Decentralisation has returned as a key theme in English health policy in recent years in policies such as Patient Choice and Foundation Trusts, among many others. The goal of these policies appears to be to stimulate self-sustaining incentives to continuous organisational reform and performance improvement through creating a pluralist model of local provision. However, the ability of local organisations to exercise autonomy and to deliver such performance is highly contingent upon their local context, not least in terms of existing patterns of dependencies. Explaining variation in local outcomes of national policies demands an understanding and explanation of local autonomy and its effect on performance which takes into account the role of the local 'health economy'--the local context within which organizations are embedded. It is this combination of vertical and horizontal autonomy which effectively determines the local room for manoeuvre in decision-making. The aim of the paper is to examine the local dimension of decentralisation policies. It draws from different strands of literature to discuss the room for manoeuvre of local organisations within local health economies in England with specific reference to Primary Care Trusts. It draws conclusions about the nature of decentralisation itself and the impact of such policies.