Last week, we watched our latest tradition - the draft queen's speech. The Conservatives claimed many of the ideas were their own, while others thought that Tony Blair's reform agenda was alive and well. Whatever the reality, there is broad consensus about the direction of travel on public services.

The obvious point from the draft legislation is that Gordon Brown is not steering away from his long held focus on the public sector. There are big bills on community empowerment and housing, health, welfare and policing.

What few people have commented on is that, certainly in health, the government, through this legislative programme, is trying to tackle some very hard issues. The NHS constitution, reforming the payment by results system, introducing a failure regime and accountability for commissioning are all thorny issues and many have had policy makers pondering for years.

A significant aim emerging across the bills concerning health is empowerment of local people, either through giving them more of a say about how local services are run or through the personalisation of public services. This is a welcome move, but the government is in a difficult place, open to criticism on two fronts. First, opposition parties and the media are asking why these changes were not introduced earlier into the Government's 11 year tenure.

Second, some policy makers are more concerned at the speed with which certain ideas, very much in their infancy, are being put into legislation. Individualised budgets for health, for example, is a progressive idea with the potential to bring real benefits to patients and is certainly worthy of proper exploration. But it has only ever been applied in social care for around 5000 people and how, or even if, it could work in health is yet to be worked through.

In mental health the range of ways you can access services means that individualised budgets could work especially well. In consultation with staff, a service user might use their budget to pay for support in finding work rather than talking therapies or arrange to have regular appointments away from where they live rather than at their home. By contrast, within the pathway for diabetes certain things have to be done and have no alternative - foot checks, regular blood tests etc. This squeezes the headroom available within an individualised budget for people to tailor services around them.

In the same vein, ideas on increased accountability are not yet fully formed, but will develop over the consultation period. Much like with our Police forces in the Police and Crime Reduction Bill, the future model of accountability in Primary Care Trusts is still up for debate. There are concerns over whether a one-size fits all solution will be imposed, or PCTs will be left free to develop their own local models.

What we have yet to see, alongside handing power to the people, is devolution of control to local organisations. The health operating framework published for the NHS last year was a good case in point. The rhetoric about local powers sat above pages of prescription on how to implement change. People running trusts face being pulled in too many directions with the public rightly having more say, but Whitehall frequently intervening. The only way to deliver good health care is through strong local autonomous organisations, accountable to local people and properly regulated, delivering the government's strategic agenda tailored to meet local need. The government's action as well as rhetoric in this area too often falls short.

Another interesting question will be how we marry trade union engagement with increased local staff engagement in an increasingly devolved NHS. The machinery for formal engagement and negotiation with trade unions is mostly national and continues to be focused on terms and conditions. Where does that fit with the wider, local engagement of staff? As the economy falters and negotiating pay rounds get more difficult, the challenge will be ensuring they are complimentary not contradictory.

The final issue the sector will have to tackle is the roll out of Gershon II. While the health service met its Gershon targets in time, the next round of savings may be harder. In health, NHS Employers provides the NHS Jobs service and has persuaded all NHS trusts to do their recruitment online. This saves up to £250 million a year. The use of temporary staffing has fallen at a reduced cost which could be up to £500 million a year. So there are big efficiency prizes to be won, and all public services have an obligation of course to find them, but they will get harder to nail.

While public services are challenged with more efficiency savings, they will need to find new ways of engaging with staff, as pay negotiations get harder. At the same time, the public will have a greater say in the running of their local, more personalised, services. The challenge for central government will be to resist the urge to interfere in this new autonomous world.

Steve Barnett is acting Chief Executive of the NHS Confederation, and is also a member of the Cabinet Office Public Sector Employers Forum; the Government's Public Services Forum; the Council of the Institute for Employment Studies; the Employers Forum on Disability President's Group; and the Governing Council of the International Hospitals Federation. He is also a member of the Open University's governing council and chair of its staff strategy committee.