Are personal budgets more cost-effective?

To what extent can self-directed support meet the need for councils to save money while improving services,  ask Mithran Samuel and Jeremy Dunning


Councils in England have two overriding imperatives in adult social care – personalising services around users’ needs in line with government policy, and reducing costs in the face of financial constraints and significant demographic pressures.

Over recent years a debate has raged over whether these two goals are compatible or contradictory, particularly over whether direct payments and personal budgets are more or less costly than conventional social care support. This debate was picked up in two reports published this week.

A government-commissioned Birmingham University study claimed adult care costs could be contained at close to current levels in future – despite massive demographic pressures – if a series of reforms were pushed to the limit, including personalisation.

It said that rolling out personal budgets could cut spending on social care services by 9%, a figure based on the evaluation of the second phase of charity In Control’s pilots of self-directed support from 2005-7.

Meanwhile, the Scottish government justified its self-directed support strategy – its blueprint for personalising services issued last week – as a way of tackling “tighter financial pressures and demographic changes” on the basis that “more of the same” could not deliver improved outcomes.

In Control, which has pioneered personal budgets, has argued that the traditional method of delivering social care – with councils contracting with providers, assessing individuals and then placing them in the most appropriate service – was wasteful on several grounds:

● Resources are misdirected as people are placed in services that are available, not those that meet needs.

● The system rarely innovates as decisions about care are taken too far from the people they affect.

● Transaction costs – spending on contracts, commissioning and care management – are high.

On this score, personalisation supports the idea that enabling people to purchase their own care and choose their services will drive efficiency.

The evaluation of the individual budget pilots, published in 2008, found little difference in the costs of support of people recieivng IBs and a control group, though the improved outcomes enjoyed by IB holders suggested the personalised system was more cost-effective.

However, it also found rolling out IBs required substantial investment, and identified increased care management costs for IB holders, with practitioners spending more time on support planning and completing assessment documentation.

Cost neutral

John Bolton, director of strategic finance, social care at the Department of Health, says he is working on the assumption that rolling out personal budgets is cost neutral.

His numerous visits to English local authorities have shown him “excellent examples” of the use of personal budgets, “particularly among older people”. “Usually when they choose to use their personal budgets in that way it’s cheaper than council methods such as day care,” he says.

However, echoing the IB evaluation, he says reductions in service costs are offset by the need for greater care management input when people are using self-directed support.

So far 30 councils – one-fifth of the total – have mainstreamed personal budgets in England and the anecdotal evidence from these has backed up Bolton’s cost neutral theory, he says.

Expanding personal budgets

Last year there were about 100,000 personal budgets in England, including direct payments. However, the Association of Directors of Adult Social Services suggests the current figure to be about double that, a belief that will be tested by a forthcoming survey of councils’ progress on personalisation.

By October, councils should be offering personal budgets to all new eligible clients and those receiving a care review.

However, as personal budgets and direct payments are rolled out in England and Scotland, concerns will have to be addressed over whether service users are given payments of sufficient value to meet their needs and associated costs.

The Scottish self-directed support strategy raised concerns about possible underfunding of direct payments, leaving users with shortfalls in areas such as training and wages for personal assistants and indemnity insurance.

It proposed a review of current rates for personal budgets and direct payments across Scotland in which they would be compared with the costs of equivalent services provided by councils or independent agencies.

If personalisation does not prove to be less costly, there is already good evidence that it will prove to deliver better outcomes for the same cost.

However, with government funding for councils expected to contract from 2011 onwards and the numbers of older and disabled people requiring care set to go on increasing, social care leaders will hope that self-directed support can definitely deliver more for less.

More on Birmingham report

More on Scottish strategy


The cost delusion?

Research does not universally support the view that implementing personalised services will lead to significant savings

● 2006 – Audit Commission study found direct payments had significant implementation costs, including staff training and support for users.

● March 2008 – Evaluation of In Control pilots found 9% fall in average care costs in a sample of 104 users after they switched from traditional care to personal budgets

● October 2008 – Individual budget pilot evaluation found little difference in average costs of IBs and conventional support but said rolling out IBs would require substantial investment.

Audit Commission report

In Control study

IB evaluation

This article is published in the 18 February issue of Community Care magazine under the heading The personalisation agenda

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