Health and Social Care Financial Recovery Update
Perth and Kinross Council · 14 January 2026
Back to Perth and Kinross Council — 14 January 2026 and its agenda
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Our vision is a Perth and Kinross where everyone can live life well, free from poverty and inequality ___________________________________________________________________ Committee: Perth and Kinross Council Date of Meeting: 14 January 2026 Report Title: Health and Social Care Financial Recovery Update Report Number: 26/12 Report Author: Jacquie Pepper, Director Integrated Health & Social Care/Chief Officer Organisational Lead: Jacquie Pepper, Director Integrated Health & Social Care/Chief Officer _______________________________________________________________ 1. Purpose 1.1 This report updates Council on work undertaken to scope out potential financial recovery actions as set out in Part B of the Integration Joint Board (IJB) Financial Recovery Plan considered by the IJB on 8 October 2025. It also includes an initial, high-level assessment of each potential action. 1.2 The report also provides clarity on the decision-making responsibilities of both IJB and Council in relation to adult social care and considering that, proposes that Part B options be considered as part of the Council Budget setting process for 2026/27 following confirmation of the Scottish Government’s budget settlement. 1.3 Sections • Background and Context • Financial Position • IJB Financial Recovery Plan • Implications for Perth & Kinross Council • Conclusion • Impact & Value Assessment • Appendices
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2. Recommendations It is recommended that the Council: 2.1 Notes delivery progress in-year on Part A of the Recovery Plan as reported to the IJB on 17 December 2025; 2.2 Notes the work undertaken to date in relation to Part B actions, their likely impact and associated risks; 2.3 Notes the clarified decision-making responsibilities of the IJB and Perth & Kinross Council with reference to the proposed Part B Actions; 2.4 Notes that Part B options require to be considered as part of the Council’s budget setting process for 2026/27; and 2.5 Agrees to continue to work collaboratively with the IJB, NHS Tayside and other strategic partners to resolve the structural funding gap for health and social care in Perth & Kinross 3. Background and Context 3.1 This report is provided to ensure that Council is fully appraised of the financial impact of significant and unprecedented demographic and population changes in Perth and Kinross which have resulted in a substantial increase in both the complexity and volume of social care needs, particularly among older people and those with learning or physical disabilities. The resulting demand has outpaced available funding, creating a material gap between assessed need and budget provision. 3.2 With a Health and Social Care emergency declared by way of a Motion to Council on 10 December 2025, it was agreed that urgent, coordinated action was required to safeguard the wellbeing of our communities and ensure equitable access to social care. 3.3 Table 1 below demonstrates that the Demand Index in Perth & Kinross baseline = 100 in 2001) rises steadily reaching 370 by 2028. This represents a 3.7 x increase in service demand over the period. 3.4 Growth is driven by: • Population aged 75+ increasing by 78%. • Population aged 85+ increasing by 90% from 2001 to 2023 and projected to rise another 14% by 2028 • Old-age dependency ratio doubling from 25 to 52 per 100 working-age people.
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Table 1. Increase in adult social care demand 2001-2028 *** In the context of social care, a demand index typically aggregates various indicators— such as demographic trends, prevalence of certain health conditions, and rates of service usage to provide an overall score or value that reflects current and projected need*** 3.5 This level of service demand indicates a requirement for a significant expansion in social care including staffing, specialist roles, and training in working with very old people as well as increased residential care and home adaptation programmes. Contrary to managing budget insufficiency through a range of proposed savings and limitations or reductions in services, the demographic change indicates a requirement for a substantial increase in funding for integrated health and social care if the Council is to meet demand and continue to deliver on its vision and priority to protect and care for our most vulnerable people. 3.6 The relationship between performance and the HSCP transformation programmes is central to addressing the financial position of the HSCP and achieving sustainable health and care services. Workstreams are prioritised with the dual aim of improving care and achieving greater efficiency. Workforce capacity, rising demand and increasing complexity present significant challenges and quarterly reporting on performance is fundamental to demonstrating impact in this challenging environment. The HSCP has driven forward service redesign and transformation to deliver the IJB’s Strategic Plan 2024-2027. Transformation is focused on shifting the balance of care towards prevention; addressing needs arising from demographic change namely the ageing population and prevalence of dementia; increasing equality of access and addressing unmet need in the community. The most recent performance report shows how all of this is leading to improved outcomes over time. 3.7 The HSCP is reprofiling its Transformation Programmes. Existing transformation initiatives are being reviewed to accelerate delivery and maximise savings.
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This includes digital enablement, workforce redesign, and integrated locality planning along with a requirement to align with the five principles Scottish outlined in the Scottish Government’s Service Renewal Framework for Health & Social Care published in June 2025: • Prevention: Prevention across the continuum of care • People: Care designed around people rather than the ‘system’ or ‘services • Community: More care in the community rather than a hospital-focussed model • Population: Population planning, rather than along boundaries • Digital: Reflecting societal expectations and system needs 3.8 As set out in previous reports to both the IJB and Council, these pressures are not unique to Perth and Kinross but reflect a national picture of underfunding in social care, with many Integration Joint Boards across Scotland facing similar challenges and depleted reserves. However, the rural geography, and relative higher growth in our older population create specific service and costs pressures, which have a significant impact across both the Integration Joint Board’s strategic plan and consequently the Council’s budgets. For example, it is estimated that the hourly costs of delivering care at home in a rural setting is circa 9% higher than delivery within an urban locality. The considerable additional costs associated with delivering social care to rural and remote rural communities requires further exploration and Officers will continue to work on understanding the scale of this locally and through national networks. 3.9 The actions under Part B of the IJB’s Financial Recovery Plan were proposed as possible options to manage the delivery of its strategic plan within available resources. Each of these actions would result in a reduction in the level of service provided and a need for a revision of the strategic plan. This is highly likely to mean limiting who can access services, reductions in the level of care and support are delivered or scaling back the Health and Social Care Partnership’s (HSCP) planning and oversight activities. 3.10 The Covid-19 pandemic clearly illustrated the wide-ranging system-wide impacts of reducing health and social care provision. Reductions or limitations will result in additional strain on other council services and NHS services. Delayed discharges will rise, support at home will decrease, individual health conditions will worsen, care needs will rise with more people requiring crisis interventions, waiting lists will lengthen, and the equality gap is likely to widen. All will likely result in financial pressures in other areas of the health and social care and wider council services. 4. Financial Position National Financial Position 4.1 Protecting health and social care was a priority during the Covid-19 pandemic and HSCPs were provided with significant non-recurring financial support to support and alleviate escalating need in vulnerable and at-risk people across our communities.
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The Perth & Kinross HSCP was at the forefront of the work to protect and safeguard the health and wellbeing and additional funding allocations assisted in securing this. Following the pandemic, the situation for IJBs has continued to worsen at a national level. The Accounts Commission’s Integration Joint Boards Finance Bulletin published in March of this year highlighted that the finances of all IJBs continue to be precarious, with the majority reporting a deficit in the cost of providing services, requiring unplanned use of reserves and additional contributions from partner bodies. A report on local government finances developed by the LGIU also highlights adult social care as the number one pressure across Scottish local authorities. The situation in Perth and Kinross is in line with this national position. 4.2 While the GAE (Grant Aided Expenditure) calculations for the 2026/27 budget cycle are not yet fully known, COSLA has advised of changes to the allocation methodology for adult social care that is likely to negatively impact upon the funding settlement for Perth and Kinross Council. The principle of these changes was agreed by COSLA leaders in late 2025 with the full implications only now being provided following the detailed work by Scottish Government. The Scottish Budget is due to be announced the day prior to Council’s considerations of this report so any further detail be shared verbally as part of the introduction to this report. Local Financial Position 4.3 Since 2019/20, increasing demand and complexity of care requirements have outpaced available funding, creating a material gap between assessed need and budget provision. 4.4 The Health and Social Care Partnership delivered £12 million in savings between 2022 and 2025 and is projected to achieve an additional £2.5 million by the end of March 2026. Audit Scotland noted in September 2025 that the IJB has made significant progress towards recurring savings targets. Substantial savings and efficiencies have already been delivered within health and social care to meet additional population growth and increased demand and the remaining options to further reduce expenditure without significant adverse impact are limited and extremely challenging. 4.5 Based on the most recent Local Financial Return (LFR) for 2023/24, for the level of adult social care expenditure per 1,000 population, Perth & Kinross ranks as the 29th lowest of the 32 local authorities in Scotland. Further demonstrating that, to date, the social care budget has been managed efficiently and effectively. This significantly reduces the scope for achieving further material savings without impacting on service delivery or worsening outcomes for people who use services, very restricted. 4.6 In 2024/25, the IJB experienced significant pressures beyond those anticipated in the 2024/25 Budget and on 2 October 2024 (Report No. G/24/163) the IJB approved a Financial Recovery Plan which included the use of IJB uncommitted reserves, in line with the Integration Scheme, and a series of cost saving actions.
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4.7 Recognising the situation faced by the IJB in 2024/25 the Council’s Revenue Budget for 2025/26 (Report 25/36 refers) approved a contribution to the IJB which included additional recurring funding of £6.7 million to protect and support the delivery of social care services. From 2015/16 to 2024/25 Perth & Kinross Council has passed on all funding from the Scottish Government intended for social care, including additional monies during and post COVID recovery period, funding to support living wage and additionality, however, there has been no additional funding provided over and above this to meet increasing demand. At no point has the Council been required to make savings to support social care. The Revenue Budget for 2025/26 was set using mid-level assumptions however, there was an acknowledged risk that the higher-level assumptions could result in additional costs of £5 million over and above the assumed mid-range figure. That risk has materialised midway through the financial year. This has resulted in a series of reports by the IJB’s Chief Officer and Chief Finance Officer to both the IJB and Council drawing attention to the demand levels being experienced, setting out the financial savings delivered by the IJB, and advising that the IJB’s financial reserves are now depleted entirely as a result of the efforts to manage and meet increasing complexity and demand across adult social care services. 4.8 These reports are listed below: • 20 August 2025: IJB report on the 2025/26 in-year financial position which included a projected net overspend of £4.915m. (Report No. G/25/108) • 1 October 2025: Finance and Resources Committee was advised that as the majority of the IJB’s projected overspend is derived from social care activity it may have implications for Council revenue budgets and that further updates would be provided. (Report No. 25/248) • 8 October 2025: IJB provided with an update on the projected financial position and presented with a Financial Recovery Plan as required by the Integration Scheme to address the anticipated overspend. Part B of the financial recovery plan was noted as including measures for which consultation, performance impact and impact assessments would be required. (Report No. G/25/158) • 29 October 2025: Comprehensive report to Council on the population and demographic changes leading to unprecedented demand pressures in health and social care. Council approved an additional non-recurring allocation of up to £4.180 million from the council’s Uncommitted General Fund Balance in 2025/26 to meet existing costs associated with high service demand and to complete the work outlined in the financial recovery plan. (Report No. 25/278). • 26 November 2025: The financial challenge and in-year response was reported to Finance and Resources Committee by the Council’s Chief Finance Officer as part of the Revenue Budget Update Report. (Report No. 25/326).
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• 17 December 2025: IJB received a high-level report confirming the work undertaken to carry out initial impact assessments relating to actions in Part B of the Recovery Plan. The IJB noted advice in relation to the decision-making responsibilities of Council in respect of Part B in the Recovery Plan and that it would be necessary to report to Perth & Kinross Council on the extent to which it was willing to progress each of the five actions. (Report No. G/25/199). • 17 December 2025: IJB received a Finance Update report and was advised of progress made in implementing the Part A recovery actions and that the associated savings will be delivered. (Report No. G/25/198) 4.9 In recognition of all these factors, and the findings of the Scottish Fiscal Commission’s 2025 Fiscal Sustainability Report about the impact of an ageing population on health and social care spending, elected members voted to declare a Health and Social Care Emergency in Perth and Kinross, becoming one of the first in councils in Scotland to do so. On the instruction of that motion the Council Leader has written to the First Minister, the Cabinet Secretary for Finance and Local Government, and the Cabinet Secretary for Health and Social Care to convey the critical nature of the situation locally and to request urgent meetings to discuss options to address the increasing demand pressures and ensure a sustainable future for our health and social care sector. Current Financial Position 4.10 Based on the latest financial update for month 7 presented to the IJB, the recurring budget for Perth & Kinross IJB in 2025/26 is £279.4 million. Of this, £176.5 million is allocated to health services and £102.8 million to adult social work and social care. As of month 7, after Part A recovery actions and use of all remaining general reserves, there is a projected gap of £4.414 million (1.6% of the total budget). Social Care faces a £4.167 million shortfall, 4.1% of the Social Care budget. 4.11 At the IJB Meeting of the 17 December the IJB noted that Perth & Kinross Council had agreed an additional allocation of up to £4.180 million in 2025/26 to the IJB to meet existing costs associated with high service demand and to complete the works outline outlined in Parts A and B of the Financial Recovery Plan; that as part of the work undertaken an exercise has been completed to clarify the respective decision-making responsibilities of the Integration Joint Board, Perth & Kinross Council and NHS Tayside in relation to the financial recovery actions; and that the Chief Officer will report progress on Part B to Perth & Kinross Council as part of its budget setting process.
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5. IJB Financial Recovery Plan 5.1 To address the in-year financial pressures, the Chief Officer and the Chief Finance Officer presented a Recovery Plan to the Integration Joint Board on 8 October 2025. The Plan combines immediate in-year actions to reduce costs and a range of potential medium to longer term measures. The financial recovery plan needs to balance the requirement to reduce costs with the legal obligation of the Council to provide safe and effective care and support for vulnerable adults. The HSCP is already preparing detail on a range of other measures and savings options in preparation for budget setting for 2026/27 to 2029/30 which will consist of reducing and removing services with the inevitable negative impact on our vulnerable citizens. 5.2 All other efficiency measures and service improvements of any material financial value have either already been delivered, identified, or are in the process of being implemented. In the absence of recurring additional social care funding, the IJB and its partners are in the undesirable position of having to consider a series of exceedingly difficult proposals to secure the sustainability of essential social care services for the local population. It is for these reasons that the recovery plan is in two parts: • Part A focusses on short terms savings measures which the Health and Social Care Partnership, with professional advice, considers deliverable. These include further strengthening vacancy management, repurposing earmarked funds, reducing supplementary staffing costs, and raising professional and leadership oversight of complex care decision-making. Part A update: The IJB was advised of progress made in implementing the Part A recovery actions. For Health and Social Care, the original projected savings were for £0.7m and £0.25m, respectively. The latest financial monitoring indicates that whilst the actions are challenging, the savings will be delivered in full. • Part B outlines potential strategic options which include reviewing commissioning models and eligibility criteria. These longer-term changes will require full impact assessments and consultation with affected stakeholders. 5.3 Given the potential options being considered in Part B of the Recovery Plan, legal advice was sought regarding the demarcation of roles and responsibilities between the Integration Joint Board and the Council. The IJB has a strategic role in terms of the adult social care function. It prepares the Strategic Plan and issues Directions to the Council (and NHST) to carry out the delegated functions in accordance with that plan within an identified budget. Whilst these Directions are the mechanism by which the IJB implements its Strategic Plan, they do not transfer legal duties, nor can they create new or substitute statutory tests.
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5.4 The Council retains the statutory duty under Section 12 A of the Social Work (Scotland) Act 1968 to assess individuals who may be in need of community care services; and having regard to that assessment, it is for the Council to determine whether those needs call for the provision of services. This is therefore a two-stage test, and it is in determining the second part (whether to provide a service) that questions such as eligibility criteria, resource prioritisation etc. come into play. 5.5 The IJB has directed that Part B of the Financial Recovery Plan should be scoped out considering the causes of service and financial pressures to identify potential medium to long term preventative measures; acknowledging that potential actions in Part B of the Financial Recovery Plan would be challenging to deliver and present risks in relation to the delivery of the IJB strategic plan, adverse impact on population safety and wellbeing, and overall performance. 5.6 As stated above, however, the proposed Part B measures are for the Council to agree to or otherwise given it statutory duties in terms of assessment and provision. It is for that reason that they fall to be considered as part of the Council’s revenue budget setting discussions. The work carried out to date is set out below to inform those discussions. Part B update: Officers in the Health & Social Care Partnership have completed an initial scoping on each of the five actions proposed in Part B of the Recovery Plan including: • a high-level assessment about the extent to which the action will constrain the IJBs Strategic Plan 2024-27 • early identification of risks • initial Equalities and Fairness Impact Assessment to identify potential impact on those with protected characteristics under the Equality Act 2010 (as far as is possible without direct engagement with stakeholders) • identification of legislative requirements, statutory guidance, and specific legal advice • early assessment of impact on performance • benchmarking with other areas across Scotland • indicative financial costings • high level assessment of system-wide impact e.g. partners and service providers
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5.7 An initial scoping and impact assessment has been completed in relation to the five key actions proposed in Part B of the IJB Financial Recovery Plan and the scoping and assessment to date is set out below: Recovery Actions Scoping and Assessment to Date Limit access to social care services in-year alongside a comprehensive review of eligibility criteria There is a growing gap between increasing demand and limited financial resources. An initial review of the eligibility criteria indicates that the current application of the policy, criterion and practice is prioritising access to services for people with higher levels of need. The consequential impact of this action is likely to be higher than its potential to reduce costs. Data analysis estimated 93% of individuals provided care are assessed as having substantial and critical levels of need. Perth & Kinross Council no longer provides support for people presenting with low level need. Those with moderate need account only £50k of the total expenditure. While cost efficiency is important, decisions must not be made solely on financial grounds. The potential impact of raising eligibility thresholds brings with it the risk of reduced preventative activity and the resultant escalation, person-centred care, increased crisis interventions, and negative effects on both service users and the workforce. Proceeding with a review of the Eligibility Criteria will require a full Equalities and Fairness Impact Assessment and formal consultation with people who use services and their carers ahead of any recommendation and before any final decision is made. Introduce waiting list for new packages of care Whilst introducing waiting lists can be explored; any potential model must still operate within the Council’s statutory duty under S12A of the Social Work (Scotland) 1968 Act to assess need then decide if it calls for the provision of a care service. Any model should take account of risk would require a full Equalities and Fairness Impact Assessment and consultation.
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Recovery Actions Scoping and Assessment to Date Re-examine and consider commissioning models for care at home The recent transformation programme has optimised current delivery, minimised unmet need and had a positive effect on delayed discharges. External provision can be lower cost, but internal provision can help maintain service quality, responsiveness, and coverage in rural areas. There are concerns about the ability to support unpaid carers and the broader workforce, anticipated if internal provision is reduced. Our analysis highlights the strategic importance of Care at Home in sustaining the wider health and social care system, warning that further externalisation could disrupt hospital discharge flows and increase pressure on acute services. Any proposed changes require comprehensive impact assessments and stakeholder consultation to manage risks to service delivery, workforce resilience, market stability, and compliance with legal duties. Accelerate recommissioning of Service Level Agreements (SLA) and contracts. While the current SLA portfolio is extensive and supports diverse user groups, potential savings from re-commissioning, consolidation, or restricting funding to statutory services could significantly impact service quality, equity, and the wider health and social care system. There is some duplication among providers and some smaller organisations at risk from financial pressures. Although some savings are possible through strategic commissioning, drastic reductions would jeopardise early intervention, increase pressure on statutory services, harm vulnerable populations, and risk workforce instability. Efficiencies are possible through alliance or place- based approaches, retaining outcomes through collective efficiency. Any proposed changes require comprehensive impact assessments and stakeholder consultation.
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Recovery Actions Scoping and Assessment to Date Vacancy management to be further strengthened to include a freeze on non-frontline posts Non-frontline roles, while not delivering direct care, are vital for supporting the organisation’s infrastructure and enabling the Integration Joint Board (IJB) to meet its statutory duties. These roles have already undergone substantial cuts and have minimal flexibility. Further reductions would threaten the HSCP’s ability to function beyond basic statutory requirements. The ability to manage best value, risk, quality, efficiency, partnership working and system-wide planning would be compromised, presenting further risk. This would require a comprehensive impact assessment, robust staff, and stakeholder engagement a full Equalities and Fairness Impact Assessment, HR impact assessment, and formal consultation with staff, trade unions, and partner organisations. 6. Implications for Perth and Kinross Council 6.1 According to the Integration Scheme, if a recovery plan fails, IJB reserves are used first. The IJB has exhausted all remaining general reserves. Therefore, after Part A recovery actions, the remaining forecast gap based on expenditure to month 7, is £4.167m in-year. The Council has already approved to support the IJB in-year and agreed an additional allocation of up to £4.180 million in 2025/26. 6.2 The financial position going into 2026/27 may be further exacerbated by a redetermination by Scottish Government of the adult social care local elements of GAE after proposed changes to the methodology used to distribute funding between local authorities. 6.3 Legal advice indicates that the decision to take forward any of the proposals in Part B will require approval of the Council. 7. Conclusion 7.1 The Perth and Kinross Integration Joint Board (IJB) faces a significant financial challenge for 2025/26, driven by increased demand and complexity in social care services. 7.2 Despite substantial savings achieved in recent years, the scale of current pressures means that further reductions will be extremely difficult without impacting service delivery and negative impact for vulnerable adults and older people. This reflects the national situation where IJBs are experiencing depleted reserves, significant financial pressures, increasing demand, and complexity of need.
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7.3 Although the actions in Part B were initially considered as part of the 2025/26 Financial Recovery Plan, they will now form part of the budget setting processes for 2026/27. As a result, there is no financial benefit anticipated within the current financial year. It may not be possible to close the financial gap for 2026/27 through savings available to the IJB and additional funding or alternative systems solutions may still be required. The IJB authorised the Chief Officer to formally request that Perth & Kinross Council and NHS Tayside work collaboratively with the IJB to set a balanced budget for 2026/27. 7.4 Should it not be possible to provide a range of measures to meet the demand levels within social care, including the potential use of Part B Options, it will fall to the Council to consider the level of funding it makes available to the IJB to deliver services. In the event of Council requiring to provide additional funding to meet the level of demand in adult social care, it will be required to implement cuts in services across other areas of Council service. 8. Impact and Value Assessment 8.1 A comprehensive Equalities & Fairness Impact Assessment will be required ahead of any decisions relating to any of the Part B Recovery Actions. The impact assessments will need to identify the potential impact on outcomes across all of those with protected characteristics. In addition, the assessment will be informed by legal and professional advice and identify the impact on unpaid carers, workforce, as well as other parts of the health and social care system including acute hospital services, and other Council services. Crucially, these must also evaluate the impact on the social care market which comprises commissioned providers in third and independent sectors. 8.2 The impact assessment should thoroughly review how proposed actions may affect the strong performance and improved outcomes achieved in the last 4-5 years, especially since Covid. 9. Appendices None.