Independence pays: a cost and resource analysis of direct payments in two local authorities

Although there is an increasing amount of literature on direct payments (DP), to date there have been few studies which have examined in any detail the costs and resources associated with them. This paper presents findings from a two year study conducted in two Welsh local authorities that jointly fund an Independent Living Support (ILS) scheme. The main study was not designed to provide definitive cost comparisons with conventional services, however, cost and resource implications of DP were considered and an analysis to determine comparative costs between DP and traditional services was undertaken. The study notes the difficulty in identifying the true cost of DP and reasonable comparators with traditional services. A set of four case studies are presented comparing actual costs of DP and in‐house and independent sector services in the two local authorities studied. The comparison of costs and resources, which did not include significant costs for traditional local authority services but included the cost of the DP support scheme, found that DP was cheaper than traditional in‐house service provision and relatively cost neutral when compared with independent sector provision. User satisfaction, however, was significantly greater with DP than traditional service delivery methods. The paper also examines factors which can potentially influence the cost of DP. The study suggests that DP represent a substantial improvement over traditional arrangements from a cost–benefit perspective. There is strong evidence to suggest that greater ‘opportunity cost’ savings can be anticipated when DP schemes become more fully integrated into policy, practice and procedures.