A review of direct payment policies across English councils, identifying opportunities for more flexibility.

Findings and implications for adult social care commissioners under the Care Act 2014.

1. Purpose

This briefing is intended for local authority commissioners and senior leaders in adult social care. Its aim is to support more effective and confident commissioning practice by exploring how Direct Payments are currently interpreted in policy across English councils, and to identify where greater flexibility can be encouraged in line with the Care Act 2014.

The article draws on a review of all 152 English Local Authority Direct Payment policy documents and guidance available in the public domain. It highlights common patterns, identifies where good practice exists, and considers where commissioning and policy decisions may inadvertently restrict personalisation.

In doing so, it provides commissioners with:

• An overview of the legal and policy landscape surrounding Direct Payments
• Comparative data on how Direct Payments are used and restricted
• Examples of enabling practice from across the country
• A set of commissioning implications and recommendations for future practice

The overarching aim is to ensure that local systems support choice, control and flexibility in the use of personal budgets – in keeping with both the letter and spirit of the Care Act.

2. Background

Direct Payments are a key mechanism through which local authorities can deliver on the personalisation agenda in adult social care. They allow individuals to take control of their personal budget and use it to arrange support in a way that meets their assessed needs and promotes their wellbeing.

2.1 Legal Framework

The Care Act 2014 and the Care and Support (Direct Payments) Regulations 2014 provide the statutory foundation for Direct Payments in England. Local authorities have a duty to offer a Direct Payment where a person is eligible, has capacity (or an authorised representative), and consents to receive one.

The Act and its statutory guidance are explicit that Direct Payments should be:

• Flexible in how they are used, provided they meet assessed needs and outcomes
• Proportionate in terms of monitoring and oversight
• Outcome-focused, rather than prescriptive in terms of service types
• Supported by clear processes for agreement, review, and change

The legislation does not limit the use of Direct Payments to specific service types — instead, it places the emphasis on whether the use is legal, safe, and aligned to the person’s care and support plan.

2.2 Policy Intent

The introduction of Direct Payments — and their continued development through the personalisation reforms of the 2000s — was rooted in a commitment to giving people more control over their care. By enabling individuals to shape their support in ways that make sense to them, 

Direct Payments can:

• Improve wellbeing and independence
• Reduce reliance on traditional or institutional models
• Support inclusion, participation, and choice
• Deliver better outcomes through more tailored support

The personalisation agenda, strengthened by the Care Act, recognises that people themselves are often best placed to determine how to meet their needs, and that flexibility, autonomy and trust are essential principles.

2.3 Rationale for This Review

Despite the clear legislative intent, there is anecdotal and documented evidence that in many areas, Direct Payments are implemented in ways that are restrictive, risk-averse, or lacking in clarity. 

This can result in:

• Unnecessary constraints on how people can use their budgets
• Low take-up among groups such as older adults
• A reliance on standardised service options
• Missed opportunities for prevention, innovation, and cost-effectiveness

This review was therefore undertaken to explore how local authorities are interpreting flexibility and restriction in their Direct Payment policies, with a view to informing more enabling commissioning practice.

3. Flexibility in Use of Direct Payments

The Care Act statutory guidance is clear: personal budgets, including Direct Payments, are intended to support people in achieving personalised outcomes. This includes the flexibility to arrange support in a way that reflects the person’s preferences, routines, aspirations, and cultural context.

To understand how this flexibility is interpreted in practice, we reviewed policy documents and guidance from all 152 English councils. Our focus was on what councils explicitly state as permissible uses for Direct Payments beyond core care arrangements.

3.1 Core Allowable Uses

All councils support the use of Direct Payments for:

• Employing personal assistants (PAs)
• Purchasing home care or support from an agency
• Accessing day activities or community-based support

These uses are well established and consistently articulated across local authority documents.

However, beyond these core functions, the degree to which councils encourage or even mention alternative, creative or non-traditional uses varies considerably.

3.2 Wider Flexibility: A Mixed Picture

The chart below summarises the frequency with which different types of flexible use are mentioned in council policy documents.

3.3 Key Insights from the Data

Respite and Equipment: Around 140 councils permit Direct Payments to be used for short breaks or respite care, and 100 councils allow them to be used for equipment or minor adaptations. These are important options for many families and can help reduce long-term support needs.

Creative Uses: Only 20 councils provide examples of flexible, creative uses such as gym memberships, transport costs for meaningful activity, or engagement in hobbies or learning opportunities. Where these are included, the tone of guidance tends to be more enabling and outcome-focused.

Pooling Budgets and Admin Support: Fewer than 10 councils mention the possibility of pooling budgets with others to arrange shared support. Only five refer to paying a family member for help with managing the Direct Payment (e.g. as a personal assistant for admin purposes).

Use Abroad and Prepaid Card Opt-Outs: Just two councils provide guidance on the use of Direct Payments while abroad, despite this being lawful in certain circumstances. Around 50 councils mention that citizens can opt out of using a prepaid card – although some require formal requests or justification.

Hospital Stays: Very few councils clearly state whether a Direct Payment continues during a short hospital stay, despite national guidance advising that it should, where practical and in the person’s interest.

3.4 Implications for Commissioning

This variation in permitted uses reflects differences not in the law, but in local interpretation, confidence, and policy framing.

Where flexibility is explicitly encouraged:

• People are more likely to feel trusted, valued and in control
• Care planning becomes more meaningful and tailored
• Creative solutions can reduce dependency on traditional services

Where flexibility is limited or unclear:

• Direct Payments risk becoming transactional or service-led
• Take-up may be lower, especially for groups such as older adults
• Outcomes may be harder to achieve, particularly around wellbeing, inclusion and prevention

Commissioners have a key role in ensuring that local policy and practice promote the full range of possibilities that Direct Payments allow. This means working with care management teams, Direct Payment support services and user-led organisations to shift culture and practice toward enabling and outcome-focused models.

4. Prohibited Uses and Patterns of Restriction

While the Care Act encourages flexibility in how Direct Payments are used, it also requires that payments are not used in ways that are unlawful, unsafe, or unrelated to assessed needs.

As part of our review, we analysed local authority policy documents to understand how councils are communicating the boundaries of Direct Payment use. This includes what they prohibit outright, what they discourage, and how much discretion or explanation they provide.

4.1 Overview of Common Prohibitions

Most councils list a broadly similar set of items that cannot be funded through Direct Payments. These generally align with national guidance and case law, but in some areas, additional or more restrictive exclusions are introduced.

The chart below summarises the frequency of different prohibitions mentioned across English councils.

4.2 Key Observations from the Data

Universally Prohibited Items:
All councils prohibit the use of Direct Payments for:

• Healthcare services provided by the NHS
• Everyday living costs such as rent, food, and utility bills
• Long-term residential care placements (beyond short breaks)
• Illegal or harmful expenditures such as alcohol, drugs or gambling
• Paying family members in the same household (unless formally authorised)

Frequently Prohibited but Open to Interpretation:

• Over 100 councils prohibit ‘luxury’ or ‘non-care-related’ items – although what counts as a luxury item is rarely defined.
• Around 140 councils prohibit using Direct Payments for services provided by other public bodies (e.g. housing, education), even when those services relate to social care outcomes.
• 135 councils state that Direct Payments cannot be used to purchase services directly from the council — despite statutory guidance allowing for this in some circumstances.

Less Common but Noteworthy Restrictions:

• A small number of councils prohibit spending on travel abroad for support, or employing family members to help manage the Direct Payment (e.g. bookkeeping or timesheets).
• A few councils introduce limitations based on value judgments – such as restricting any spending deemed ‘not in the spirit’ of the Direct Payment.

4.3 Discretion and Transparency

There is significant variation in how councils present prohibited uses:

• Some provide clear rationale for exclusions, referencing the Care Act or regulations.
• Others include blanket statements with limited explanation or legal basis.
• A number of councils include phrases such as “you must not use your Direct Payment for anything we would not agree to”, which undermines the principle of individual choice and introduces ambiguity.

This lack of consistency can result in:

• Confusion among staff, providers, and Direct Payment holders
• Missed opportunities for creative or effective support arrangements
• Unwarranted refusals that may not withstand challenge

4.4 Implications for Commissioning

Restrictive or poorly explained prohibitions can dilute the value of Direct Payments as a tool for personalisation.

Commissioners should be alert to policies that:

• Go beyond what the law requires, without offering discretion or review
• Frame decisions in risk-averse or service-led terms
• Omit opportunities for innovation or user-led flexibility

At the same time, it is important that boundaries are clearly articulated and defensible. The challenge is to maintain clarity without rigidity, and to apply proportionate oversight without defaulting to restriction.

Local policies should distinguish between:

• Statutory exclusions (e.g. NHS care, unlawful activity)
• Discretionary exclusions (e.g. family payments, luxury items)
• Situations where flexibility may be considered through individual planning and agreement

5. Examples of Positive Practice

While many local authorities adopt a cautious or narrowly defined approach to Direct Payments, a small but growing number of councils demonstrate more enabling, person-centred practice. These councils recognise that flexibility is not a risk to manage, but a necessary condition for personalisation, independence and improved outcomes.

5.1 What Good Looks Like

Councils demonstrating positive practice tend to share the following characteristics:

• Clear, plain-language guidance that explains what is allowed, not just what is prohibited
• Concrete examples of how Direct Payments can be used flexibly
• Encouragement to think creatively, particularly where this helps avoid traditional or higher-cost services
• Processes for exceptions and discretionary decisions, especially around paying family members or using Direct Payments in non-standard ways

They also tend to adopt a tone of trust in their guidance – positioning the citizen as a partner in planning and spending decisions, rather than a risk to be monitored.

5.2 Examples from Council Policies

The following examples illustrate how some local authorities are going further in supporting flexible use:

• Herefordshire Council provides clear guidance on using Direct Payments for gym memberships and fitness activities where these are linked to social care outcomes. This reflects an understanding of wellbeing beyond service-based provision and helps shift the focus from ‘care’ to ‘life’.
• Haringey Council includes detailed instructions for using Direct Payments abroad, recognising that people with family overseas or cultural ties elsewhere may wish to arrange temporary support in another country. It also sets out conditions under which family members can be paid for administrative help, showing a nuanced and practical approach.
• Dorset Council explicitly allows the use of Direct Payments to purchase council-run services in certain situations – something permitted by law but often excluded in local policy. This supports continuity of care and provides people with more meaningful choice.
• Bristol City Council offers examples of flexible use in its public-facing materials and presents a clear distinction between essential restrictions and areas where discretion can be applied. It actively encourages families and support workers to propose alternative uses linked to wellbeing outcomes.

These councils provide a counterpoint to the default assumption that Direct Payments should only be used to replicate commissioned services. Their guidance reflects a willingness to engage with complexity and an understanding that individualised support requires individualised decision-making.

5.3 Learning for Commissioning

Commissioners in these areas have played a vital role in shaping local guidance that is:

• Consistent with the Care Act’s intentions
• Grounded in evidence of what works
• Supportive of innovation and co-production

Positive practice shows that flexible Direct Payments can support:

• More inclusive, community-based lives
• Reduced reliance on high-cost services
• Stronger relationships between councils, providers and citizens

In a time of budget constraints, these approaches are not just more person-centred — they are also more sustainable.

6. Implications for Commissioning

The findings of this review have direct implications for local authority commissioning functions. As the strategic leaders of the care and support system, commissioners play a central role in shaping the interpretation, application, and delivery of Direct Payments.
Even where the operational delivery of Direct Payments sits with care management or finance teams, commissioners influence the culture, tone, and permissiveness of local systems through policy decisions, provider frameworks, and strategic priorities.

6.1 Language and Framing Influence Culture

The way that Direct Payments are described in local guidance has a significant impact on how they are used in practice.

• Enabling language (e.g. “You can use your Direct Payment for anything that meets your agreed outcomes”) invites innovation, partnership, and ownership.
• Restrictive language (e.g. “You must not use your Direct Payment for anything we do not approve”) fosters risk aversion, compliance thinking, and dependence on professional approval.

Commissioners can and should challenge policy documents or practitioner handbooks that default to restrictive language, or that treat flexibility as an exception rather than a feature.

6.2 Personalised Care Planning Must Lead

The effectiveness of a Direct Payment rests on the quality of the underlying care and support plan. If plans are service-led, vague or generic, then Direct Payments risk becoming a way to buy more of the same — rather than a route to something different and better.

Commissioners should ensure:

• Support planning is explicitly outcome-focused
• Review processes consider what matters to the person, not just inputs and costs
• Training and practice tools promote imaginative thinking and strength-based planning

Where this is embedded, more varied and creative uses of Direct Payments become not only possible but expected.

6.3 Monitoring and Prepaid Systems Must Be Proportionate

Many councils have introduced prepaid card systems to monitor Direct Payments, but in some cases this has led to:

• Reduced choice over how funds are held and managed
• Surveillance-style oversight that undermines trust
• Legal challenge, particularly where opt-outs are not made available

Commissioners should:

• Ensure that prepaid cards are optional, not mandatory
• Regularly review monitoring arrangements for proportionality
• Reframe monitoring as a shared tool for accountability, not control

The Care Act guidance is clear: monitoring must be proportionate to risk. Over-monitoring low-risk users can drive up costs and disengagement.

6.4 Flexibility Supports Sustainability

There is a tendency to view flexibility as a risk to be managed — but in reality, it can be a lever for prevention, independence and sustainability.

Where Direct Payments are used to:

• Maintain people’s skills and confidence
• Reduce isolation and dependence
• Avoid crisis or high-cost placements

They deliver better outcomes and reduce demand on formal services.

Commissioners should develop business cases that reflect the true value of flexibility — not only in improving lives, but in managing public resources more effectively.

7. Considerations

This section sets out a series of practical recommendations for commissioners seeking to improve the effectiveness and flexibility of Direct Payments in their local area. These actions are aligned with the Care Act 2014 and reflect learning from local authorities that have developed more enabling policy frameworks.

7.1 Review Local Direct Payment Policies and Guidance

• Audit your current Direct Payment policy, public-facing materials, and staff guidance documents for alignment with statutory guidance.
• Identify areas where the language or content is unnecessarily restrictive, vague, or lacking in examples.
• Work collaboratively with legal, finance and operational colleagues to update these documents, ensuring they reflect the principles of flexibility, proportionality and personalisation.

7.2 Promote Creative and Outcome-Focused Use

• Develop a library of example uses of Direct Payments that reflect a wide range of personalised and cost-effective arrangements (e.g. community activities, transport, technology, shared arrangements).
• Use these examples in practitioner training, support planning tools, and Direct Payment agreements.
• Encourage social workers to explicitly build creative options into support plans where appropriate, especially for younger adults or those moving out of formal care settings.

7.3 Support Informed Risk and Discretion

• Embed processes that enable discretion, rather than blanket prohibitions — for example, allowing case-by-case consideration of payments to family members, or overseas use in exceptional circumstances.
• Provide training for practitioners on applying professional judgment, using risk enablement principles, and focusing on outcomes rather than services.

7.4 Ensure Proportional Monitoring and Flexible Payment Systems

• Offer multiple ways to receive and manage Direct Payments, including bank transfers and third-party arrangements, not just prepaid cards.
• Ensure monitoring is proportionate to risk and capacity, and that it supports people rather than deterring them.
• Review your use of prepaid cards to ensure citizens can opt out if they have valid reasons, and that such decisions are respected.

7.5 Embed Flexibility Within Commissioning and Market-Shaping Functions

• Use market-shaping responsibilities to support innovation in how Direct Payments are used — e.g. developing micro-enterprise networks, promoting individual service funds, or supporting provider alliances that facilitate more personalised provision.
• Involve people with lived experience and user-led organisations in the design and evaluation of your Direct Payment offer.
• Monitor trends in Direct Payment take-up, creative use, and cost-effectiveness across demographic groups, and use this data to inform future commissioning strategy.

8. Conclusion

Direct Payments remain one of the most powerful levers for delivering personalised, outcome-focused care and support under the Care Act 2014. At their best, they enable individuals and families to design support that fits their lives, draws on their strengths, and avoids unnecessary reliance on traditional services.

However, this national review of local authority policies shows that the implementation of Direct Payments is uneven. While some councils demonstrate bold, enabling approaches that reflect the spirit of the legislation, others adopt a more cautious, restrictive stance. These differences are not rooted in law, but in local interpretation, culture, and commissioning practice.

For commissioners, this represents both a challenge and an opportunity.

The challenge lies in addressing outdated or overly risk-averse frameworks that constrain innovation, limit take-up, and diminish the value of Direct Payments.

The opportunity is to lead a shift toward more confident, proportionate, and person-centred commissioning – one that:

• Frames Direct Payments as a means of achieving outcomes, not just purchasing services
• Embeds flexibility as a default, not an exception
• Values trust, co-production and individual decision-making
• Supports innovation, sustainability and inclusion

This approach ensures that Direct Payments function as a practical tool for delivering personalised support, rather than being reduced to an administrative process.

Chris Watson
Chris Watson is the founder of Self Directed Futures, the Chair of SDS Network England and co-founder of LDA Commissioners Network. With extensive experience in strategic commissioning and change management, Chris advocates for innovative, community-led approaches to adult social care.