Insourcing Direct Payment Support Services

Author: Chris Watson

Benefits and Drawbacks

Local authorities face a critical decision when managing Direct Payment (DP) support services whether to provide these services in-house or commission them from independent providers. In-sourcing offers councils the opportunity to retain direct control, enhance accountability, and deliver integrated services tailored to local needs. However, it also presents challenges, including resource constraints, potential inefficiencies, and risks of bureaucracy.

This article explores the benefits and drawbacks of insourcing DP support services, drawing on research and broader perspectives on public service delivery to provide actionable recommendations for councils.

Introduction

Direct Payments (DPs) are central to the personalisation agenda in adult social care, enabling individuals to take control of their care and choose how their needs are met. However, managing DPs requires navigating complex processes such as payroll, compliance, and budget oversight. While many councils outsource DP support services to independent providers, others choose to deliver these services in-house, leveraging existing resources and expertise within the council.

Insourcing DP support services has the potential to enhance accountability, improve service integration, and deliver cost efficiencies. However, it also comes with challenges, including the risk of resource limitations and a lack of specialist expertise.

Benefits of Insourcing Direct Payment Support Services

1. Enhanced Accountability and Control

In-sourcing enables councils to retain direct oversight of DP support services, ensuring alignment with statutory obligations under the Care Act 2014 and local priorities.

Direct management allows councils to monitor service delivery in real-time, quickly addressing issues and ensuring compliance.
Retaining control helps councils avoid conflicts of interest that may arise in commissioned services, where external providers may have competing priorities.

Example: A council-managed DP team can implement new policies more swiftly and ensure that support aligns with wider local authority objectives, such as promoting sustainability in the local care market.

2. Improved Service Integration

Council-managed services can be seamlessly integrated with other in-house teams, providing a more cohesive and consistent approach to care.

In-sourced teams can work closely with other council departments, such as safeguarding or reablement services, to deliver holistic support.
Integration facilitates better communication and coordination, ensuring that citizens experience a streamlined journey through the social care system.

Practical insight: For example, an in-house DP team can liaise directly with council social workers to address complex citizen needs, avoiding delays caused by external contracts.

3. Cost Control and Long-Term Efficiency

While commissioning services can offer short-term savings, in-house provision eliminates profit margins and contract management costs associated with outsourcing.

According to the Association for Public Service Excellence (APSE), in-sourcing can ensure public funds remain within the local economy, supporting employment and community development.
Councils can reinvest savings from in-house services into other priority areas, such as workforce training or preventative care.

Example: In-house teams can focus on refining existing systems, such as streamlining administrative processes, to reduce inefficiencies over time.

4. Greater Flexibility and Responsiveness

In-sourced services can adapt quickly to changing citizen needs, demographic trends, or council priorities.

Councils can make decisions without the constraints of external contracts, allowing them to pilot innovative approaches or address emerging challenges directly.
Localised decision-making ensures that services remain relevant and responsive to community needs.

Example of flexibility: A council responding to a sudden increase in demand for personal assistants (PAs) could quickly allocate resources to expand support services without waiting for external providers to adapt.

5. Building Community Engagement and Trust

Direct management of DP support services fosters stronger relationships between councils and citizens.

In-house teams provide a single point of contact, improving communication and citizen satisfaction.
By maintaining a visible presence in the community, councils can build trust and promote citizen confidence in DP systems.

Drawbacks of Insourcing Direct Payment Support Services

1. Resource Constraints

In-sourcing requires significant investment in staffing, training, and infrastructure.

Councils may struggle to recruit and retain staff with the specialised expertise needed to manage DPs effectively.
Inadequate resources can lead to delays, reduced service quality, and increased administrative burdens for citizens.

Challenge example: A council with limited capacity may find it difficult to keep pace with complex regulatory changes, such as updates to employment law affecting personal assistants.

2. Limited Specialist Expertise

Independent providers often have greater experience and expertise in managing DPs, particularly in areas such as payroll, employment law, and compliance.

Glasby and Littlechild (2009) note that councils may lack the technical knowledge required to handle these complexities, potentially leading to errors or inefficiencies.
Citizens with complex needs may find in-house services less flexible or innovative than those provided by specialist organisations.

3. Higher Operational Costs

Although in-sourcing eliminates profit margins, the costs of maintaining in-house teams—such as ongoing training and IT investments—can escalate over time.

Smaller councils may struggle to achieve economies of scale, making in-house services less cost-effective.
Without competitive pressures, in-house teams may lack the drive to improve efficiency or reduce costs.

4. Risk of Bureaucracy and Citizen Dissatisfaction

Council-run services are sometimes perceived as bureaucratic and less responsive to individual needs.

Leece and Bornat (2006) highlight that Citizens often feel more empowered and supported when working with independent providers, who are seen as more citizen-focused.
Citizens may face longer wait times or limited flexibility if in-house teams are overburdened or constrained by administrative processes.

Conflict of Interest in Insourcing

In-sourcing DP support services can create potential conflicts of interest, as councils are responsible for both allocating funds and overseeing their use.

This dual role may lead to competing priorities, such as balancing budgetary constraints with citizen advocacy.
Resnik (2015) notes that institutional conflicts of interest can compromise ethical obligations, a risk that councils must actively manage.

Mitigation strategies: Councils should establish independent oversight mechanisms to separate financial management from service delivery, ensuring that Citizen needs remain central to decision-making.

Recommendations for Councils Considering Insourcing

To maximise the benefits of in-sourcing while addressing its challenges, councils should:

1. Invest in Training and Expertise

Equip in-house teams with specialist knowledge in areas such as payroll, employment law, and compliance.
Provide ongoing professional development to keep pace with evolving best practices.

2. Streamline Administrative Processes

Adopt digital tools to simplify budget tracking, payroll management, and reporting.
Focus on reducing administrative burdens for both staff and citizens.

3. Engage Citizens in Service Design

Involve service citizens in planning and evaluating in-house support services to ensure their needs are prioritised.
Establish feedback mechanisms to identify areas for improvement.

4. Maintain Flexibility and Innovation

Encourage teams to explore new approaches, such as integrating assistive technologies or piloting personalised budgeting tools.

5. Strengthen Governance and Oversight

Create independent review boards to monitor service delivery and address potential conflicts of interest.

Final Thoughts

In-sourcing Direct Payment support services offers councils the opportunity to retain control, enhance accountability, and deliver integrated care aligned with local priorities. However, this approach requires significant investment in resources, expertise, and governance to succeed. Without these, insourced services risk becoming inflexible, under-resourced, or disconnected from citizen needs.

By adopting a strategic approach that emphasises training, innovation, and citizen engagement, councils can realise the benefits of insourcing while mitigating its challenges. A well-managed in-house DP support service can serve as a cornerstone of personalised, cost-effective social care that aligns with the principles of the Care Act 2014.

References

Glasby J & Littlechild R (2009) Direct payments and personal budgets Putting personalisation into practice. Policy Press.
Leece J & Bornat J (2006) Developments in direct payments. Policy Press.
Resnik D B (2015) Institutional conflicts of interest in research in: Science and Engineering Ethics, 21(1), 83–96.
Association for Public Service Excellence (APSE) Insourcing A guide to bringing local authority services back in-house (apse.org.uk)