Contact: David Ward Ext: 7259

email: [email protected]

Contact: David Ward Ext: 7259

email: [email protected]

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1 Published works

2 Documents which disclose exempt or confidential information as defined in the Act

Ref/Initials/5-May-06

APPENDIX 1

IN THE MATTER OF COMMUNITY CARE

AND DIRECT PAYMENTS

INSTRUCTIONS TO COUNSEL

TO ADVISE IN WRITING

1. Counsel is instructed in this matter by Jeff Pattison, Head of Corporate and Legal Services, Hampshire County Council, The Castle, Winchester, Hampshire SO23 8UJ. Jennifer Watts has conduct of this matter and can be contacted on telephone number 01962 847352, or by fax on 01962 844024 on Wednesdays, Thursdays and Fridays. Ian Dumont can be contacted on the same number on Mondays and Tuesdays.

2. Counsel has herewith:

(i) Previous instructions to Counsel dated February 1997 and Opinion provided by Richard Gordon QC.

(ii) Community Care, Services for Carers and Children Services (Direct Payments) (England) Regulations 2003.

(iii) Fairer Charging Policies for Home Care and Other Non Residential Social Services September 2003.

(iv) Local Authority Circular (2001) 32 dated 23 November 2001.

(v) Section 57 Health and Social Care Act 2001.

(vi) Letter of Advice from Luke Clements - 15 March 2006.

(vii) Fairer Charging Policies for Home Care and other Non-Residential Social Services - Practice Guidance.

(viii) Joint Report by the Director of Adult Services and the County Treasurer to Committee dated 9 December 2005

Background

3. For some 16 years prior to 1997, Hampshire County Council ran the
Self-Operated Care Scheme ("SOCS"), a process by which individual service users received payments in lieu of community care services that they would otherwise have been provided with to meet their assessed needs. The principle behind this was to enable those users to control and manage their own care arrangements, thus enabling the service user to be independent, and to promote choice and controls rather than being dependent upon the local authority for the services received.

4. SOCS was operated under general social services legal powers, namely Section 29 National Assistance Act 1948. Although the Government recognised the value of schemes such as SOCS, there were some authorities who were reluctant to provide such schemes without specific statutory powers. This led to the Community Care (Direct Payments) Act 1996, which came into force on 1 April 1997.

5. Counsel will be aware that the 1996 Community Care (Direct Payments) Act gave local authorities the power to make direct payments to service users to enable them to secure services to meet their assessed needs and that this was subsequently repealed and replaced by Section 57 of the Health and Social Care Act 2001 with Regulations being made by the Secretary of State in 2003.

6. Following the introduction of the 1996 Act providing a comprehensive statutory code for the making of Direct Payments, it was no longer legally permissible to utilize general statutory powers to circumvent the requirements of that code. However there were some important differences between direct payment schemes permitted under the 1996 Act and the "SOCS" previously operated by Hampshire County Council. The difference of most relevance related to charging. Statutory guidance on the Act issued by the Secretary of State required authorities to treat direct payment recipients as they would have treated them under their non-residential charging policy if they were receiving the equivalent services. Counsel's advice clarified that the Council was bound by the requirement to treat service users and direct payment recipients equally. SOCS users were used to receiving a flat rate payment without being means tested and the prospect of a means tested scheme was deeply unpopular with them.

7. After much consideration, a proposal was developed which Counsel confirmed was, in his opinion, lawful. This involved the creation of two new schemes: Scheme A where there was no means testing and a flat rate was paid; Scheme B where there was means testing and the direct payment was paid net of a client contribution. Users could opt which scheme they could go on to. On the basis that there was choice, the requirement to treat people equally was considered to have been met. Social Services Committee approved this way forward in 1997.

8. In 2002, further consideration was given to the schemes under which direct payments were operating due to the further statutory guidance "Fairer Charging Policies for Home Care and Other Non-residential Social Services". This contained a paragraph emphasising the need for equality of treatment between direct payment recipients and service users. The two schemes continued in operation after 2002 following clarification from the Department of Health that the Council's two schemes could continue on the basis that there was a choice for users.

9. Regulation 5 (2) of the Community Care, Services for Carers and Childrens Services (Direct Payments) (England) Regulations 2003 states "for the purpose of making the payment ... the Responsible Authority shall determine, having regard to the prescribed persons means, what amount or amounts (if any) it is reasonably practicable for him to pay towards securing the provision of the relevant service".

10. These regulations came in to effect in April 2003 i.e. post the decision taken by Hampshire County Council Cabinet in 2002 that both Scheme A and Scheme B could continue.

11. The statutory guidance issued in September 2003 "Fairer Charging Policies for Home Care and other non residential Social Services" states in paragraph 86
"in considering whether, and if so how, to ask an individual to make a financial contribution to the cost of their care package, Councils should treat receiving direct payments as they would have treated them under the Council's charging policy, if those people were receiving the equivalent services. Charges should be assessed and made in all respect in accordance with this guidance".

Counsel's Instructions

12. Counsel is asked to advise whether Hampshire County Council can lawfully continue to operate Scheme A at all having regard in particular to the requirements of Regulation 5 of the 2003 Regulations. If not, is there any possible lawful way to allow the current Option A to continue for existing recipients only (i.e close Scheme A to new applicants).

13. If Counsel does not consider that Scheme A can lawfully continue to operate Counsel is asked whether there is any other basis on which the Council can lawfully operate a flat rate scheme without means testing the recipients of the direct payments.

14. Counsel is asked to contact Jennifer Watts or Ian Dumont on 01962 847352 if further information or documentation is required.

.


Signed .......................

Jennifer Watts, Solicitor

Dated ........................

IN THE MATTER OF COMMUNITY CARE &

DIRECT PAYMENTS

INSTRUCTIONS TO COUNSEL

Richard Gordon QC

Brick Court Chambers

DX: 302

LONDON/CHANCERY LANE

J A Pattison Head of Corporate and Legal Services

Hampshire County Council

The Castle

Winchester

Hampshire

SO23 8UJ

File ref:

APPENDIX 2

IN THE MATTER OF COMMUNITY CARE AND DIRECT PAYMENTS

O P I N I O N

Pt 1 INTRODUCTION

1. I am instructed to advise on behalf of Hampshire County Council (`HCC'). The issue that arises is whether the schemes currently operated by HCC in respect of direct payments for community care services are lawful.

2. The remainder of this Opinion is structured as follows. Pt 2 sets out the relevant background. Pt 3 identifies the questions on which my advice is sought. Pt 4 outlines the material legal regime. Pt 5 contains my analysis. Finally, Pt 6 summarises my Conclusions.

Pt 2 RELEVANT BACKGROUND

3. For some 16 years prior to 1997, HCC operated the Self-Operated Care Scheme (`SOCS') a distant precursor of direct payments. This scheme involved direct payment to individual service users in lieu of community care services that they would otherwise have been provided with to meet their assessed needs. It was assumed that SOCS was lawfully operated under the general statutory authority of s. 29 of the National Assistance Act 1948.

4. However, I was asked to advise on the legality of SOCS having regard to the then imminent enactment of the Community Care (Direct Payments) Act 1996 (`CCDPA') which came into force on April 1^st 1997. In my Opinion dated March 11^th 1997 I advised that HCC could not lawfully continue SOCS after CCDPA came into force because this would be to bypass the statutory restriction contained in CCDPA s. 1(1)(b) (see paragraph 2(3) of my Opinion).

5. Following the passing of CCDPA, HCC introduced a new direct payments scheme which contained two discrete elements. Scheme A involved direct payments with no means testing and with payment of a flat rate being made. Scheme B involved means testing with the direct payment being paid net of a client contribution. Users could opt for whichever scheme they preferred.

6. It appears that further consideration was given as to the legality of Schemes A and B following the introduction of Central Government Guidance `Fairer Charging Policies for Home Care and Other Non-residential Social Services' (`the Fairer Charging Guidance') (see Pt 4 below). I am instructed that the Department of Health clarified in 2002 that HCC's scheme could continue because there was a choice for service users.

7. Importantly (see Pt 4 below) as from March 16^th 2003, CCDPA was repealed and replaced by s. 57 of the Health and Social Care Act 2001 (`HSCA'). Pursuant to HSCA, regulations were made by the Secretary of State for Health in 2003 - these were the Community Care Services for Carers and Children's Services (Direct Payments) (England) Regulations 2003 SI 2003/762 (`the Regulations').

8. In summary, questions have arisen having regard to the passing of HSCA and the Regulations as to the legality of Scheme A. This is because of the flat rate nature of that part of the scheme which does not take account of service users' means.

9. HCC has been sent by an advice given by Luke Clements, a specialist and well known community care solicitor and academic, to the effect that Scheme A/B is lawful. However, Luke Clements appears to have based his advice solely by reference to the Fairer Charging Guidance - a point to which I will return. The advice was provided by Mr. Clements to Philip Mason (Hampshire Centre for Independent Living).

Pt 3 THE QUESTIONS

10. I am asked to consider the following three questions:

(i) Can HCC lawfully continue to operate Scheme A at all having regard, in particular, to the requirements of regulation 5 of the Regulations?

(ii) (If not) is there any possible lawful way to allow the current Scheme A to continue for existing recipients only?

(iii) Is there any other basis on which HCC can lawfully operate a flat rate scheme without means-testing the recipients of the direct payments?

Pt 4 MATERIAL LEGAL REGIME

11. It is, first, necessary to consider HSCA s. 57. Section 57(1) provides as follows:

`(1) Regulations may make provision for and in connection with requiring or authorising the responsible authority in the case of a person of a prescribed description who falls within subsection (2) to make, with that person's consent, such payments to him as they may determine in accordance with the regulations in respect of his securing the provision of the service mentioned in paragraph (a) or (b) of that subsection.'⁴

12. HSCA s. 57(3) provides a non-exhaustive list of the proper content of Regulations under s. 57(1). These include the power to make regulations `specifying circumstances in which the responsible authority are not required or authorised to make any payments' (s. 57(3)(a)) and regulations providing `for any payment required or authorised by the regulations to be made to a person ... to be made to that person as gross payments or alternatively as net payments' (s. 57(3)(b)).

13. So far as the Regulations are concerned, regulation 5(1) provides for the making of direct payments as either gross or net amounts.⁵ Regulation 5(2) then stipulates that:

`For the purpose of making the payment referred to in paragraph (1), the responsible authority shall determine, having regard to the prescribed person's means, what amount or amounts (if any) it is reasonably practicable for him to pay towards securing the provision of the relevant service (whether by way of reimbursement as mentioned in section 57(4) of the 2001 Act or by way of a contribution as mentioned in section 57(5) of that Act).'

[Underlining added].

14. Moving on to Guidance, although HCC has considered the effect of the Fairer Charging Guidance, I should - before coming to that document - make reference to Central Government Guidance that is exclusively concerned with direct payments, namely the Community Care (Direct Payments) Policy and Practice Guidance (`the Direct Payments Guidance').

15. Paragraphs 88-90 of the Direct Payments Guidance are material. Paragraph 88 provides thus:

`In considering whether to ask recipients of direct payments to make a financial contribution to the cost of their care package, the Regulations provide that the local council shall determine, having regard to the recipient's means, what amount or amounts (if any) it is reasonably practicable to pay towards the cost. For people assessed as needing community care services or carer services, the relevant guidance is Fairer Charging Policies for Home Care and Other Non-residential Social Services.'

[Underlining added].

16. Paragraph 89 provides as follows:

`There are two ways in which an individual may make a financial contribution to the cost of his or her care. The council may make a direct payment that is equivalent to their estimate of the reasonable cost of the service and subsequently seek reimbursement (gross payment). Alternatively, the local council may deduct from their estimate the assessed charge before the payment is made and make direct payments net of the amount that the individual is expected to make (net payment). Councils should take into account the views of users when producing their policy on charging, allowing sufficient flexibility to respond to individual circumstances.'

[Underlining added].

17. Finally, paragraph 90 states that:

`Councils are reminded that they do not have power to charge for services provided under section 117 of the Mental Health Act 1983 (after-care). Accordingly, where local councils make direct payments instead of providing services under section 117 of the Act, they may not seek payment, whether by way of reimbursement or a contribution. Where the need for services arises under section 17 of the 1989 Act and payments are made to persons with parental responsibility for a child aged 16 or 17, or to a person in receipt of certain benefits, the same restrictions on charging apply.'

[Underlining added].

18. Apart from HSCA it is also relevant to consider the Local Government Act 2000 (`LGA') LGA s. 2(1) provides (materially) as follows:

`Every local authority are to have power to do anything which they consider is likely to achieve any one or more of the following objects:

...

(b) the promotion or improvement of the social well being of their area ...'.

19. LGA s. 2(2) provides that the general power in s. 2(1) may be exercised for the `whole or part' of an area and in respect of `all or any person' resident or present in that area. This implies that the exercise of the powers, the formulation of the local authority's practices and policies (most probably contained in the community strategy required to be established under LGA s. 4)⁶ can be devised by reference to categories of places or persons but must retain a flexibility to deal with specific circumstances as and when they arise.

20. LGA s. 2(4) gives examples of the use that might be made of the s. 2(1) power and includes (see s. 2(4)(b))giving financial assistance to any person.

21. By virtue of LGA s. 3(1) the local authority may not use s. 2 to do anything which they are unable to do by virtue of `any prohibition, restriction or limitation on their powers which is contained in any enactment.' It is immaterial when the enactment was passed.

22. Quite what constitutes a `prohibition, restriction or limitation' has been the subject of consideration by the Courts. In R v. Lewisham LBC, ex p. Theophilus [2002]] EWHC 2211 Silber J had to consider whether s. 2 enabled the local authority to give a bar student "student support" (i.e. paying fees and a living allowance etc) despite the fact that under the relevant regulations she was ineligible. Lewisham had mistakenly represented that it would pay student support.

23. The issue was whether s. 2 gave the local authority power at all and whether s. 3 prevented its exercise because the student was ineligible under the regulations.

24. At paragraph 18 of the judgment the judge held that s. 2(1) was sufficient authority (see also paragraphs 22-25).

25. Similarly, in asylum cases, the Court of Appeal indicated in R v. Lambeth LBC, ex p. W [2002] EWHC 1371 that the mere absence of other statutory power or a restriction directed towards housing authorities does not affect the powers of social services (see the judgment of Brooke L.J. especially at paragraphs 74-75).

Pt 5 ANALYSIS

Question (1) - Can HCC lawfully continue to operate Scheme A at all having regard, in particular, to the requirements of regulation 5 of the Regulations?

26. The analysis must be directed to the scope of the statutory power(s) to make direct payments. This is because HCC is a local authority and a local authority may only exercise powers that have been conferred on it by Parliament.

27. In determining the scope of a statutory power some principles are of particular importance in the present context. First, in the absence of an express statutory power a power may only be implied. In determining whether or not a power may be implied the process is solely one of statutory interpretation to be judged mainly by the language that Parliament has used.

28. Secondly (and very much connected to the first principle) a statutory power cannot be implied merely because it would be desirable for the public body to have it. As Lord Lowry observed in McCarthy and Stone (Developments) Ltd v. London Borough of Richmond upon Thames [1992] 2 AC 48:

`The rule is that a charge cannot be made unless the power to charge is given by express words or by necessary implication. These last words impose a rigorous test going far beyond the proposition that it would be reasonable or even conducive or incidental to charge for the provision of a service.'⁷

29. Thirdly, it is well established (see, eg, Credit Suisse v. Borough Council of Allerdale [1997] QB 306) that one cannot use even a broadly worded statutory power to bypass a comprehensive statutory code unless Parliament has made its intentions clear.

30. Here, it is clear from the terms of HSCA s. 57(1) that the power to make direct payments under HSCA can only be derived from the terms of the empowering regulations. I draw attention to the phrase in s. 57(1) `such payments to him as they may determine in accordance with the regulations.'

31. There is no ambiguity in HSCA s. 57(1). Direct payments may only be made in accordance with the regulations. However, as explained above, regulation 5(2) of the Regulations stipulates that direct payments are to be determined `having regard to the prescribed person's means.'

32. Similarly, there is no ambiguity in the Regulations which require that for a direct payment to be able to be paid the quantum of such payment must be assessed by reference to the means of the individual recipient concerned.

33. Nothing in the Guidance can alter the meaning and effect of primary legislation (see, especially, R v. Wandsworth London Borough Council, ex p. Beckwith [1996] 1 WLR 60).

34. However, the relevant Guidance (see paragraph 88 of the Direct Payments Guidance) confirms the clear meaning of the specific legislation.⁸

35. The Fairer Charging Guidance is concerned with charging more generally under s. 17 of the Health and Social Services and Social Security Adjudications Act (`HASSASSA') but must, mutatis mutandis, be applied to direct payments as to specific s. 17 social care services (see Fairer Charging Guidance at paragraph 86). That includes the obligation in paragraph 86 on a local authority to `treat people receiving direct payments as they would have treated them under the council's charging policy, if those people were receiving the equivalent services.' However, nothing in this obligation or in the Fairer Charging Guidance taken as a whole can affect the proper interpretation of regulation 5(2) of the Regulations.

36. Applying those principles to HSCA there is, in my view, no power under HSCA to implement Scheme A. This is, essentially, because:

(i) HCC may, under HSCA (including regulation 5(2)), only adopt schemes that take into account the means of the individual service user: Scheme A is not such a scheme.

(ii) The fact that a service user may choose a lawful scheme (Scheme B) as opposed to a scheme that is unlawful (Scheme A) cannot, in logic, have the consequence that the service user may choose a scheme (Scheme A) outside HSCA merely because it is more convenient for the service user.⁹

37. It also occurs to me (though this has not been a determining factor in my reasoning) that a fixed payment without recourse to means may, depending on the detail of Scheme A, be at least capable of producing some anomalous (and presumably unintended) effects. Would, for example, a rich service user be able to by-pass the constraints of means-testing by opting always for Scheme A? If that were so, it might mean that the local authority budget could become seriously distorted.

38. LGA must also be considered although it is, to my mind, highly material that there is a very specific set of statutory provisions relating to direct payments which would be effectively by-passed if LGA could simply be used instead.

39. There are two issues in relation to LGA. First, is there any restriction, prohibition or limitation on direct payments such as to trigger s. 3 LGA?

40. Secondly, and in any event, has HCC invoked (or could HCC invoke) LGA given the existence of HSCA and the clear and specific scheme for direct payments contained in HSCA?

41. As to the first point, whilst there is no express prohibition in HSCA on making direct payments outside the terms of HSCA it seems clear that HSCA and the Regulations are intended to provide a comprehensive statutory code for the making of such payments: hence the accompanying direct payments guidance. I consider, therefore, that because of this specific statutory code, a Court would be likely to infer an implied limitation under LGA s. 3 so as to prevent direct payments being made in a manner outside Regulation 5(2).

42. Even if as a matter of theory direct payments could be made under LGA s. 2(1) (being a form of financial assistance to the service user for the purposes of social care) it is very difficult to see how, in practice, a local authority could reasonably come to the view that a scheme such as Scheme A was necessary to achieve the objectives of social well being given the panoply of powers under HSCA and the existence of Scheme B.

43. Finally, I have considered the points made by Luke Clements in his helpful letter dated March 17^th 2006. That letter makes a number of important points about Guidance both generally and in respect of the specific Guidance to which he refers.

44. He addresses a particular part of the Fairer Charging Guidance (paragraph 86 and the obligation referred to in paragraph 30 above) and clarifies that the concept of equal treatment in human rights law is not written in stone but admits of a reasonable and purposive application. However, he does not appear to have been asked to address regulation 5(2) (and HSCA s. 57(1)) or LGA ss. 2-3. These are, to my mind, the critical provisions. Whilst Luke Clements correctly points out how desirable it would be for HCC to have the power to implement Scheme A (and why that is a good reason to interpret the Guidance in a purposive manner) he has not been invited to analyse the effect of regulation 5(2), HSCA or LGA.

45. For the reasons given, I consider that Scheme A is unlawful.

Question (2) - (If not) is there any possible lawful way to allow the current Scheme A to continue for existing recipients only?

46. As just indicated, I can well understand why HCC would like to continue to use Scheme A. The way in which Question (2) is phrased suggests that I am being asked to be as imaginative as possible in the absence of a positive opinion on Question (1).

47. The short answer to Question (2), however, is that if Scheme A is unlawful, the local authority has no power to continue it.

48. This is subject to one qualification. If a violation of fundamental rights would be involved by withdrawal of the benefits conferred by Scheme A then it is at least arguable that under the Human Rights Act s. 6, HCC could seek to justify continuing Scheme A in favour of existing recipients.

49. There is, however, only the slenderest basis provided by a decision of the European Court of Human Rights for suggesting that exercise of a power that is ultra vires may be continued on fundamental rights grounds. Such proposition has not been endorsed in any domestic case.

50. In Stretch¹⁰ the Applicant's building lease, granted by the Borough Council, contained an option to renew. The Applicant gave notice to the Council's successor of his wish to exercise the renewal option. However, this request was refused because the original grant of the option had been made ultra vires. In domestic proceedings the Applicant sought declarations and specific performance but his claim and appeal were dismissed. He applied to the European Court of Human Rights alleging a breach of Article. 1of the First Protocol. The Strasbourg Court held that he had a legitimate expectation of exercising the option. The Council was not obliged in law to renew so its refusal could not amount to interference with the Applicant's possessions. However, it was held that the Council's actions did deprive the Applicant of part of the consideration which he gave in entering the original agreement. That was an interference with peaceable enjoyment of his possessions and the interference was disproportionate. This was, therefore, a violation of his Article 1 rights and compensation was awarded for pecuniary and non-pecuniary damage (that is, for frustration and inconvenience).

51. It is, however, by no means clear to me that such an argument - even if it could be advanced as a matter of theory - would survive the facts of this case. Given that the Fairer Charging Guidance (paragraph 86) itself requires a charging regime that impacts upon service users equally (i.e. whether or not such users are in receipt of direct payments) it does not seem to me to be easy to advance the contention that a service user's fundamental rights would be violated by withdrawal of Scheme A.

52. In my view, there is no realistic basis for contending that existing recipients could lawfully continue to receive direct payments under Scheme A.

Question (3) - Is there any other basis on which HCC can lawfully operate a flat rate scheme without means-testing the recipients of the direct payments?

53. Again, I regret that the answer to this Question is short. If a flat rate scheme without means-testing is unlawful, then there is no other basis on which, applying the principles set out above, direct payments could be made.

Pt 6 CONCLUSIONS

54. I advise and conclude as follows:

(i) HCC does not have power to use Scheme A. It cannot use Scheme A under HSCA and regulation 5(2) because: (a) under regulation 5(2) of the Regulations it may only make direct payments that take the means of the individual service user into account: Scheme A (by definition) does not; (b) the element of being able to opt out and choose Scheme B instead does not have the effect of validating Scheme A: HCC does not have power to give service users the choice of receiving payments without having their means taken into account.

(ii) Nor do I consider that HCC can lawfully implement Scheme A by recourse to LGA. First, the highly specific nature of the direct payments regime under HSCA and the Regulations would be eroded if there were power to make direct payments in a different manner under LGA s. 2(1): for that reason I consider that there is likely to be an implied limitation under LGA s. 3. Secondly, and in any event, I consider that a local authority would be unlikely in practice to be able reasonably to conclude that it was promoting the objective of social well being by implementing Scheme A given the wide ranging statutory powers under HSCA s. 57 and Regulation 5(2).¹¹

(iii) If, as I advise, HCC does not have power to use Scheme A it follows that it cannot lawfully continue to use Scheme A even in relation to existing recipients. This is subject to the qualification that if by removing Scheme A service users' fundamental rights were to be infringed it is arguable (though no more than arguable) that HCC would have power to continue Scheme A for existing recipients. Importantly, however, the proposition that exercise of a supposed power that is, in fact, ultra vires may continue where abandonment of that power will infringe fundamental rights has not been tested in any domestic case. I regard it as an unrealistic argument.

(iv) If HCC does not have power to use Scheme A it may not adopt any other (new) flat rate scheme that does not take account of the means of service users.

55. I fully understand the reasons why HCC would like to continue to use Scheme A. There is rarely certainty over the scope of statutory powers and a Court would, I suspect, be sympathetic to HCC's reasons for wishing to continue with the Scheme. Ultimately, the only way of reaching complete certainty is by authoritative ruling of the Court. However, for the reasons I have given here I do not consider it likely that a Court, however sympathetic, would be likely to hold that Scheme A was lawful.

56. This Opinion is given for the benefit of HCC. I understand that it may be made public under the Freedom of Information Act. However, anyone reading it under that Act is reminded that they should not rely on the views expressed here but should seek their own legal advice.

57. I shall be happy to advise further if there are any queries arising out of this Opinion or otherwise.

RICHARD GORDON Q.C.

Brick Court Chambers,

7-8 Essex Street,

London WC2.

April 7^th 2006.

APPENDIX 3

Dear Miss Hudson

HAMPSHIRE COUNTY COUNCIL'S DIRECT PAYMENTS SCHEME

I write to you on behalf of the Director of Adult Services in the hope that you can offer some assistance with the proper interpretation of The Community Care, Services for Carers and Children Services (Direct Payments) Regulations 2003 and the Fairer Charging Policies Guidance issued in September 2003 as they impact upon this Authority's current charging scheme for direct payments. In essence, prior to 1997, this Authority offered a scheme by which individual service users received payments in lieu of community care services that they would otherwise have been provided with to meet their assessed needs. This scheme was operated under the general social services legal powers contained in Section 29 of the National Assistance Act 1948.

The requirement on the Local Authorities to offer such a service was then embodied in the Community Care (Direct Payments ) Act 1996 which came into force the following year. Statutory guidance on the 1996 Act issued by the Secretary of State required authorities to treat direct payment recipients as they would have treated them under their non-residential charging policy if they were receiving the equivalent services.

Counsel's advice clarified that the Authority was bound by the requirement to treat service users and direct payment recipients equally. Effectively, this meant that where a user receiving a directly provided service would be means-tested and required to pay a contribution, then a recipient of a direct payment, who was expected to use their payment to buy an equivalent service, should also be means-tested and expected to pay a contribution. In response to the 1996 Act Hampshire County Council established two new schemes:

Scheme A, where there was no means testing and a flat rate was paid;

Scheme B, where there was means testing and the direct payment was paid net of a client contribution.

Users could opt which of the two schemes they could go on to. On the basis that there was a choice, the requirement to treat people equally was considered to have been met.

In August 2002 Hampshire County Council wrote to the Department on Health on the issue of Direct Payments. A copy of that letter is enclosed for ease of reference.

The Community Care, Services for Carers and Children Services (Direct Payments) (England) Regulations 2003 came into effect in April 2003 after the decision taken by this Authority in 2002 that both Scheme A and Scheme B should continue. Regulation 5 (2) of 2003 Regulations states

"For the purposes of making the payment... the Responsible Authority shall determine, having regard to the prescribed persons means, what amounts or amounts (if any) it is reasonably practicable for him to pay towards securing the provision of the relevant service".

The statutory guidance issued in September 2003 states that in considering when and if so how to ask an individual to make a financial contribution to costs of their care package, Councils should treat receiving direct payments as they would have treated them under the Council's charging policy, if those people were receiving the equivalent services. Charges it said, should be assessed and made in all respects in accordance with the guidance.

I write to ascertain whether the Department of Health has a view as to whether this Authority could properly continue to operate Scheme A (i.e. flat rate charge) bearing in mind the requirements of Regulation 5 of the 2003 Regulations. Furthermore, in the event that the Department takes the view that Scheme A can no longer continue to be operated, is the Department aware of any other basis upon which this Authority could continue to operate a flat rate scheme without means testing the recipients of the direct payments.

I would be most grateful if you would provide a written response to the difficult issues raised as soon as possible. Please do not hesitate to contact either me or Jennifer Watts, should there be any questions relating to the contents of this letter. I thank you for your help in anticipation of your response .

Yours sincerely

Ian Dumont

Adult Services Solicitor

APPENDIX 4

27 April 2006

Mr Ian Dumont

Legal Practice

Chief Executives, The Castle

Winchester

Hampshire

SO23 8UJ

Dear Mr Dumont

Hampshire Country Council's Direct Payments Scheme

I am writing in the first instance to acknowledge receipt of your letters regarding your scheme. We are currently considering the matter in consultation with Department of Health solicitors.

The issues raised in the correspondence, both from yourselves and from the Hampshire Centre for Independent Living, are potentially much wider than the Hampshire Scheme.

The Department of Health would be willing to offer a view concerning how the legislation falls to be interpreted and regarding its policy in this area. However, as you will appreciate, the Department is unable to provide legal advice to councils and others. Subject to further consideration, if there are any amendments to the legislation which Ministers consider it is appropriate to make, these could not take effect immediately as they would have to go through the usual Parliamentary process and, in any case, they would not be retrospective.

We will be in contact with you in due course when we have had time to consider all of the issues.

Yours sincerely

Kathryn Hudson

National Director for Social Care

KH/CS/041

cc Phillip Mason - Hampshire Centre for Independent Living

APPENDIX 5

Legal Implications

The Chief Executive advises that the key points to note on the legal position are as follows:

The law has changed in the period since the question of the legality of operating a flat rate scheme was last considered by the Cabinet in September 2002. In particular, Regulations coming into force in April 2003 have made it mandatory for social services authorities to means test recipients of direct payments.

The barrister approached by the Council for advice, Richard Gordon QC, is well-respected nationally as an expert in public law, and social services law in particular. It will be noted from the instructions given that advice has been sought as to any possible legal basis on which the Council could continue to operate a flat rate scheme. Counsel has considered other possible options, including the use of the power to promote social well being under S.2 Local Government Act 2000, and whether there are possible human rights arguments that could justify retention of the current scheme. However, he concludes that there is no such basis. Thorough consideration has been given to the issues, and seeking a further opinion from another source is unlikely to produce any different outcome. This would also be difficult to justify as a use of public funds.

The legal advice obtained by Hampshire Centre for Independent Living, from Luke Clements, a community care solicitor, was included in the material given to Counsel to consider in giving his advice. Counsel notes that Mr Clements' advice is based on an assessment of guidance, and omits to consider at all the key point that the Regulations coming into force in April 2003 make means testing mandatory.

All public bodies are required to act within the scope of the powers and legal framework applicable to them, and cannot act ultra vires i.e. in excess of their legal powers. The Council must therefore take steps to cease the operation of Scheme A and offer direct payments within a regime that fully complies with the law.

In the unlikely event that a decision was taken to act ultra vires, this would have a number of serious consequences for the Council. The Council's Monitoring Officer would be required to formally report the matter to the Cabinet in exercise of his statutory duties under the Local Government and Housing Act 1989. Implementation of the decision would be suspended pending publication of a report by the Cabinet as to the action to be taken in response to the Monitoring Officer's concerns. A decision to act unlawfully would also expose the Council to the risk of judicial challenge by or on behalf of other service users who do not enjoy the option of a flat rate scheme without means testing. Legal challenge could also be brought by the District Auditor under the Audit Commission Act 1998. Contesting any such proceedings would be very difficult for the Council and one would anticipate the Council being ordered to bear the legal costs incurred. Other consequences could include qualification of the Council's accounts and a negative impact on the comprehensive performance assessment.

APPENDIX 6

The way the financial assessment works is set out in the following example (weekly amounts):

Income taken into account:

State Retirement Pension £87.47

Occupational Pension £16.10

Attendance Allowance (higher rate) £41.65

Income Support £55.72

Interest on building society account £0.47

£201.41

Subtract outgoings:

General expenses £142.56

Disability-related expenses

- Domestic help £6.14

- Gardening £10.85

- Home maintenance £4.10

- Transport £10.24

Total £173.89

Leaving a disposable income of: £27.52

In this example, the disposable income is a positive one. In many cases, the result of the financial assessment would be a zero or negative disposable income, leading to the service user not being charged for services. The service user is charged for care provided each week at an hourly rate of £13.32 up to their upper limit. The current upper limit of 75% of disposable income would lead, in this example, to a maximum weekly charge of £20.64. Thus, if this person was receiving a care package of 6 hours a week (which would otherwise attract a charge of £79.92), his or her charge would be capped and he or she would only contribute £20.64 to the cost of his or her care.

Disability-related expenses

Special clothing/footwear

Domestic help

Equipment maintenance (powered bed, hoist, powered reclining chair, stairlift, wheelchair)

Food - special diet

Gardening

Extra heating

Home maintenance

Incontinence aids, laundry, replacement bedding

Lifeline/alarm system

Medication

Personal care arranged privately

Transport costs

Extra water usage

Purchase of disability-related equipment

APPENDIX 7

The consultation

1. The agreed approach to the consultation was to involve all users affected by the proposals for changes to the policy of charging for non-residential services for adults, groups representing their interests, staff of the Adult Services Department and the general public, asking for their views on the proposals set out in the report Review of equity and fairness in relation to income. The user consultation focused on contacting all users of those services which are affected (and/or their agents or carers) individually so that they could give their own comments. Groups representing the interests of users were also involved but were not expected to take on a co-ordinating role, or to gather views from all users.

2. All users who were affected, and/or their agents, were sent clear, relevant information about the proposals for changes to the charging policy (in the format they needed). Everyone was sent a feedback form for their comments (with a postage paid envelope), the questions asked focusing on the fairness and equity of the proposals for both service users and the tax payer. Around 9,500 letters were sent to service users on 9 January 2006 by first class post. Large print and 'easy to read' versions were prepared before the mail-out and despatched the same day that a request was made for them to the consultation helpline (see below). An electronic version of the feedback form was emailed to consultees on request.

3. A special 'Charges Bulletin', giving detailed information about the current charging policy, the proposed changes and the consultation, was prepared and sent to Adult Services' staff and to user and advocacy groups in advance of the mail-out to service users so they could be of assistance to consultees in understanding the information given to them and making a response. A letter drawing attention to the consultation was also sent to all members of the County Council.

4. A consultation helpline (a manned, dedicated telephone number) was set up to help consultees who requested it and take comments and a special email address was also set up.

5. The feedback form included a question about charging for day care/services but only those people receiving day care/services who also received a chargeable service (domiciliary care or sitting service) - and who therefore had some experience of the financial assessment process - were included in the consultation. Recognising that there were many users of day care/services who did not have such experience, and therefore would have difficulty in commenting on the proposal to make such services chargeable, the Executive Member for Adult Social Care agreed that a second consultation should be held once any changes to the policy were agreed.

6. The consultation with the general public was conducted via the Citizen's Panel and carried out by Ipsos MORI. Questions on charging for services were included in the questionnaire which dealt largely with the funding of Council services and Council Tax.

7. 388 relevant Adult Services and FAB team staff were also asked their views by way of an email and attached form similar to that sent to service users.

8. The consultation ran from early January and 2,076 completed questionnaires were returned by service users, their carers or agents by the closing date of 7 April 2006. 183 of the questionnaires were returned by direct payments recipients, the other 1,893 in respect of other service users. In addition, approaching 100 letters were also received. This represents a very satisfactory response rate of 23% which compares favourably with earlier such consultations.

9. The questions put were:

1. Do you think it is fair to take capital, savings and/or investments over £12,500 into account?

2. Do you think it is fair to base a weekly charge on 100% of disposable income?

3. Do you think it is a good idea to provide a safeguard for people who might have a potentially very high upper limit to what they are asked to pay as a weekly charge?

4. Do you think it is fair to charge for day care and equivalent services as well as care at home?

5. Do you think that everyone using care at home services of any kind should have a financial assessment to see what contribution they should make to the cost of their care?

APPENDIX 8

Letter to all County Councillors

Dear Councillor

Charges for non-residential care services for adults

Councillor Patricia Banks, at her Decision Day on 9 December 2005, approved a proposal to consult service users on changes to the charging policy. The consultation will start on 9 January 2006 and will last for twelve weeks. It will involve sending a letter with a leaflet explaining the proposed changes and a feedback form to all users of chargeable services. You may be asked questions by your constituents - hence my writing to you now to alert you to this.

Currently, our charging policy means that roughly 50% of all users of chargeable services are not asked to make a financial contribution towards the cost of their service. This results from the way in which the Council has interpreted and applied the national scheme of financial assessment rules which is out of step with most other councils. This was highlighted in the findings of a national study which shows that the Council is amongst the most generous of all local authorities.

The proposed policy changes could affect all people living in their own homes who receive social care services. They are designed to make the policy fairer for all service users and to help recover further costs, thus making it easier to continue to provide services. They include: taking people's savings, investments and capital into account in their financial assessment; increasing the amount of 'disposable income' that can be used to calculate a weekly charge (from the current 75% to 100%); charging for additional services (adding day care to care at home services); and ending flat rate payments to users of Direct Payments Option A, by introducing a financial assessment and asking for a contribution according to means.

It is likely that, as a result of the proposed changes, some service users would be expected to start making a contribution or to make a greater one. However, many will continue to receive free services.

Once the consultation has ended, a report summarising the messages received from the people consulted will be taken to Cllr Banks' Decision Day on 28 April 2006. At this point a decision will be sought on whether or not the proposed changes should be implemented.

The report considered by Cllr Banks on 9 December, `Review of equity and fairness in relation to income', gives much more detailed information and is available on Hantsnet. In addition, more general briefing material has been prepared for and distributed to Adult Services Department staff and the staff of agencies providing services on the Council's behalf so they can deal confidently with questions from service users and give any necessary reassurance. These can be made available to you if you wish: you should contact David Ward, Assistant Director (01962 847259 [email protected]) who will be happy to arrange for this to happen and to try to answer any questions you may have.

I hope you find this helpful.

Yours faithfully

Rea Mattocks

Director of Adult Services

APPENDIX 9

COMMENTS FROM THE FEEDBACK FORMS SENT BACK BY SERVICE USERS

The comments are given in the order that the topics are dealt with in the report.

The figures in this appendix are based on all responses received: feedback forms and letters.

1. DIRECT PAYMENTS OPTION A

The proposal:
Option A should be closed to new applicants for direct payments from the beginning of April. Users of option A would be brought into the charging policy by transferring them to direct payments option B. This would mean that they would have the same financial assessment that all other users of care at home services receive. Any contribution they were asked to pay towards the cost of their care would be based on this 'means test'.

We asked option A users for their views about the best way to effect this change.

1.1. 70% of DP A users who replied had misunderstood the proposal, believing that the direct payments scheme was being 'abolished' and that they would have to use agency staff in future.

The only change proposed is that users of DP A should have a financial assessment to work out how much they could afford to contribute towards the cost of their care. The gross hourly rate paid to users would stay as it is now. They would still be able to use their direct payments money to employ a personal assistant as they do now.

"We are opposed to the closure of Option A which many people use. This gives them the right to select and ensure that they have a consistent level of care provided by an individual they can trust, have vetted will be qualified, and provide a reliable service for the exact number of hours that are needed, not a guide visit by someone who is sent by an agency who is working to time-tables and targets and may vary daily." [None of these things would change under the proposal - see above]


1.2. 40% of DP A users who replied quoted HCIL / HCODP information saying that 'closing' option A, and moving people to option B would cost the County Council £3.5m (based on the wrong assumption that people would have to buy more expensive agency services).

"Option A should not be closed as it's perfectly legal and very different to B. A is easy to administer and understand. No one wants a means test. It will cost £3.5m less to operate. People won't go on B and be responsible for administration. They will opt for more expensive direct services. There has to be an incentive for people doing direct payments and A provides the incentive and no means testing." [See above.]

"To close Option A would be gross stupidity. Option B costs more to run. Someone can't count!" [See above]


1.3. 25% of DP A users who replied quoted the HCIL / HCODP information that the County Council's financial assessment would reduce them to having to live on around £120 a week.

The existing financial assessment takes account of income from benefits, pensions (but not earnings), and interest from capital and savings. It sets against it living expenses (calculated at IS + 25%) actual housing costs, including council tax, and specific 'disability related expenses' which include the cost of things that people have to buy in because of their frailty, illness or disability (for example, housework, gardening, the purchase and maintenance of equipment, extra personal care bought on top of the assessed 'care package', extra costs incurred on holiday etc). What is left after all expenses have been taken into account is someone's 'disposable income' and any charge is based on a proportion of this.

"You will leave us with nothing more than income support plus 25% to live on." [See above for details of how the financial assessment actually works.]


1.4. 37% of DP A users who replied focused on the legality of option A (which is dealt with in the report).

"Option A should NOT be closed. Nothing has changed since 2002, it is legal and fair. A & B cannot be compared, they are different, leave this flagship scheme alone."


1.5. 10% of direct payments option A (DP A) users who replied thought that moving to option B was not a problem.

"The closure of A makes for greater fairness. We leave it to your department to ensure the transition is as painless as possible."

"No objection to moving to option B so long as there is no break."

"I think people who can afford care should pay as much as they can without lowering their standard of living too much."

"Providing the rate per hour remains the same and people of low income are not worse off or get less support, then I would be in agreement and the change could be immediate."

"I do not oppose changing to option B if the conditions are fair to those of us who over the years have paid higher taxes and tried to make provision for old age."


1.6. Only 7% of DP A users who replied made suggestions about how the transition should be managed.

"The change may have significant financial impact for some. Six months for implementation would be more reasonable, in the meantime financial assessments could be made."

"A transition period of a year would be appropriate, during which time a full financial assessment would be made. This would allow the individual to try to find alternative financial arrangements should the grant be withdrawn."

"If option A has to be closed, then it should only be closed to new applicants - people on option A continue - stop eventually through natural wastage."


1.7. 78% of DP A users who replied opposed charges of any kind for services for disabled people.

"It's morally wrong to charge for care services."

"I've already paid for services through taxation."

"Why can't care be free like it is in Scotland?"

"This is discrimination dressed up as 'fairness'. No other receivers of social services are charged in this way. You are effectively stealing from people who have no other choice but to receive care. Your list of Disability Related Expenses is a sham. Your charging policy is a tax on disabled people. You attack them because you are a) inefficient and b) you have already taxed everyone else. You think disabled people can't fight back??? Hampshire County Council cannot be trusted."


1.8. 39% of DP A users who replied objected to any form of 'means testing'.

"Option B exists as an option for those on lower incomes who prefer to undergo a means test."

"Under no circumstances should existing option A clients be forced to have a financial assessment. I don't own my home, but work hard and have some savings. I think it is really disgraceful if I have to pay towards my care."

"Means testing is degrading."

"My financial affairs are none of your business."

2. TAKING CAPITAL, SAVINGS AND/OR INVESTMENTS OVER £12,500 INTO ACCOUNT

Figures in this section combine responses from both 'mainstream' users of care at home services (who have had a financial assessment) and DP A users. There was no substantial difference in the views of the two groups.

In the consultation we suggested the capital thresholds that are used in the financial assessment for residential care (the CRAG rules): that savings below £12,500 would not be taken into account, and people with over £20,500 would pay the full rate for their care. These thresholds are increased each year by the government (they are £12,750 and £21,000 for the year 2006/7).

Rather than take actual income on capital etc into account, as we do now, we have suggested that we would use the notional income that is used for depleting capital in the residential assessment. This means calculating £1 income for every £250 per week, which is roughly 20% a year.

2.1. People made two main points about depleting capital:

People who are income poor / capital rich rely on the income from capital to provide or supplement their income.

As the notional income far outstrips actual income, people's capital would be depleted very rapidly, particularly if they were paying full cost for their services.


2.2. 51% of people replying saw the proposal as a 'slap in the face for the prudent'

"It's unfair to penalise people who have saved all their lives, and have done without things."

"People without savings have wasted their money and are now benefiting from this."

"I feel I am supporting those who haven't saved."

A comment from the staff consultation:
"The effect of taking savings into account is sending out a bad message: `save and you will pay, don't save and we will pay for you'."


2.3. 15% of people who replied made the point that they expect to be able to use their capital judiciously to maintain their home, including its structure, and to replace things like washing machines etc.

They also expect to pay for the things that will make life more manageable as they become increasingly frail - equipment like special chairs, a stair lift, adaptations to their home, domestic help etc.

"We have spent over £25,000 on equipment and alterations to the house to make sure that my wife can stay at home."

"I need the income from my capital - if I eat away at it to pay bills, I won't have enough to live on - it needs to last for the rest of my life."

"Our interest from the Building Society pays for the maintenance of our house, runs a car which is essential for doctors' visits, prescriptions, teeth and eye appointments etc. We are waiting for this year's interest to get replacement windows done etc. I thought we were encouraged to stay at home with help to save hospital beds and the cost of residential care."


2.4. 13% of people who replied said that the proposed thresholds were too low

"The thresholds you quote are far too low - if you only leave me £12,500 I won't be able to live on the interest or maintain my home, and I will have to go into a care home. The thresholds should be more like £20,000 and £50,000."

"If my capital is depleted to £12,500, I won't be able to afford to go on living at home - which would cost the County Council more when it happens."

"If you're in residential care £12,500 is all right -all your day to day needs are met, including maintaining your 'home'. "

"If I have to pay full cost of my weekly care at £200/£300 a week, my savings will quickly be gone."

"I've paid national insurance all my working life, and I'm still paying my taxes - now you are proposing to tax me again. £1 in every £250 (20%) is an outrageous stealth tax for people who've planned for their old age."

"I think you should take actual interest into account as you do now - it's much fairer. Income from shares fluctuates, for example, and we wouldn't be able to meet a charge based on such a high rate of interest."

"You're being very selective in your evidence. In Fair Enough?, the report you quote from to justify what you're doing, Age Concern recommend taking £1 in £1000 as the notional income for people living at home - not £1 in £250."

"We have 1 hr care a day now @ £11 an hour = £77 a week. No charge at present. At £20,500 we would be asked to pay full cost, but the £8000 [between £12,500 & £20,500] @ 5% would only earn £7.70 a week, leaving us to find £70 a week. We would need capital of £80,000 @ 5% to cover the weekly charge - or use the £8000 excess, which would be all spent in just over 2 years."

"We have known about my disease since 1988, and have tried to save to prepare ourselves - we've re-mortgaged our house and I have tried to provide for my family and children."

"Middle income families are, as usual, hit hardest."

3. INCREASING THE PERCENTAGE OF PEOPLE'S DISPOSABLE INCOME THAT CAN BE USED TO PAY FOR CARE FROM 75% TO 100%

'Disposable income' is the money left each week after all living expenses, including actual housing costs and expenses that people incur because they are frail, ill or disabled ('disability related expenses') have been taken into account.

The allowances for living expenses are linked to benefit levels, plus 25%. We also allow for what people are actually paying for their housing and council tax.

Disability related expenses
We allow for the extra expenses that people incur because they are frail, ill or disabled (for example, buying in housework or gardening, the purchase and maintenance of equipment, extra costs incurred on holiday etc).

3.1. 59% of people replying were opposed to increasing the percentage to 100%


3.2. Of the people who offered a view about what the percentage should be
16% thought it should be 50% or less
9% thought it should be somewhere between 75% and 95%
75% thought that the existing 75% was fair

"You need to allow something for...
emergencies
repairs
unforeseen expenses
quality of life
saving
treats
minor medical expenses
help with cleaning and shopping
transport to hospital appointments..."

"Expenses are greater if you are disabled."

"What you allow for the costs of every day living isn't realistic. We need a bit in reserve to cover the real costs."

This is confirmed by comments from staff in the staff consultation:
"Hampshire isn't the cheapest place to live. We know that when we carry out a financial assessment people are having to pay more for domestic and gardening help than we allow for in the disability related expenses."


3.3. In the staff consultation FAB team visiting officers made the following points about the possible impact taking 100%, based on their experience of carrying out financial assessments:

"If we take 100% of disposable income there is no benefit to individuals in going through the difficult process of claiming other benefits, such as Attendance Allowance, Pension Credit etc. We would also lose income as people wouldn't have this extra income that we could take into account."
"If the percentage of disposable income we take into account is increased we should allow actual expenditure incurred in relation to DREs, and not make the DREs subject to a maximum. Many people pay more for cleaning or gardening than we allow."

"Although we allow for disability related expenses we do not take into account the fact that some clients have loans which are ongoing. If we take 100% of disposable income into account we could be putting them more into debt as they will not have the money available to pay these loans."