the right quality of care. But the market must be allowed to express the price at which it wants to do business.

'This is our price, take it or leave it' fee structures are unfair and simply not good enough. In the end they distort the market, drive down quality and generate capacity shortfalls.

It's also important that you look at ways to help providers become more cost-effective, for example by reducing transaction costs. You should be considering simplifying contracts as much as possible. Many of the elements in a contract will be the same in every case. Adopting a straightforward format would save commissioners the time and staffing resources they use in drawing up individualised contracts and it would save providers having to carry out a detailed review of each and every contract.

A key element of the contract is fees. The contract should set out the fees that the provider is to be paid for providing services, as agreed in the initial tender process. And if the service is to be offered over the long term it should also include an agreed mechanism for calculating an annual fee increase.

The contract should be flexible and allow for the price to be varied in the light of changing circumstances and legitimate increases in the cost of providing care, including staff costs, insurance and registration fees which should be passed on.

And on top of all this you must ask yourself if, when you commission services, you are giving fair weight to quality? It's no good just working out how much of a service, or how many places you are buying, you must also look at the quality of that provision. Quality should be measured by outcomes that have as their goal, the highest possible quality of life for the people using services.

For most people, this will mean being able to live in their own home as independently as possible but also having contact with family and friends will be important whatever the care setting. Privacy, dignity, respect-these are things we all value but how good are you at commissioning for these elements?

And remember, when you are commissioning services governed by national minimum standards they are just that - national minimum standards. How good are you at recognising when a service is doing better than the minimum standard but still delivering value for money?

So, that's how I see best practice commissioning. But am I being realistic? Is this just the vision of a minister who hasn't had to make this work at the 'coal face' of social care? No it's not and I'm not alone.

I can hear you thinking, well who is going to pay for this?

Significant sums are tied up in commissioned services that are just not working in the way that older people want it to. Commissioning is not therefore all about new money but improving the use of money already available in the system.

We have given local authorities substantial extra funding. Since 1997, we have given councils, on average, a real terms increase of around 25% for personal social services, and that is money that can be used to change the landscape of care services locally. We've also promised an average annual increase of 6 per cent over and above inflation next year and the year after.

 This means that local authorities are now receiving the resources they need to purchase services at realistic prices.  But I do acknowledge that where prices in the past have been artificially depressed it simply won't be possible, over one financial year, for commissioners to be able to offer fully person centred services while paying a price that is fully market driven.

It may well take longer. But the substantial funding increases provided since 1997, both to the NHS and local authorities and the promise of significant inflation busting increases over the next two years provide a platform for building best commissioning practice within a reasonable timescale. And what every authority should put in place, in the very near future, is a partnership plan to adopt best commissioning and an agreement with local providers over the period it will take to fully implement.

So, who should be driving these reforms?

First and foremost the top leadership in every partnership organisation, should be focussed on the challenges of creating person centred care, capacity planning and my four tests of fairness. Plans must account for the lives of older people and help focus the minds of everyone on the need for comprehensive and coherent services that do not get stymied by organisational boundaries.

Secondly, managers must recognise the need for reform and plan a route to best practice commissioning. If you get it right it will make budgeting easier, make day to day delivery easier and, most of all, give you the satisfaction of seeing services improve.

The idea behind the Learning and Improvement Network is to identify and share what works at a local level; to commission development work on common issues and challenges; to promote and develop a whole systems approach to capacity and service planning, with the independent sector fully engaged as active partners; and to give support and help locally, to put in place arrangements that improve commissioning.

You will have plenty of opportunity to consider and assess how you are currently doing and how you might change services and practices. I urge you to keep an open mind. Don't dismiss an idea out of hand, don't make assumptions about things not working in your area. Ideas can transfer, sometimes with modifications. And we are not talking about swapping one restricted set of services and ways of doing things wholesale for another - this is about expanding options.

So as well as learning about how you should be commissioning services you'll have the chance to question the range of services you are providing.

Learn about ways in which you might increase home care. Intensive home care packages have increased by 30% since 1998 but are you doing enough in your area to make them available?

Learn about extra-care as a real alternative to residential care. For those of you who haven't seen it, extra care housing enables people to live in their own accommodation with their own front door while receiving a care package that changes as their needs change. I think it will become the dominant model of support for older people over the next generation. The Department of Health is so excited about Extra Care that we are spending £87m to encourage new extra care schemes throughout the country. Shouldn't you be at the forefront of this revolution?

Learn about how direct payments can transform people's lives and remember councils now have a duty to make direct payments not just a duty to offer one. Are you making direct payments easy to use?

Learn about capacity planning, learn about the challenges facing the housing and care sectors and what you should be doing to assess and address local pressures.

The Change Agent Team will provide learning materials and promote good practice through a website for the new network. Master-classes will be available, free of charge to assist in developing ideas and ways of working. The network will help you to both ask and answer questions and forge new ways forward. But above all, the network should make it much easier for you to learn from other places about what works - and what doesn't.

Commissioning is not a bureaucratic administrative function. It has a huge impact on people's lives, and often on the most intimate aspects of their lives.

Getting it right transforms lives. Getting it wrong creates heartache for services users, wrecks council budgets and is bad news for providers of care.

Best practice commissioning is for every organisation that has a responsibility for the health and wellbeing of older people in every area of the country.

 A commissioning system that is fair for people using services, fair for taxpayers and fair for providers is practical, vital and very much not optional. I very much hope you enjoy today and the start of your journey. But just as much, I hope you will use this new Learning and Improvement Network to improve your commissioning practice and so change dramatically, the quality of life for older people who use your services in the coming years.

Thank you.