Survey highlights direct payments’ true cost

The administrative costs of direct payments outweigh any savings, a study suggests. Amy Taylor reports

As well as putting service users in charge of their own services, direct payments are often promoted as a cheaper option for councils than commissioning care. But an Audit Commission study has called this into question.

The report found that, for all 10 of the councils who provided this information, direct payments cost them more than they saved.

While savings were made through service users taking responsibility from care managers for finding and administering care, the research found that these were more than offset by the costs of supporting users and providing training to staff.

Tim Hind, an adviser to the Local Government Association, says he was not surprised by the finding. “If you change things there’s a cost to it,” he says.

The study suggests that the only way councils can make savings overall is to make the value of direct payments lower than the sums they pay to providers for equivalent levels of support.

Nic Rowland-Crosby, a consultant with learning difficulties services consultancy Paradigm, says this would not necessarily penalise direct payment recipients as they can get more for their money than councils commissioning care.

This may be as a result of commissioning services from smaller agencies as opposed to larger providers, and not having to pay providers a fee to cover management costs.

“If a council is purchasing from a provider they will be paying for management costs as well which can be quite a slice as well as actually paying for care,” he says.

Mark Wardman, studies manager at the Audit Commission, says that money might be saved if users employed their friends and families as personal assistants.

The report states that the value councils set for direct payments determines the level of take-up they will need to break even and begin to make savings. Hind says that it may take councils a long time to make direct payments cost-effective by increasing take-up, because authorities are often tied into large-scale contracts with providers.

“It may be that in the short or medium term there is a large overhead for direct payments,” he says.

Despite the importance of the price of payments, Wardman says that many of the councils involved were unable to provide researchers with information explaining how they decided how much to pay out. “We want this report to provide them with the means to make a more measured decision than perhaps they are at the moment,” he says.

Richard Parnell, head of research and public policy at disability charity Scope, argues that even if direct payments cost more than council-commissioned services they should still be provided if they benefit service users.

Generally, councils tend to be drawn to services that save them money and Parnell says that a reluctance to roll out direct payments if they prove a more costly option is a genuine concern. He calls for more central government funding for local authorities to ensure that this is not an issue, a point backed by Hind.

Putting the financial implications of direct payments to one side, Parnell says that, overall, the direction councils are travelling in is the correct one.

“The way services are evolving is to give users more control and that has to be a good thing,” he concludes.

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