Item 6 - Medium Term Financial Plan 2023
North Lanarkshire Council · 22 March 2023
Back to Health and Social Care Integration Joint Board — 22 March 2023 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: 6 SUBJECT: IJB Medium Term Financial Plan 2023 - 2026 TO: Integration Joint Board Lead Officer for Report: Ross McGuffie, Chief Officer Author(s) of Report Amanda Kilburn, Chief Finance Officer DATE: 22nd March 2023 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 outlook for North Lanarkshire IJB as set out in the attached Medium Term Financial Plan 2023 – 2026. 2. ROUTE TO THE INTEGRATION JOINT BOARD 2.1 This paper has been: Prepared By; Chief Finance Officer Reviewed By; Chief Officer 3. RECOMMENDATIONS 3.1 The IJB is asked to agree the following recommendations: (1) Note the assumptions and context of the financial plan; and (2) Approve the Medium-Term Financial Plan 2023 - 2026. 4. VARIATIONS TO DIRECTIONS 5. BACKGROUND/SUMMARY OF KEY ISSUES 5.1 The Medium-Term Financial Plan (MTFP) outlines the financial challenges and opportunities the Health and Social Care Partnership (HSCP) face over the next three years and provides a framework which will support the HSCP to remain financially sustainable. It will complement the Strategic Commissioning Plan 2023 – 2026, highlighting how we will support the delivery of the IJBs strategic objectives and priorities. 6. MEDIUM TERM FINANCIAL OUTLOOK 6.1 Looking into 2023/24 and beyond, it is anticipated that the public sector in Scotland will continue to face a number of challenges in the short and medium term. There is significant uncertainty over what the scale of this is likely to be and it is therefore important that the IJB plans for a range of potential outcomes, ensuring sufficient flexibility to manage in a sustainable manner over the coming years. Yes No N/A 1
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6.2 As a consequence, the IJBs financial planning arrangements remain subject to active review using a scenario-based approach in recognition of the scale of variability in the potential future pressures and funding for the IJB. Using a range of outcomes across our key financial risks, including the likely impact, reduces the risk of future challenges and will help to enable financial sustainability of the IJB. 7. FINANCIAL CHALLENGE 7.1 In view of the current scale of uncertainty, and in line with previous financial plans, potential outcomes have been considered over optimistic, envisaged, and pessimistic projected positions. 7.2 Using the above range of scenarios, current projections for the life of the plan include a wide range of assumptions in respect of key cost pressures and demand. On the basis of this projected outlook, and subject to active review over the coming months and years, the Chief Finance Officer (CFO) recommends that the IJB progresses with a financial planning strategy based on the envisaged scenario. This assumed position does not take into account potential future additional funding for any pressures from either the Scottish Government or our partners. 7.3 The MTFP is based on a range of demand and cost pressures which could be faced by the IJB over the medium term. These assumptions are informed by both the local and national context and future funding contributions from partners for which there remains significant and real uncertainty. 7.4 Detailed below are the main areas of cost pressures and demand which will be subject to ongoing review: Future funding allocations Future pay settlements Cost of living crisis and inflation Contractual pressures and the living wage commitments Demand led services including deprivation and health issues Prescribing costs and availability 7.5 Additional funding streams have been provided by the Scottish Government in respect of multi-disciplinary teams, providing interim care, investing in staff and wellbeing and health care support. This will help to address recognised winter pressures and ongoing challenges presented by the pandemic and cost of living crisis. However, the difficulty in utilising non-recurring and/or ring-fenced funds whilst seeking to continue to deliver business as usual within a balanced budget should not be underestimated. Such funding impacts directly on the nature of the services that can be delivered in the timeframe and in pursuit of the outcomes associated with the funding. 7.6 Looking beyond this financial year and into the term of the financial plan, it is inevitably more difficult to forecast. It is important the IJB adopts a plan, not just in the delivery of strategic outcomes and services, but also from a financial perspective to ensure medium to long term risks to the financial sustainability of the IJB are identified early, even though there may be uncertainty over the specific timing, scale, and ultimate effect. 2
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8. MEDIUM-TERM FINANCIAL PLAN 8.1 Our MTFP consists of seven components which collectively support the transformational change required to deliver financial balance whilst delivering safe and sustainable services. This strategy is set out in the diagram below: 9. RESERVES 9.1 As part of the development of the financial plan and in line with the North Lanarkshire IJB Medium to Long Term Financial Plan 2020/21 to 2029/30, if possible, it is recommended that the risk-based and contingency reserves are established as a percentage of the financial envelope as follows: Year 2022/2023 2023 to 2030 Contingency Reserve % 3% 5% 9.2 The IJB contingency reserves currently equate to 2% of the financial envelope, however, following completion of the 2022/2023 financial year end, it is anticipated this percentage will increase. 10. IMPLICATIONS 10.1 NATIONAL OUTCOMES The effective management of financial resources contributes to the achievement of the national outcomes. 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 and are included in a separate report to the IJB. 3
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10.5 PEOPLE None 10.6 STAKEHOLDER ENGAGEMENT The Director of Finance of NHSL and the Head of Financial Solutions of NLC have both been consulted on the proposed IJB Reserves Strategy 2021/2022 for the North Lanarkshire IJB. 10.7 INEQUALITIES & FAIRER SCOTLAND DUTY Equality and Diversity Impact Assessment Completed & Fairer Scotland Impact Assessment Form Completed: Yes No N/A 10.8 CARBON MANAGEMENT IMPLICATIONS Yes No N/A 11. BACKGROUND PAPERS None. 12. APPENDICES Medium-Term Financial Plan 2023 - 2026 Appendix 1 Chief Finance Officer Members seeking further information about any aspect of this report, please contact Amanda Kilburn on telephone number 07816 126362. 4
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North Lanarkshire Integration Joint Board Medium Term Financial Plan 2023 – 2026 5
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Contents Page • Introduction 3 • Executive Summary 4 • Purpose 5 • National Context • Impact of European Union (EU) Withdrawal 6 • Covid-19 Pandemic 6 • Cost of Living 6 • Increase in Demand 6 • National Direction 7 • Local Context • Our Budget 8 • Hosted Services 9 • A Profile of North Lanarkshire 10 • Projected Population Change 12 • The Impact of Covid-19 13 • Strategic Objectives 14 • Medium Term Financial Outlook • Reserve Strategy 16 • Financial Planning Assumptions 17 • Financial Pressures 18 • Sensitivity Analysis 20 • Financial Sustainability Approach 20 • Financial Performance 22 • Key Risks and Uncertainties 22 • Appendix 1: Estimated Impact of Cost and Demand Pressures for 2023-2026 23 • Appendix 2: Financial Strategy to Address Funding Pressures for 2023-2026 24 6
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Introduction The North Lanarkshire Integration Joint Board (IJB) was established as a corporate body by Scottish Government and became operational in June 2015 with integrated delivery of health and social care services commencing on 1 April 2016. It is a joint venture between NHS Lanarkshire (NHSL) and North Lanarkshire Council (NLC). The IJB has responsibility for the strategic planning and commissioning of a wide range of services within North Lanarkshire. The North Lanarkshire Health and Social Care Partnership (HSCP) is responsible for the operational delivery of the IJB strategic directions. This includes the service we are required to provide, the funding allocated and the monitoring of performance. The services include: • Accident and emergency services provided in a hospital; • Inpatient services related to general, geriatric, respiratory and rehabilitation medicine; • Palliative care services; • Community health services including Lanarkshire wide hosted services; and • Social care services. Our Purpose People of North Lanarkshire will achieve their full potential through: • Living safe, healthy, and independent lives in their communities • Receiving the information, support and care they need, efficiently and effectively, at the right time and in the right way 7
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Executive Summary The North Lanarkshire IJB Medium to Long Term Financial Plan 2020 – 2030, outlined the anticipated financial challenges and opportunities that the partnership expected over the ten-year period and provided a framework which would support the partnership to remain financially sustainable. The impact of Covid-19 on health and social care services and the economy created considerable unanticipated pressures, and therefore the partnerships governance arrangements were reviewed and adapted to support the response, recovery, and redesign of services. Whilst many of the elements in the previous Medium to Long Term Financial Plan remain, the pandemic and ensuring cost of living crisis has accelerated the delivery of some of our objectives, made others increasingly important and lowered the priority of some of our previously agreed actions. Alongside the development of the new Strategic Commissioning Plan 2023 – 2026, it is consequently necessary to update our supporting plan to a Medium-Term Financial Plan (MTFP). The new Medium-Term Financial Plan 2023 – 2026 reflects the impact of recovering from Covid-19 and other challenging factors facing the IJB. It has been condensed to a three-year plan rather than the original ten-year plan due to the pending formation of the National Care Service (NCS) and the continuing uncertainty around future funding. As was the case prior to the pandemic, the IJB’s financial planning arrangements remain subject to active review, to enable us to continue to plan for a range of potential outcomes and scenarios. This helps us to manage emerging financial risks and challenges and the likely impact these could have on the financial position of the IJB. The financial position for public services continues to be challenging and it is therefore important that our ambitions are set within the content of the funding available. The aspiration to prepare a balanced budget covering a longer term will support the development of strategic savings plans and ensure the available resources are allocated effectively across competing priorities. This aspiration however is dependent on the certainty of the financial settlements from the Scottish Government. Both partners have a proven track record of managing budgets effectively over many years. A clear strategy is required to ensure the IJB continue to remain financially sustainable over the medium term. The limited financial and workforce resources will require to be focussed on services which are sustainable and are targeted to those with the greatest need. To prepare this financial plan, a co-ordinated and strategic approach across the partnership has been adopted with both partners including the cost pressures in relation to their delegated functions. A range of outcomes will continue to be analysed and the financial planning assumptions updated as the most likely scenarios emerge for future years. The Scottish Governments aspiration to move to multi-year settlements in the future is welcome and would reduce the uncertainty which is currently impacting on strategic commissioning activity across the health and social care partnership. 8
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Purpose In respect of the functions delegated to the IJB, the IJB MTFP sets out the financial outlook for the next three years 2023/24 to 2025/26. The purpose of the MTFP is to set out challenges facing the IJB in maintaining financial stability whilst achieving the strategic commissioning intentions. The MTFP therefore provides an overview of the financial planning assumptions in relation to projected cost pressure arising from demographic growth, legislative and policy developments, employee costs and inflation alongside potential partner funding contributions in future years. The plan will deliver a number of benefits to North Lanarkshire HSCP including: • Aligning with the Strategic Commissioning Plan to progress the shift in the balance of care to a community setting; • Working alongside partners to achieve common goals; • Providing sustainable services to support transformation and local communities; and • Maintaining a balanced and transparent budget. Medium Term Financial Plan Strategic Commissioning Plan Engaging with Partner Bodies Supporting Transformation Budget Setting Process 9
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National Context IJB’s 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. The emergency caused by the Covid-19 pandemic has only escalated these challenges along with changes to policy, legislation, and future funding from the Scottish Government. Impact of European Union (EU) Withdrawal The withdrawal from the EU is currently still a factor contributing to the uncertainty of the economic outlook. There is an ongoing impact on supply chains and labour markets which creates a risk to the financial planning assumptions upon which the financial plan is based. The Covid-19 pandemic makes it difficult to assess the sole impact of the EU withdrawal however, some of the direct consequences which have been experienced across the UK include the removal of a large pool of EU workers, which many UK business rely, a reduction in the UK’s Gross Domestic Product (GDP), supply chain shortages, increased bureaucracy and an increase in prices. The full impact will be realised over the coming years. Covid-19 Pandemic The last 24 months has brought unprecedented challenges due to the Covid-19 pandemic and this looks set to continue for the foreseeable future. Although the full impact is still to be understood, it is clear, that there is and will be a significant impact on the health and wellbeing of our staff and communities. The impact on both the UK and Scottish economy will underpin policy direction and funding of our services. Cost of Living The volatility of the UK inflation, impacted by the record global energy costs, will present a considerable challenge to the IJB over the short to medium term. Currently at 10.1%, inflation is at its highest level in 30 years far exceeding the Bank of England 2% target. Such pressures will impact on the sustainability of our external providers who will struggle to cope with the rising cost of goods and services, our service users as they battle with the concept of ‘heat’ or ‘eat’ and the IJB directly due to rising costs from providers and increased demand on all services as we continue to help those most in need. Increase in Demand The demand for services is increasing with Scottish Government estimating that the need for health and social care services would rise by between 18% and 29% throughout 2010 to 2030. Statistical information indicates the following: • One in four adults has a long-term illness or disability and around two million people in Scotland have at least one long-term condition. • People in Scotland are living longer, but more of these people aged over 75 are living with a long-term condition and/or significant frailty. • The population over 75 is expected to increase by 63% over the next 20 years. 10
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National Direction The independent review of Adult Social Care recommended the creation of a National Care Service (NCS) and a system of care which took a human right based approach with a focus on incorporating the views of those with lived experience about what needs to change to make real and lasting improvements. The aspirations of the NCS represent a progression from the Scottish Government’s Health and Social Care Delivery Plan1 and supports their long-standing desire to shift the balance of care and support from hospital to a community care setting. The outcome of this review is currently subject to ongoing consultation. This will be used to shape and develop the new legislation, which was introduced in the Scottish Parliament in 2022, with the intention that the NCS will be fully functioning by the end of the Parliamentary term in 2026. This will impact on the delivery of services and will be closely watched to understand how this will shape service provision and the direction of IJB resources. 1 Scottish Government Health and Social Care Delivery Plan 11
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Local Context Our Budget North Lanarkshire IJB delivers and commissions a range of health and social care services to our local population. This is funded through budgets delegated from both NHS Lanarkshire and North Lanarkshire Council. The resources available to the IJB in 2022-2023 to take forward the commissioning intention in line with the Strategic Commissioning Plan, are circa £738m. Included in the above table is a ‘Large Hospital Service’ (National Set Aside) budget totally £66.858m. This budget is in respect of those functions delegated by the Health Board which are carried out in a hospital within the Health Board area. The Set Aside resource for delegated services provided in acute hospitals is determined by apportioning the hospital expenditure to individual patient episodes, separating out episodes for services delegated to the IJB from those that are not, and assigning these to the relevant IJB based on postcode. The IJB is responsible for the strategic planning of these services but not their operational delivery. North Lanarkshire Council £188.18m National Set Aside £66.858m NHS North Lanarkshire £482.813m NORTH LANARKSHIRE IJB RESOURCES AVAILABLE 2022-2023 12
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Hosted Services In seeking to identify the most appropriate disposition of services within North Lanarkshire HSCP, some services required to be delivered on a pan- Lanarkshire basis. In delivering these services the IJB has primary responsibility for the provision of the service and bears the risk and reward associated with this service delivery in terms of demand and the financial resources required. As such, the full costs of these services will be included within all financial statements. The resourcing of each of the hosted services is based on a 51:49 split between North and South partnerships, with the total budget for each transferred to the host area. Information regarding the proportionate costs incurred by North and South Lanarkshire HSCPs are included in the Annual Accounts of both IJBs and are regularly reported to each board via each partnerships financial monitoring reports. The table below shows the split of hosted services between North and South Lanarkshire: HOSTED SERVICES BY PARTNERSHIP Led by the North Partnership Led by the South Partnership Sexual Health Services Community Dental Services Continence Services Brain Injury Unit Immunisation Services Out of Hours Services Speech and Language Therapy Services Palliative Care Services Children and Adolescents Mental Health Services Physiotherapy Services Children Services Primary Care Services Integrated Equipment and Adaptations Store Occupational Therapy Services Dietetics Services Diabetic Services Podiatry Services Primary Care Improvement Fund Prisoner Healthcare Services Primary Care Transformation Fund Blood Borne Viruses Services Hospital at Home Mental Health and Learning Disability Services 13
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A Profile of North Lanarkshire Our Population According to the latest official statistics from the National Records of Scotland (NRS)2, the population of North Lanarkshire is 341,400. The estimated future breakdown of this figure into age group is shown in the following graph. Between 2018 and 2028, the 0 to 15 age group is projected to see the largest percentage decrease (-9.8%) and the 75 and over age group is projected to see the largest percentage increase (+21.8%). Health 13.5% of North Lanarkshire residents are living with three or more long term conditions such as anxiety/depression and COPD/asthma. North Lanarkshire has had consistently higher accident and emergency attendance rates compared to Scotland over the last five years. Both areas had an increasing trend over the period 2017/18 – 2019/20, followed by a considerable decrease in 2020/21 due to fewer people attending A&E departments as a result of the Covid-19 pandemic. All North Lanarkshire localities remain above the Scotland rate with Coatbridge currently the highest and North Lanarkshire North the lowest. Carers 10% of North Lanarkshire’s population is identified as being in a caring role and early indication are that this number is set to rise when the most recent census information is published. It should be noted that not all carers are known to services. 2 National Records of Scotland (NRS) 14
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Life Expectancy In North Lanarkshire, life expectancy at birth was higher for females (78.8 years) then for males (74.1 years) in 2019 -2021, however both male and female life expectancy remains below that of the Scottish average. Deprivation The Scottish Index of Multiple Deprivation (SIMD) assesses 6,976 small areas known as data zones. 34% of our data zones are in the 20% most deprived data zones compared with 20% of Scotland’s population. Income Deprivation Across North Lanarkshire 50,897 (15%) people are income deprived. The Scottish average is 12%. • 28,234 live in the 20% most deprived data zones and 21,655 live in the 15% most deprived data zones. • Therefore, 22,663 income deprived people live outside the 20% most deprived data zones and 29,242 income deprived people live outside the 15% most deprived data zones. 15
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Employment Deprivation There are 24,796 working-age people in North Lanarkshire experiencing employment deprivation. This is 11% of the working-age population. In Scotland this is 9%. • 13,415 people are employment deprived in the 20% most deprived data zones and 11,205 people are employment deprived in the 15% most deprived data zones. • This means 11,381 employment-deprived people outside the 20% most deprived data zones. Projected Population Change of North Lanarkshire Between 2018 and 2028, the population of North Lanarkshire is projected to increase from 340,180 to 341,174. This is an increase of 0.3% which compares to a projected increase of 1.8% for Scotland as a whole. • North Lanarkshire is expected to have the 4th highest population out of the 32 council areas in Scotland in 2028. • Over the next 10 years, the population of North Lanarkshire is projected to decrease by 1.7% due to natural change (more deaths than births). • Total net migration is projected to result in a population increase of 1.9% over the same period. • The average age of the population of North Lanarkshire is projected to increase as the baby boomer generation ages and more people are expected to live longer. Between 2018 and 2028, the number of households in North Lanarkshire is projected to increase from 151,744 to 157,469. This is a 3.8% increase, which compares to a projected increase of 4.9% for Scotland as a whole. • North Lanarkshire is projected to have the 4th highest numbers of households in 2028, out of all 32 council areas in Scotland. • In 2028, the household type ‘one adult’ is projected to remain the most common (35.2%) and the household type ‘one adult, one or more children’ is projected to remain the least common (7.8%) in North Lanarkshire. • The household type ‘two or more adults, one or more children’ is projected to see the largest percentage decrease (-4.0%) and the household type ‘two adults’ is projected to see the largest percentage increase (+8.1%). While many older people are expected to enjoy better health than their predecessors did at an equivalent age, they will still have significant health needs living with potentially multiple and complex conditions. The impact of this will be a steadily increasing demand on our health and social care services, including home care support, care homes, increases in demand for community-based healthcare, equipment and adaptations and an increased demand for GP services and medication. 16
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The Impact of Covid-19 The Covid-19 pandemic has had a profound impact on our health, economy, and society, with damaging impacts on the way of life and wellbeing of people in North Lanarkshire and across Scotland. A key finding is that the impacts of the pandemic have been, and are likely to continue to be, borne unequally. Unequal outcomes between different groups existed pre-Covid, and the effects of the pandemic have only worsened this. It has produced disproportionate impacts across a range of outcomes for several groups, including households on low incomes or in poverty, low-paid workers, children and young people, older people, disabled people, minority ethnic groups and women. The direct and indirect health impacts of the pandemic are significant, and this is likely to have a negative impact on people’s health in the short and long term. Reduced or paused services during the pandemic and delays in seeking health care, as well as longer waiting times due to backlogs, will continue to impact on many health and social care services and their users. On a positive note, the Covid vaccination programme has been very successful in Lanarkshire, with the current position noted below, following the autumn/winter programme roll out: Total Doses Administered 1,835,182 Individuals With at Least 1 Dose 560,175 Partially Vaccinated 26,294 Fully Vaccinated 92,277 Boosters 441,604 Ongoing Resilience Response There remains significant ongoing pressure in all health and social care systems across Scotland. High demand and patient acuity, coupled with increased flu and covid numbers in recent months has placed even greater demand on our system. In Lanarkshire, there is a genuine whole-system focus to our resilience response and there has been a tremendous effort across the whole system, including third and independent sectors, communities, and public partners in the continued response to the pandemic and more recent system pressures. 17
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Strategic Objectives Our Strategic Commissioning Plan 2023-2026 sets out our commitment to work with you to achieve our long-term ambitions. Only by working together, can we bring about real change to improve the overall health and wellbeing of the people of North Lanarkshire. We very much value your input and feedback as the services we plan to design and deliver are your services, for your families and neighbours. We continue to experience the long-term and lasting impact of the Covid-19 pandemic, whilst working with people to ensure they can access the support and treatment they require following a sustained period of disruption and restriction. We recognise the strength and resilience of our communities, workforce, and partners as we move forward with our plans for recovery and renewal. The new Strategic Commissioning Plan 2023-2026 will help to inform financial planning and how we allocate our resources to the programme of work 2023- 2026. To enable us to measure how well we are doing, our achievements will be measured and reported against a range of national and local performance measures including the nine national health and wellbeing outcomes below. NATIONAL HEALTH & WELLBEING 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 their 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 provide unpaid care are supported to look after their own health and wellbeing, including to reduce any negative impact of their caring role on their own health and wellbeing. People using 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. The long-term vision for the Health and Social Care partnership which was set out in the original Strategic Plan 2016-20263 remains relevant and will continue as the over-arching vision of this plan. The vision set out in 2016 was that the people of North Lanarkshire will achieve their full potential through: • Living safe, healthy, and independent lives in their communities; • Receiving the information, support and care they need, efficiently and effectively, at the right time, in the right place and in the right way; and • Ensuring North Lanarkshire is the best place in Scotland to grow up. 3 Strategic Plan 2016-2026 18
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This approach underpins our Strategic Commissioning Plan and will be facilitated by our financial resources, enabling investment in our ambition statements: AMBITION STATEMENTS Do The Right Thing First Time When people contact our services, we need to respond quickly and effectively, with a focus on helping people to help themselves first. We will continue to develop ‘First Point of Contact’ by incorporating good conversations across the HSCP and prioritising and embedding the whole system approach to get it right first time. Increased Focus on Prevention, Early Intervention and Tackling Inequalities by Working with Communities and People The population and needs analysis highlighted the need to do things differently, to understand the demographic challenges facing North Lanarkshire and to harness the opportunities of people living healthier lives for longer. We need to keep changing the way we deliver services and support people, focusing more on prevention, early intervention, and empowering people to live fulfilling lives. By providing ‘upstream’ support at an early stage, we can reduce the demand on intensive health and care services and re-invest in more community focused support services. By working with our partners in the Third Sector, we can identify, support, and develop local community-based programmes, run by voluntary and independent organisations that focus on the health and care needs of local communities. We will continue to support and empower people to continue to live healthy, meaningful, and more personally satisfying lives as active members of their community for as long as possible by showing ambition and innovation to develop and try new ways of providing services. We value and recognise the vital role local people and communities play by continuing to ensure we listen and provide a voice to their needs and aspirations. We will continue to engage and participate with local people as we extend into the delivery of our partnership priorities. Develop And Support a Workforce for The Future The increase in ageing population of North Lanarkshire is broadly mirrored within the workforce of the Health and Social Care sector, therefore it is important for us to be cognisant of this and ensure mechanisms are put in place to allow flexibility and support to our workforce to ensure their physical and mental health is nurtured. There are also continuing challenges with regards to resourcing, attracting, recruiting, and retaining staff. Whole system planning requires further development to better understand the needs and demands of communities including the public health challenges, the types of roles needed to support different care needs, and the availability of different types of workers over time and geographically. Improve Mental Health and Wellbeing Mental health concerns are continuing to increase in the population which could lead to a greater demand for mental health services and community supports. There is a need for a refreshed and reinvigorated approach to mental health improvement with the focus on the four core areas within the Lanarkshire Mental Health and Wellbeing Strategy: • Good mental health for all • Improving access to mental health supports and services • Children and young people’s mental health and wellbeing • Specialist mental health services Supporting People Through a Whole Family Approach Our aspiration is to support adults and children of all ages with the tools to set, plan and achieve their goals together. This puts wellbeing at the heart of our approach by considering the situation that adults and children live in, who they live with and their family relationships. In practice, this means understanding each person as an individual, as well as recognising the part they play in their family and community. This approach builds on people’s strengths and resilience. 19
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Medium Term Financial Outlook Reserves Strategy The IJB has the same legal status as a local authority and is therefore able to hold reserves under section 106 of the Local Government (Scotland) Act 1973. A reserves strategy was developed to provide security against unexpected cost pressures and to aid financial stability. The use of reserves must be prudent and controlled and are generally held for the following purposes: • To create a working balance to help cushion the impact of uneven income flows. • To create a contingency to cushion the impact of unexpected events or emergencies. • To create a means of building up funds, to meet known or predicted liabilities. • To fund non-recurring costs and to help with payment profiles straddling more than one financial year. • To enable the implementation of longer-term savings proposals. The North Lanarkshire IJB Reserves Policy allocates funding to a ring-fenced, earmarked, risk-based or contingency reserve. For each reserve there should be a clear protocol setting out the reason/purpose of the reserve, how and when the reserve can be used and the review timescale to ensure continuing relevance and adequacy. IJB reserves will be held for four specific purposes as follows: Ring-fenced Reserves This reserve will be established when funding has been received for a specific purpose. Earmarked Reserves An earmarked reserve will be established when funding has been allocated by the IJB to commission services in line with agreed directions. Risk-Based Reserves A risk-based reserve will be established to provide a contingency to address a specific financial risk. Contingency Reserves A contingency reserve will be established by the IJB to cushion the impact of unexpected events and emergencies. As part of the development of the financial plan and in line with the North Lanarkshire IJB Medium to Long Term Financial Plan 2020/21 to 2029/30, if possible, it is recommended that the risk-based and contingency reserves are established as a percentage of the financial envelope as follows: Year 2022/2023 2023 to 2030 Contingency Reserve % 3% 5% 20
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Page | 17 Financial Planning Assumptions Financial planning requires assumptions to be made about demand and cost pressures which could be faced by the IJB and our partners. This financial plan focuses on the likely cost pressures that we can reasonably expect over the next three years. These assumptions have been informed by the local and national context within which we operate. Our MTFP has seven components which collectively support the transformational change required to deliver financial balance whilst delivering safe and sustainable services. This strategy is set out in the following diagram: Medium Term Financial Plan Reserves Strategy Engaging with Partner Bodies Supporting Transformation Workforce Planning Strategic Commissioning Plan Financial Management and Planning Budget Setting Process Supporting service redesign Integrated working and shifting the balance of care Investing in staff development, health, and well- being Plan and commission our services in the most cost- effective way Robust financial planning and governance Achieving more together Whole system approach working groups Delivering safe and sustainable services within budget Prevention and early intervention Delivering on our statutory requirements and national policy Making North Lanarkshire a better place to work and live 21
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It is widely expected that the public sector in Scotland will continue to face a very challenging short and medium-term financial outlook. Whilst the provision of recurring investment in 2021-2022 and non-recurring reserves will help, there remains significant uncertainty over increasing cost pressures and what the scale of the likely reduction in available funding will be over the medium term. It therefore remains important that the IJB ensures sufficient flexibility to manage in a sustainable manner the position which emerges over the coming years, with the likely scenario that a significant level of further recurring savings will be required. Consequently, the IJB’s financial planning arrangements remains subject to active review using a scenario-based approach in recognition of the significant uncertainty over raising costs and the scale of variability in the potential funding available to the IJB. Taking the 2022-2023 budget as the new baseline, this plan updates the financial planning assumptions in relation to funding sources and increased cost pressures arising from employee costs, inflationary cost pressures, demographic growth and demand, local cost pressures and legislative and policy developments. Due to the continuing changing financial environment we are currently facing, the reliance which can be placed on the financial costings decreases the further into the future the projections relate to. Using a range of scenarios, current projections for the period 2023-2026 highlight potential cost pressures within a range of £19.823m to £44.459m for this period (Appendix 1). Based on these projections, and subject to clarification over the coming months and years, the Chief Finance Officer (CFO) recommends that the IJB progresses with a financial planning strategy based on the envisaged scenario showing potential cost pressures within a range of £26.105m to £29.326m per annum, over this three-year period. This assumed scenario and the financial strategy to address it can be found at Appendix 2. Financial Pressures Detailed below are the main areas of cost pressures and demand which will be subject to ongoing review as clarification of the position of each emerges. These assumptions are based on the budget position and assumptions in January 2023 and represent a similar picture to the pressures we identified in our previous North Lanarkshire IJB Medium to Long Term Financial Plan 2020/2021 to 2029/2030. Pay Pressures - Employee costs represent a large portion of IJB net budgets with any increase in pay awards impacting directly on current and future cost pressures. At the time of writing some areas of the pay offer for 2022-2023 is still to be agreed however, the assumption is Scottish Government will fund this additional cost burden on a recurring basis. In relation to 2023-2026, an estimated 2.5% has been assumed for staff employed within NLC and 2% for staff employed within NHSL, to reflect the pay award expected to be managed within IJB resources. In the event of an uplift greater than that estimated and no additional government support, the envisaged forecast gap could potentially change materially. Consideration is also given to the challenges of recruiting and whether pay settlements are keeping pace with industry standards, particularly considering the burden placed on employees in the health and social care sector throughout the pandemic and cost of living crisis. 22
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Inflationary Cost Pressures - A significant cost pressure relates to the National Care Home Rate Contract (NCHR) which is negotiated annually. The level of increase for future years is unknown but it is prudent to assume, based on past year trends and the on-going cost of living crisis that this is likely to increase significantly over the life of this plan. Health and social care services including independent home support are also commissioned. Increases in the Scottish Living Wage significantly impact on the cost of these services and service level agreements with other health boards. In the current challenging financial economic environment with raising inflation and energy costs, it will be even more difficult for services to manage budgets. Inflationary cost pressures will remain under review with updates provided as necessary through subsequent Financial Monitoring Reports. Demographic Growth and Demand - Health and social care services are experiencing increasing demand due to demographic growth, an ageing population, complexity of care needs, deprivation, and health issues. It remains to be seen how detrimental the lasting impacts of Covid-19 will be on our communities, but we project this will result in negative impacts on the health of North Lanarkshire in the future and subsequently as a direct result, an increase in pressure on health and social care services. Prescribing - The cost of drugs prescribed by GPs usually increases year on year. The prices of drugs are set nationally and influenced by factors such as supply and demand, currency movements and patents. Prescribing activity is a clinical decision made by individual GPs. At the time of writing, the current prescribing budget is projected to overspend by year end. Based on this trend, a volume and price uplift has been included in future projections to mitigate against deteriorating health within our population and the continuing uncertainties experienced in supply and demand due to the withdrawal from the EU. Legislative and Policy Developments - There are a range of legislative and policy developments which have and are continuing to be implemented across the partnership. These include the Carer’s Act, Alcohol and Drug Partnership (ADP), Primary Care and Mental Health developments. To date, additional funding has been made available by the Scottish Government to take these policies forward and it is assumed that the expenditure will be contained within the funding available. Recognising this, no variation in the cost projection is therefore considered, however, if future funding from Scottish Government is withheld or withdrawn, the envisaged forecast gap could potentially change. Local Cost Pressures - A range of local priorities are included in the MTFP including digital and IT technology improvements, investing in home support, tests of change pilots and continued recovery from the pandemic. Depending on when the cost commitment is expected to be incurred and expected duration, the cost pressures will be recognised in the year it is forecast to materialise. Although the preferred approach is to identify recurring funding solutions, until this is achieved, consideration will need to be given to establishing earmarked reserves to fund these commitments. 23
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Sensitivity Analysis This MTFP is a financial model. As the financial planning assumptions are likely to vary over the duration of the plan, it is prudent to consider a range of financial outlooks. To test the assumptions used in the modelling of our three scenarios (envisaged outlook, optimistic outlook, and pessimistic outlook), sensitivity analysis was carried out to determine the impact of any material changes on our current assumptions. The following table shows the impact if our key assumptions increased by 1% against our envisaged outlook: A one percent increase would increase our current cost pressures by £7.056m in year one rising to £7.569m by year three. Financial Sustainability Approach The financial sustainability approach considers a range of interventions. The IJB ambitions are set out in the Strategic Commissioning Plan and further detailed in the Programme of Work. The following key principles underpin these strategies: Efficiency The IJB has a statutory duty to deliver best value in its use of public funds. The cost of services therefore requires to be kept under review and sources of income which are available to fund services should also be secured and maximised. Service Redesign and Innovation Service redesign and innovation involves significantly changing the way in which services are planned and delivered, working in partnership with stakeholders, service users and carers to better support them to achieve their personal outcomes and aspirations. Redesign opportunities also need to take into consideration digital, telehealth, telecare, and e-health strategies. 2023/24 2024/25 2025/26 2023/24 2024/25 2025/26 TOTAL £m TOTAL £m TOTAL £m TOTAL £m TOTAL £m TOTAL £m Contractual Pressures 9.065 9.495 9.971 11.250 11.762 12.328 Demand Pressures 7.063 7.578 8.130 8.033 8.618 9.246 Pay Pressures 4.929 5.053 5.179 6.901 7.074 7.251 Local Cost Pressures 1.212 2.037 2.037 1.224 2.057 2.057 Prescribing 3.835 3.912 4.009 5.753 5.868 6.014 TOTAL 26.105 28.075 29.326 33.161 35.379 36.896 Envisaged Outlook Type of Pressure on Base Budget Increased by 1% 2023/24 2024/25 2025/26 TOTAL £m TOTAL £m TOTAL £m 2.185 2.266 2.357 0.970 1.040 1.116 1.972 2.021 2.072 0.012 0.020 0.020 1.918 1.956 2.005 7.056 7.304 7.569 Impact of 1% Change 24
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Shifting the Balance of Care A whole system approach to service redesign and savings options is critical. The management of the volume of delayed discharges is an essential consideration going forward to deliver future cost reductions. This however is dependent on capacity being available in community care which is currently a major issue. Service Prioritisation and Reduction The scale of the financial challenge will require the IJB to consider prioritising, reducing, or stopping some services to stay within the funding available. Should demand continue to increase, it is likely that a reduction in service levels will be required to ensure a balanced budget. It is important to note that some services delivered across the health and social care partnership are difficult to transform or reduce as service users are dependent on these services to support their daily living. Prescribing Efficiencies and Medicines Management Mitigating the risk of the rising costs of primary care medicines will remain a focus for the partnership. A range of measures locally and regionally are being progressed to control prescribing volumes and where possible, reduce cost per item. This includes implementing a range of alternatives to prescribing medicines and engaging with our community in self-management and prevention measures. Realistic Care and Realistic Medicine Our users have a key role in deciding what care and treatment best meets their needs. It is therefore important that individuals are better informed about what they can realistically expect from health and social care services. Resources should be directed to achieve realistic goals and manage expectations of what future services can deliver. Early Intervention and Prevention There is strong evidence that early intervention and prevention is very cost effective. Increased emphasis on prevention is an important element of the transformation of services. Recovery approaches which are peer led also provide unique and personalised support opportunities for self-management. Providing our users with the correct service at the right time, first time is critical in avoiding unnecessary and prolonged intervention. 25
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Financial Performance Through regular updates to the IJB from the CFO and by ensuring decisions are taken with both partners to support the financial sustainability, the HSCP has successfully managed to deliver year on year financial balance. This has been achieved through a combination of: • Flexible use of recurring and non-recurring resources. • Creation and use of reserves for specific commitments. • Delivery of approved savings through service redesign and removing duplication. • Workforce planning and focusing on services that are sustainable in line with our Strategic Commissioning Plan. • Implementing a co-ordinated and strategic approach across the partnership. • Effective governance and audit controls. Key Risks and Uncertainties Given the current political climate and the associated economic uncertainty, there are a number of financial challenges facing the IJB which have the potential to affect the partnerships financial sustainability and consequently, future service delivery. These include but are not limited to: • Future funding levels from our partner organisations and Scottish Government. • Our ability to recruit and retain quality staff to continue to deliver services and manage increasing demand. • Continued increasing costs and raising inflation including future pay awards. • Unexpected shortage of supplies and materials. • Changing political factors which influence the UK and Scottish Government priorities and policy initiatives. • The cost and implications due to targets and the impact of the Climate Change. • Introduction and impact of the National Care Service. The IJB maintains a strategic risk register and both partners maintain operational risk registers. Strategic and operational risks are regularly monitored and updated by senior officers across the health and social care partnership. 26
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Estimated Impact of Cost and Demand Pressure for 2023 – 2026 Appendix 1 In early November 2022, the Scottish Government published their Emergency Budget Review (EBR)4 in light of the cost-of-living crisis and inflationary pressures. The EBR sets out reprioritisation of spend of c£0.4 billion within the health and social care portfolio to support pay and wider pressures in the sector. To minimise the impact on existing services, this reprioritisation of spend will largely focus on previously planned additional funding and new allocations. At time of writing, further details of changes to budgets are uncertain and the plan will be adjusted as and when these become clear. 4 Emergency Budget Review: 2022 to 2023 - gov.scot (www.gov.scot) 2023/24 2024/25 2025/26 £m £m £m Contractual Pressures 8.871 9.268 9.686 Demand Pressures 3.879 4.162 4.466 Pay Pressures 3.944 4.022 4.103 Local Pressures 1.212 2.037 2.037 Prescribing 1.918 1.937 1.956 TOTAL 19.823 21.426 22.248 2023/24 2024/25 2025/26 £m £m £m Contractual Pressures 9.065 9.495 9.971 Demand Pressures 7.063 7.578 8.130 Pay Pressures 4.929 5.053 5.179 Local Pressures 1.212 2.037 2.037 Prescribing 3.835 3.912 4.009 TOTAL 26.105 28.075 29.326 2023/24 2024/25 2025/26 £m £m £m Contractual Pressures 12.403 13.364 14.430 Demand Pressures 9.698 10.406 11.165 Pay Pressures 7.887 8.203 8.531 Local Pressures 1.212 2.037 2.037 Prescribing 7.670 7.977 8.296 TOTAL 38.870 41.986 44.459 Type of Pressure on Base Budget - Envisaged Outlook Type of Pressure on Base Budget - Pessimistic Outlook Type of Pressure on Base Budget - Optimistic Outlook 27
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Financial Strategy to Address Funding Pressure for 2023 – 2026 Appendix 2 The IJB will address the potential funding pressures for the next three years using a combination of re-profiling of cost pressures by using a mixture of redesign and budget realignment, making best use of available reserves and by addressing pressure points through management actions and interventions. This will include identifying potential recurring savings and completing an in-year analysis and review of all remaining reserves to identify those no longer required for their original purpose. As previously stated, due to the continuing changing financial environment we are currently facing, the reliance which can be placed on the financial costings and mitigation to address these pressures, decreases the further into the future the projections relate to. The CFO will continue to update and refresh the assumptions as new financial information and certainty becomes available. NORTH LANARKSHIRE IJB 2023/24 2024/25 2025/26 MEDIUM TERM FINANCIAL PLAN 2023 - 2026 TOTAL £m TOTAL £m TOTAL £m Total Envisaged Outlook 26.105 28.075 29.326 2023/24 2024/25 2025/26 TOTAL £m TOTAL £m TOTAL £m Use of Reserves 8.219 9.958 0.864 In Year Re-Profiling of Cost Pressures 7.008 1.329 1.329 Resource Forecast 10.878 11.301 11.767 Management Actions 5.487 15.366 Total Financial Strategy 26.105 28.075 29.326 2023/24 2024/25 2025/26 TOTAL £m TOTAL £m TOTAL £m NET TOTAL 0.000 0.000 0.000 ENVISAGED FUNDING GAP Financial Strategy to Address Funding Pressures: 28