Direct Payments compared to Individual (Personal) Budgets

Shirley Jarlett

And

Amanda Julian

The Statutory Framework for Direct Payments

• Direct Payments were first introduced under the Independent Living Fund in 1998

• Health and Social Care Act 2001 sections 57 and 58.

• Community Care, Services for Carers and Children’s Services (Direct Payments) Regulations 2003 (The Regulations)

• The Direct Payments Guidance, Community Care, Services for Carers and Children’s Services (Direct Payments) Guidance 2003 (English Guidance)

The obligation to offer Direct Payments

• Individuals are not assessed for a direct payment.

• Direct payments are integral to the assessment and care planning process.

• Once an assessment has been undertaken, either a community care assessment, under the Children Act 1989 or the Carers and Disabled Children Act 2000.

• There is an obligation under Regulation 4 of the Regulations to offer a direct payment.

Consent and Direct Payments

• Section 57 of the Health and Social Care Act 2001 and section 17A Children Act 1989 require direct payments to be made only were the recipient consents to such an arrangement.

• Paragraph 45 of the English Guidance stresses local authorities should “make clear that a person does not have to agree to a direct payment and that it would arrange services in the normal way if someone decides not to accept direct payments. They should also discuss with people who receive direct payments what to do if they no longer wish to receive the payments”

Ability to Manage the payment – alone or with assistance

• The Regulations (but not the HSCA 2001 or CA 1989) specify that direct payments can only be made to persons who appear to be capable of managing the payment themselves or with such assistance as may be available.

Mental Capacity and direct payments

• Whether a person has the mental capacity to manage the direct payment will in essence depend on what the money is to be used for. For example a direct payment to employ someone will require greater mental capacity than one to purchase meals. Though the use of a broker can enable a person to access direct payments to employ a person assistant.

• Caution should be exercised as it would be difficult to argue that a person has the capacity to employ a person but subsequently would not be able to represent themselves at an Employment Tribunal hearing or instruct someone to act on their behalf.

• The Guidance assists at paragraphs 48 and 49 by making it clear blanket decisions should not be made about groups of people who should or should not receive a direct payment.

• Paragraphs 51 to 54 gives further guidance on managing a direct payment.

Who can receive a direct payment

• Regulation 2 of The Regulations provide the exemptions to who can be offered a direct payment.

• A local authority cannot require a person to give reasons why they should be offered a direct payment – Public Service Ombudsman (Wales) Complaint B/2004/0707/S/370 against Swansea City Council

Further restrictions

• Regulation 6 places further conditions on the payment of direct payments for securing the services by the recipient from a close family member.

• It does allow the local authority a discretion to make a payment in exceptional circumstances.

• Research has shown most service users would if enabled prefer to employ a family member

Residential care and direct payments

• Regulation 7 caps the amount of residential care that can be purchased by direct payments to four weeks in every twelve month period.

• The English Guidance expands this in paragraphs 74 to 76.

What does the Guidance say?

• Paragraph 74 states• direct payments may not pay for adults to live for the

long-term in a care home. They may be made to enable people to purchase for themselves short stays in a care home, but this cannot be for more than four weeks in any twelve months. Where two successive periods are less than four weeks apart, they may be added together to make a cumulative total not exceeding four weeks. If more than four weeks apart they are not added together. It is unlikely that direct payment would be suitable for emergency respite.

Continued..

• Paragraph 75 of the Guidance states that additional weeks of respite can be provided but not by a direct payment.

• Paragraph 76 restricts the use of direct payments for the provision of residential accommodation for children or young people, to avoid inappropriate use of residential accommodation.

Residents of a care home and direct payments

• Paragraph 7 of the English Guidance allows for people living permanently in a care home to receive a direct payment for day care or to try out independent living prior to moving from the home.

Provision for the recovery of money and termination of a direct payment• Regulation 9 provides the framework to

enable the local authority to recover money from a recipient if the authority is satisfied the money is not being used to secure the provision of service it relates to.

• Regulation 10 provides the framework for the local authority to terminate a direct payment agreement

Restrictions on the National Health Service to make direct payments

• The Department of Health, under its policy the National Framework for NHS Continuing Healthcare and NHS funded Nursing Care 2007, has made it clear that the NHS cannot make direct payments under the Health and Social Care Act 2001.

In conclusion

• Direct payments have a statutory framework that has been further expanded by Regulations and Guidance that provide for who can receive the payments and what they can be used for. The framework lays down how Brokerage, Independent Living Trusts are to be used. Further how the process must be audited.

Personalisation of Social Care

• By contrast to direct payments the Government has not introduced legislation to govern the use of Individual/Personal budgets. Rather they have bought in the idea for change through policy documents.

• The Government vision is to ensure that people with disabilities are citizens with powerful rights to non-discrimination and equality. The vision is for a society where everyone is respected and included as equal members of society.

Putting People First Concordant – published December 2007

• Central Government, Local Government, the professional leadership of adult social care and the NHS jointly committed to the transformation of Care Services over the next three years

• An extra £520 million has been pledged to transform the care of older and disabled people. This will be allocated as a Social Reform Grant over the next three years. The grant includes some NHS resources in recognition of the impact on social care in improving people’s health and wellbeing.

Key principles

• To give the vast majority of people who receive funded care their own personal budgets so they can choose their own support services they want for themselves or their family. An increasing amount of people to access direct payments. The Health and Social Care Act 2008 introduces direct payments to those who lack capacity though it only covers those who are in receipt of payments under section 57 Health and Social Care Act 2001.

Key principles continued• High quality care homes, home care and day services to be

rewarded while poor performers not to be used by local authorities and the NHS.

• First stop shops becoming common place. To include people who are not eligible for social services support. Access to advice and advocacy about community care services.

• Investing in support to keep older people healthy.• Closer collaboration between the NHS and local government.• Assessment and paperwork to become streamlined so social

workers spend more time on the frontline.• Co-ordinated services social workers to be based in primary health

centres as well as GPs and nurses.• Champions to promote dignity for older people.• Inter-generational programmes• New technology to be at the heart of ensuring people can remain in

their own homes and live independently.

How is it to be achieved?• The Government proposes the use of Individual/Personal Budgets

being a notional pot of money established for someone’s care and support. The person controls how the money is spend.

• Our Health, Our Care, Our Say: A new direction for community care services 2006 and budget statements of 2007 supported by the Comprehensive Spending Review envisages a system wide transformation of the provision of adult social care services based on a common assessment process with greater emphasis on self assessment. Though the duty to assess under section 47 National Health Service and Community Care Act 1990 is not affected by this policy statement. The guidance on assessments has not changed in stating that an assessment involves an meeting with the person being assessed.

• The strategic movement is for Person Centred Planning and Self Directed Support.

What is the basis to make cash payments outside direct payments?• In order to deliver on the policy vision it has been

necessary to find a basis on how to provide cash payments in lieu of services that are more flexible than direct payments.

• The Government in 2006 stated:• “Individuals who are eligible for these funds will have a

single transparent sum allocated to them in their name and held on their behalf rather like a bank account. They can chose to take this money out either in the form of a direct payment in cash or a provision of services or as a mixture… This will offer the individual much more flexibility to choose services which are more tailored to their specific needs.”

Local Authority Circular (2008) 1 – Transforming Adult Social Care

• This LAC was issued in January 2008 and provides the basis of what is expected of local authorities. It supports the policy of Independence, Wellbeing and Choice and reinforces both Our Health, Our Care, Our Say and Putting People First.

• What it does not do is change the statutory basis for the provision of personal budgets.

• What it does do is inform how these policies should be delivered operationally and strategically and should be followed as guidance.

Can a payment be made under other legislation?

• The Local Government Act 2000 section 2 enables a local authority to do anything they consider likely to promote the wellbeing for social, economical or environmental reasons, subject to section 3 which prohibits the use of section 2 to raise money.

• In 2001 the Government issued guidance in the form of Power to promote or improve economic, social or environmental well-being 2001.

• Paragraph 6 stresses that the “the purpose of introducing the well-being power is to reverse that traditional cultural approach, and to encourage innovation and closer joint working between local authorities and their partners to improve communities”

What at the limits to section 2 LGA 2000?

• Section 3 of the LGA 2000 limits the use of section 2.

• Section 3 prevents the use of the powers in section 2 if there is a prohibition under limitation under other statutory provisions, and prevents the use of section 2 to raise money.

• It does not prevent a local authority from charging for services provided under section 2 LGA.

• Nor does it prevent companies set up under the provisions of section 2 from raising money as long as it is reinvested in the company.

Can section 2 be used to provide social care services?

• The provisions of section 2 LGA known as the wellbeing provisions can be used to make payments to enable services users to access services that do not conform to the traditional model for the provision of social care services.

• The power under section 2 LGA 2000 has be widened under section 93 LGA 2003 to enable local authorities to charge for discretionary services.

What has section 2 LGA been used for?

• Money released under section 2 has been used to:– Top up day care outside the assessed need– To assist elderly residents on discharge from hospital.– To assist vulnerable people and families to remain in

their own home.– To bridge the perceived gap for housing with care

schemes.– To provide grants.– To provide community alarm systems.

What could the payment be used for ?

• Direct payments have not been provided to purchase in house services, the rationale being that local authorities cannot sell their services.

• This principle may not apply to services provided under section 2 LGA. While section 3(2) prohibits the raising of money there is no restriction on the recovery of money for services provided. This would also apply were the authority had provided the money to purchase the service in the first instance.

Sustainable Communities Act 2007

• Enables local authorities to transfer functions from one public authority to another if doing so would promote the economic, social or environmental wellbeing within its area, this can include funding.

• These functions reflect the wellbeing provisions of the LGA 2000.

• The 2007 Act enables a local authority via a selector to request that a proposal be approved by central government. It is a power of first resort meaning as long as the proposal is not expressly prohibited or subject to limitations or restrictions in another statutory provision the power can be used inventively.

• The power could therefore be used to enable the use of other public funding streams to be incorporated under agreement into the individual or personal budgets

Consent and Capacity and Individual/Personal budgets

• As there is no statutory framework to provide an individual or personal budget can the wellbeing provisions under section 2 LGA enable a payment to those who cannot consent and/or lack the capacity to agree to a direct payment?

• Section 3 LGA prohibits the use of section 2 if there is a limitation or statutory bar to making the payment. It could be argued that as there is a statutory bar under the Health and Social Care Act 2001 then payments may not be made directly to those who lack capacity. Though the use of independent user trusts are permissible within the provisions of the National Assistance Act section 30. Further in R (A&B) v East Sussex CC (No 1) [2002] EWHC 2771 admin: argued the point successfully.

conclusion• There is no statutory or regulatory framework for providing individual

budgets under current legislation.• Payments to provide discretionary care outside the traditional model

can be provided under the provisions of the Local Government Act 2000 section 2 subject to section 3.

• There is still a statutory duty to offer direct payments once an assessment of need has been completed.

• There is still the statutory duty to assess under section 47 NHSCCA 1990.

• In order to be clear on whether it is a direct payment or a personal/individual budget it is important to know under what provision the service is being provided under. If it is a direct payment then the statutory framework will apply, if it is an individual budget then it can be spent on services that are not traditionally provided by social care.

Implications of cash payments on benefits

• In making cash payments there are implications with regard to tax and national insurance for the service user if they employ a personal assistant.

• The Department of Work and Pensions class the recipient of a direct payment as the employer for the purposes of PAYE and NI, they are classed as non business employers.

Payment in lieu of services and the minimum wage

• The Department for Business Enterprise and Regulatory Reform (DBERR) deal with the national minimum wage and state that all direct payment recipients and by analogy it would include individual budget recipients must ensure that they pay their employees at least the minimum wage.

• If a carer or personal assistant is paid less than £87 per week no National Insurance is payable but the carer or PA is a worker under the national minimum wage regulations.

Benefits in Kind and payments in lieu of services

• Board and lodgings or accommodation is not normally charged for national insurance or tax if the employer can show that the employee is living in.

• Other benefits in kind may be subject to tax. The Income Tax (Earnings and Pension) Act 2003 (ITEPA) section 201(1) describes a benefit in kind as a an “employment related benefit”.

• Section 751(2) ITEPA states “a benefit or facility of any kind provided to an employee or a member of his/her household.”

What is a benefit in kind?

• A benefit must be over and above what an employer would give as a fair bargain. If the employee would receive the same benefit if not an employee then it is not a benefit for tax purposes. The essence is that the employee must not be in a more beneficial position then if they had not been employed by the person giving the benefit.

• For example if a carer or PA was given money for petrol this may be taxed as benefit in kind unless they can show the whole tank of petrol was used on business mileage.

• Unless covered by the exemptions in the ITEPA then the benefit will be taxable.

What could be the implications for a recipient of a cash payment?

• If a recipient of a cash payment is not aware that they are liable as an employer for tax and national insurance or that benefits in kind given during the course of employment may be taxable they may become the subject of an investigation by HMRC. If this is were to happen then they could find that they owe a substantial amount in back payments.

• The result would be that they would have insufficient funds to purchase the care for which the payment was made.

What would the implication be for the local authority

• If a person were unable to purchase the care identified in the support plan due to the pounds per point not taking into account the minimum wage this could be challenged as unreasonable.

• If a recipient of a cash payment is liable to pay their employee the minimum wage net of tax and national insurance the setting of the pounds per point will need to reflect this. Otherwise it might mean there is a shortfall between what is allocated and what is needed to actually purchase the care identified in the support plan.

Minimising the risk

• To minimise the risk the use of brokerage is advocated.

• Paragraph 100 of the English Guidance on direct payments states the local authority needs to make the recipient of the payment aware of their legal obligations. By analogy the same could be set of any cash payment being paid in lieu of services.

Recent Court of Appeal Decision -social security benefits

• THE FACTS:• A recent decision on appeal from CIS/1068/2006

– a carer had prior to 2004 been in living in the administration area of an authority who paid him directly as a carer. These payments were disregarded for income support purposes. The couple moved the new authority paid the wife directly, the Rowan Organisation issued payslips to the husband.

Case continued – the decision

• For income support the direct payment was disregarded as part of the wife’s income – schedule 9 paragraph 58 Income Support (General) Regulations.

• The payments to the husband were taken into account as income reducing their total income support by £53.50 per week

• The husband appealed to the Court of Appeal

The Court of Appeal Judgment

• The appeal was based on section 136 Social Security Contributions and Benefits Act that requires payments to a family member for benefit purposes be counted only once when they come into the family, at that point they are disregarded. They cannot counted again on being transferred from one member of the family to another.

• The Court held under section 136(1) of the Act that the payments made were for services rendered and in his hands became income.

Implications for Local Authorities

• When considering making a payment intended to provide respite for the carer who is a family member if the payment is made direct to the carer it will be disregarded for benefits purposes.

• If the money is paid directly to the service user to pass on to the carer it will be seen as income under the benefits legislation and will result in a loss of income for the family.

• The wider implication is that any payment from the recipient of the cash payment will either be treated as income for those on benefit not just family members. It will also if the payment is over £87 be subject to national insurance payments and tax by HMRC.