08 - 2025-09-17 IJB - Chief Finance Officer Report - Medium Term Financial Outlook 2026-2029
North Lanarkshire Council · 17 September 2025
Back to Health and Social Care Integration Joint Board — 17 September 2025 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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REPORT Item No: 8 SUBJECT: Medium Term Financial Outlook 2026-2029 TO: Integration Joint Board Lead Officer for Report: Chief Officer Author(s) of Report Chief Finance Officer DATE: 17 September 2025 1. PURPOSE OF REPORT 1.1 This paper is coming to the Integration Joint Board (IJB) For approval For endorsement For noting 1.2 This report advises the IJB of the medium term financial forecast position for 2026- 2029. 2. ROUTE TO THE INTEGRATION JOINT BOARD 2.1 This paper has been: Prepared By: Chief Finance Officer ☒ Reviewed By: Chief Officer ☒ Endorsed By: ☐ 3. RECOMMENDATIONS 3.1 It is recommended that the IJB: (1) Acknowledge Medium Term Financial Outlook (MTFO) position for 2026/27 to 2027/29 (2) Acknowledge the forecast funding gap over the 3 year cycle (3) Recognise this outlook will be subject to ongoing review with an update reported in December before the Medium Term Financial Plan (MTFP) is presented to the Board for approval in March. (4) Acknowledge the forecast reserves position. 4. VARIATIONS TO DIRECTIONS 5. BACKGROUND/SUMMARY OF KEY ISSUES 5.1 This report provides an update on the MTFO for 2026/27 to 2028/29 and outlines the financial challenges the University Health & Social Care Partnership (the Partnership) faces over the coming three years. The assumptions reported within this outlook will continue to be reviewed and updated until the MTFP, for the three year period to 2028/29, is presented to the IJB in March 2026. 5.2 The MTFP 2025/26 – 2027/28 was approved on 19 March 2025 which indicated a 3 year budget gap of £51.854m (2025/26 £14.729m, 2026/27 £18.322 and 2027/28 Yes No N/A
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£18.804m). Taking this approved budget as the new baseline, this MTFO updates the financial planning assumptions and projected funding gap focussing on those factors which have the biggest impact on the Partnership. 5.3 This outlook assumes that the service redesign and transformation solutions approved within the MTFP in March 2025 are fully implemented to meet the 2025/26 budget gap. 6. FINANCIAL OUTLOOK 6.1 Health & Social Care Partnerships operate in a complex, challenging and changing environment where national issues can have an impact on what and how services are delivered along with the financial resources, they have available to meet this. 6.2 It is clear from the census information and the pressures being seen across all areas of health and social care in Scotland that demand continues to exceed funding available to the sector. It is also increasingly difficult to implement service redesign options which don’t directly impact on service users. However, it is essential that the Partnership maintains a service model which can be financially sustainable in the long term. 6.3 The Partnership’s financial planning arrangements remains subject to active review using a scenario-based approach in recognition of the significant uncertainty over rising costs and the scale of variability in the potential funding available to the Partnership in future years. 7. FORECAST ASSUMPTIONS 7.1 This MTFO focuses on the likely cost pressures that the Partnership can reasonably expect over the next three years. These assumptions have been informed by the local and national context within which the Partnership operates. Contractual Pressures 7.1.1 The National Care Home Rate will not be known until Spring 2026. An annual 10% increase was included in the current MTFP with the actual increase being 6.8%. For the financial outlook it is prudent to keep the envisaged increase at 10% which results in a provision of £4.893m for 2025/26 and £16.198m for the 3 year finance cycle. This will be reviewed as necessary throughout the year. 7.1.2 Contract inflation for Care at Home provision represents the increases to the Scottish Living Wage which is unknown at this stage, therefore the financial outlook includes an average of the weighted 2025/26 increase. This results in a provision of £6.596m for 2026/27 and £20.594m for the 3 years. 7.1.3 A provision of £2.969m has been included in the 2026/27 outlook for inflationary pressures across the Partnership. This is based on the OBR’s Economic and Fiscal Outlook as at March 2025. Demand Pressures – Social Care 7.1.4 Demand on social care services continues to increase which has been well reported through the 2022 census information. A provision of £19.228m has been included over the next 3 years which is based on an average 5% increase. The 2026/27 value is £1.193m which assumes the £10.686m savings are fully achieved in 2025/26.
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Pay Pressures 7.1.5 Employee costs represent 34% of the IJB net budgets therefore any increase in pay awards have a material impact on the forecast plan. 2025/26 Pay Award A pay offer has been agreed for NHS Agenda for Change staff at 4.25% in 2025/26 which is higher than the 3% included in the MTFP presented to the Board in March. The budgeted increase was based on the Scottish Government’ Public Sector Pay Policy of a 9% increase over 3 years. The expectation is that Scottish Government will provide the necessary funding to meet the 1.25% increased offer. The 2025/26 MTFP also includes a 3% increase for council services pay award, however an offer of 4% has been agreed. It is also anticipated that Scottish Government will fund the differential for Council staff therefore there is no change in relation to these cost projections. Pay Award – Future Years For future years the projected pay awards have been budgeted at 3% again reflecting the Public Sector Pay agenda. A total provision of £6.041m is estimated for 2026/27 and £18.287m for the 3 year planning period to 2028/29. These assumptions will remain under review as negotiations continue. Prescribing 7.1.6 In 2024/25 the cost of prescribing to the Partnership was £81.7m which represented an overspend of £4.757m and also a 4% increase on the 2023/24 position. The price of drugs is set nationally and influenced by factors such as supply and demand, currency movements and patents. Activity is a clinical decision, and demand is ever changing despite positive work being undertaken to reduce the number of drugs prescribed. The MTFP included a 10% increase for 2026/27 and 2027/28; based on current projections this remains unchanged for this financial outlook. The provision for 2026/27 is £8.534m with the total 3 year provision being £28.249m Reinstatement of Non Recurring Solutions 7.17 In 20254/25 and 2025/26 a number of non-recurring solutions were used to support the budget gaps and as yet recurring solutions have not been identified to replace these budgets therefore £16.260m has been included as a cost pressure to reinstate these. Funding 7.1.8 Funding contributions from both Partners are significantly influenced by the Scottish Government Finance Settlement which will remain unknown until December. The MTFP currently includes a 3% increase on Health Services and 5.23% for Council Services. These forecasts would generate recurring income of £20.610m in 2026/27 and £64.288m over the 3 years. 8. MEDIUM TERM FINANCIAL OUTLOOK SUMMARY 8.1 Using the financial planning assumptions detailed in section 7, a range of risk-based scenarios have been considered, resulting in envisaged, pessimistic and optimistic positions. 8.2 Table 1 provides a summary of these scenarios over the forthcoming 3 years.
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Table 1 Forecast Gap 2025/26 £000 2026/27 £000 2027/28 £000 Total £000 Envisaged £26,241 £17,727 £19,420 £63,388 Optimistic £24,855 £12,902 £13,813 £51,569 Pessimistic £35,997 £23,346 £25,972 £85,314 8.3 It is recommended that the IJB progresses with a financial strategy based on the envisaged scenario. This scenario projects an estimated budget gap of £63.388m over the 3-year planning period 2026/27 to 2028/29 of which £26.241m relates to 2026/27. 8.4 Over the coming months, savings options will be developed by the Senior Management Team and be presented at a future IJB Development Day for discussion ahead of being presented to the next IJB in December. A proposed timeline is presented in Table 2. Table 2: Budget Setting Timeline Date Meeting Purpose TBC - October IJB Development Day Discussion on savings proposals TBC - November IJB Development Day Discussion on savings proposals 3rd December 2025 Integrated Joint Board Medium Term Financial Outlook Update 2026/27 – 2028/29. TBC - January IJB Development Day Discussion on savings proposals 18th March 2026 Integrated Joint Board Approval of Medium Term Financial Plan 2026/27 – 2028/29 and Long Term Financial Outlook to 2036. 9. Reserves 9.1 As reported to the performance, Finance & Audit Committee in August, the year end reserves position is currently forecast as £72.556m as shown in Table 3. Table 3 Reserves £m Ring Fenced 14.190 Earmarked 22.711 Sub Total 36.901 Risk Based 21.536 Contingency 14.119 Sub Total 35.655 Total 72.556 9.2 Assuming all 2025/26 savings are achieved, and the Partnership closes the financial year with a break even position the level of useable reserves from this total will be £35.655m. Therefore, if savings are not identified to address the projected £26.241m budget gap in 2026/27, three quarters of these useable reserves will be utilised during next financial year.
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10. IMPLICATIONS 10.1 NATIONAL OUTCOMES People are able to look after and improve their own health and wellbeing and live in good health for longer ☐ People, including those with disabilities or long-term conditions, or who are frail, are able to live, as far as reasonably practicable, independently and at home or in a homely setting in their community ☐ People who use Health and Social Care Services have positive experiences of those services, and have dignity respected ☐ Health and Social Care Services are centred on helping to maintain or improve the quality of life of people who use those services ☐ Health and Social Care Services contribute to reducing health inequalities ☐ People who use Health and Social Care Services are safe from harm ☐ People who work in Health and Social Care Services feel engaged with the work they do and are supported to continuously improve the information, support, care, and treatment they provide ☐ Resources are used effectively and efficiently in the provision of Health and Social Care Services ☒ 10.2 ASSOCIATED MEASURE(S) Each partner is required to remain within their approved budgetary provision. 10.3 FINANCIAL This paper has been reviewed by Finance: Yes No N/A 10.4 RISK ASSESSMENT/RISK MANAGEMENT The strategic financial risks detailed in the IJB Risk Register have also been updated where necessary. Relevant Risk Register Details Current Risk Level Risk Owner Financial Challenges Very High Nicola Scott Prevention and Detection of Fraud, Bribery and/or Corruption Low Claire Rae National Set-Aside Budget High Claire Rae Hosted Services Medium Claire Rae Prescribing Activity and Costs Very High Claire Rae Pharmacy Pressures within Prison Service High Claire Rae Third and Voluntary Sector Low Claire Rae Ineffective Governance Arrangements Low Claire Rae 10.5 ENGAGEMENT & PARTICIPATION Please tick the engagement and participation objectives that link(s) with this piece of work and provide further details on the engagement and participation that was undertaken.
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Objectives Further details ☒ Involve stakeholders in the development work aimed at achieving the national outcomes The Director of Finance of NHSL and the Chief Officer (Finance) of NLC both continue to be consulted on the financial position of the NL IJB. ☐ Provide stakeholders with information on how to get involved ☐ Ensure a diverse range of engagement and participation and opportunities are in place to suit different needs ☐ Measure how well we involve community stakeholders in the planning, design, and delivery of our services ☒ Provide regular feedback on how stakeholder engagement and participation is shaping and influencing service development and delivery Financial information is shared with stakeholders on a regular basis and is provided to the PFA and IJB on a quarterly basis. ☒ Provide support to enable stakeholder representatives to participate meaningfully and confidently at meetings ☐ Develop participation guidelines to ensure a common understanding and set of expectations for both stakeholders and partnership staff ☒ Support engagement planning and participation in localities, taking account of other engagement activity and local plans across the Community Planning Partnership IJB Financial Plan and Reserves Strategy aligns and supports the IJB Strategic Commissioning Plan to ensure robust financial monitoring and scrutiny. 10.6 INEQUALITIES & FAIRER SCOTLAND DUTY Equality and Diversity Impact Assessment Completed & Fairer Scotland Impact Assessment Form Completed: Yes No N/A 11. BACKGROUND PAPERS None. 12. APPENDIX None Nicola Scott Chief Finance Officer Members seeking further information, please contact Nicola Scott on 07581 007187.