Abstract The aim of New Labour's health policy is to shift more of the balance of power and responsibility for services to the local level. But, while the government proclaims a new decentralized NHS, doubts exist about the extent to which the reality on the ground matches the tone of policy. This article reports empirical work examining the level of autonomy purchasers have over budgetary allocation. A case study analysis of purchasing within a single district was undertaken for the financial year 2001/2 which included semi‐structured interviews with key officers responsible for budget allocation. Purchasers approach a new financial year with a starting position that matches the previous year's allocation—the “baseline”, this is adjusted for inflation and, as has happened over the last few years, increased further in real terms by “growth funds” for service modernization and government initiatives. The analysis shows a clear dissonance between policy and practice; although purchasers have complete control over their “baseline budgets”, the study found that this does not “ring true” at the local level. Only about a fifth of growth funds were at the discretion of purchasers as most are taken by national priorities and pay and price inflation. Further decentralization is planned, which includes transferring more control of funds to primary care trusts by 2004, the extent to which these measures will change the perceptions of those working in the service remains to be seen—only then will the government be able to claim a truly decentred service.