Budget Monitoring - 3 Months to 30 June 2026
Argyll and Bute Council · 18 August 2026
Back to Argyll and Bute HSCP Finance and Policy Committee — 18 August 2026 and its agenda
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1 Finance & Policy Committee Date of Meeting: 18 August 2026 Title of Report: Budget Monitoring – 3 months to 30 June 2026 Presented by: James Gow, Head of Finance The Finance and Policy Committee is recommended to: • Note the HSCP is reporting a small year to date overspend of £0.7m. • Note that the forecast is currently in line with budget apart from a large forecast £10.2m overspend on the SLA with Greater Glasgow and Clyde. • Note the HSCP is not currently progressing actions to mitigate the SLA overspending but is working in partnership within emerging sub-national frameworks. • Note financial restrictions remain in place as spend is being financed by use of reserves and the HSCP is not operating on a sustainable basis. • Note savings of £2.8m have been delivered, 39% of target. • Note the financial risks associated with the SLA and service provider failure within the care at home service. 1. EXECUTIVE SUMMARY 1.1 1.2 This report provides a summary of financial performance for quarter 1 of 2026/27. It provides the year to date position and year end forecast. At this early stage there is significant uncertainty which makes projecting future costs difficult. Spend is broadly in line budget and good progress has been made in delivering savings. The main issue is the projected overspend on the SLA with NHS Greater Glasgow and Clyde (GG&C). This has been known about for some time but the approach to managing the financial implications has not yet been settled. A detailed report is due to be provided to the IJB in September and the HSCP continues to work with GG&C, Scottish Government and NHS Highland. A sub-national / regional approach to this is required rather than an entirely local one. The other main concern is provider failure within the care at home service which is resulting in increased spend on agency and requires the HSCP to consider the expansion of in-house services to manage service risk. It is difficult to predict the financial implications at present and an options appraisal model is being developed.. 1.2 The HSCP is not operating on a financially sustainable basis and therefore existing spend controls remain in place. There is still evidence that the actions
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2 to improve financial performance are continuing to have an impact on service delivery, unmet need and delayed discharges. 2. Recommendations • Note the HSCP is reporting a small year to date overspend of £0.7m. • Note that the forecast is currently in line with budget apart from a large forecast £10.2m overspend on the SLA with Greater Glasgow and Clyde. • Note the HSCP is not currently progressing actions to mitigate the SLA overspending but is working in partnership within emerging sub- national frameworks. • Note financial restrictions remain in place as spend is being financed by use of reserves and the HSCP is not operating on a sustainable basis. • Note savings of £2.8m have been delivered, 39% of target. • Note the financial risks associated with the SLA and service provider failure within the care at home service. 3. DETAIL OF REPORT 3.1 3 Months to 30 June 2026 The table below provides the year to date figures for the first quarter. Social Work/Care services report on a cash basis, Health report on an accrual basis. Appendix 1 provides further analysis: Service Actual £000 Budget £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 20,385 19,948 (437) (2.2%) HEALTH SERVICES TOTAL 74,104 73,855 (249) (0.3%) GRAND TOTAL 94,489 93,803 (686) (0.7%) 3.2 3.2.1 Overall, financial performance is largely in line with budget. Forecast Outturn The main focus of budget monitoring is in respect of the forecast. At this stage there are risks and uncertainties that make forecasting difficult. The table below provides a summary with the estimated overspend on the SLA with Glasgow shown separately. The HSCP does not consider that it is in a position to manage this in the current year through spend reduction. This means that additional funding and utilisation of reserves will be required to contribute to the increased cost. The reported overspend is included in the NHSH financial performance reporting to Scottish Government. Aside from this, financial performance is otherwise close to budget.
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3 Service Annual Budget £000 Forecast Outturn £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 108,103 108,336 (233) (0.2%) HEALTH SERVICES 225,197 224,864 333 0.3% GLASGOW SLA 89,105 99,264 (10,159) (11.4%) NHS Services Total NHS Services Total 314,302 324,128 (9,826) (3.0%) HSCP Total 422,405 432,464 (10,059) (2.3%) 3.2.2 Within Social Work / Social Care the areas of concern and risk are: Children’s and Families – Forecast overspend £0.3m The Children and Families budget is forecasting an overspend as external child placements are above budget despite the extra resource allocated here. This will continue to be monitored in detail throughout the year. There may be some opportunity to re-allocate budget within the service as the year progresses, the total forecast overspend on this heading is £656k, savings relating to other budgets are partially offsetting this. Older Adult Services – Forecast Overspend £0.1m Older Adult Services are currently forecast close to budget, the main concern relates to the care at home service as 2 providers are in the process of handing back services in areas where no other service providers are wiling / able to step in. This is expected to increase agency costs and is pushing the HSCP towards consideration of increased internal service provision in the Oban area. Both of these approaches will put significant upward pressure on costs and may result in reduced service provision across the area due to budgetary constraints and shortage of staff. At present the service is managing service hours on the same basis as last year, these are being held constant for now. Adult Services Budget Forecast Spend Variance External Residential Placements – demand led @ national contract rate £14.2m £14.3m (£0.1m) Care @ Home Service £21.1m £21.1m - Internal Care Home Placements £8.9m £ 8.9m - Older Adults - Other £10.7m £ 10.7m - Total £54.9m £55.0m (£0.1m) Services to People with lifelong Conditions – Forecast Overspend £0.2m These budgets total £31m and a small overspend is forecast. Key risks: • Costs of delivering care at home services increasing as a result of provider failure. Excess costs arise from agency, accommodation for agency and the potential for the expansion of in-house services which
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4 will increase on-costs and will require spend on management and vehicles over and above current budgets. • Continuing high levels of service demand in older adult services, particularly in winter and pressure to manage delayed discharges. • On-going costs of external placements and numbers of clients requiring these. • Delivery of the remaining savings programme. To some extent, these risks can be mitigated by the general reserve prudently built up in recent years. The Social Work budget relies upon £1m of non- recurring funding from Council. 3.2.3 NHS services are forecasting a significant overspend due to the increased cost associated with the SLA with Greater Glasgow and Clyde. This single issue is driving the adverse financial performance within the NHS and therefore is presented separately. Excluding the SLA, the NHS budget is otherwise forecasting a very small underspend. There are other concerns, these are: • Agency spend on medical staff at Lorn and Isles Hospital. • The costs of locum / agency staffing within 2C GP practices. • Costs associated with out of area Mental Health placements. • Shortfalls in the delivery of the savings programme. The NHS budget is so far reliant upon £6.5m of reserves to support services. As has been highlighted for some time, the main strategic finance issue facing the IJB relates to the NHS financial position and the SLA with Greater Glasgow and Clyde. The current position is that Glasgow intend to invoice for 75% of what they say is the full cost increase of services provided by them to Argyll & Bute residents. The resultant forecast overspend currently sits at £10.2m. It is intended that a detailed report providing an analysis of the activity and financial data will be provided to the September 2026 meeting of the IJB. Whilst the financial implications are provisional at this stage, it is certain that the SLA charge will be well above budget and therefore the IJB will be spending substantially more on services for residents than it is funded for (through the NRAC funding model). NHS Highland are aware of the projection as are Scottish Government. There is no agreed approach at present. Additional funding, reduce utilisation of services in Glasgow and / or a significant reduction in activity will be required for the Argyll & Bute health system to move towards financial balance. A sub-national planning approach is developing. Locally there may be opportunities to consider: • What clinical activity could take place locally within existing resources instead of in GG&C. • Can delayed discharges be managed better locally through discharge to assess models and better use of our community hospitals. • Are there charges and services within the SLA model which can be negotiated down or sourced elsewhere. These issues will be considered in the September report. Ultimately the expectation is that costs will be greater than the HSCP is currently resourced for and additional funding and / or additional savings will be required.
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5 In the short term the re-purposing of reserves is likely to be the only realistic local contribution. Structural change is likely to take some years and the IJB will be contributing to system overspending in the meantime. 3.2.4 Due to the unsustainable financial position and outstanding savings which are still to be delivered, processes to manage spend continue: • Vacancy management. • Increased controls and reporting of agency and locum spend. • New approval process for agency staffing. • Care at Home is being managed within budgeted hours as part of the Threshold of Care implementation. Additionally Scottish Government have placed restrictions on the ability of NHS Boards to appoint senior staff without central approval. These measures may result in some reduction in service and increase in unmet need or increased waiting times for care packages. Reserves are being held to contribute to managing overspending and / or slippage with the savings programme. 3.3 Savings Delivery 3.3.1 3.3.2 3.3.3 The savings programme totals £7.2m, this includes a 3% savings target (£2.2m) attached to the SLA with NHS GG&C. This saving is based on the national savings target set by Scottish Government, it is assumed that the intention was not to disproportionately target rural services and therefore this has been applied to the SLA. It is forming part of the discussions with GG&C and Scottish Government but is also considered a red risk. To date £2.8m or 39% of the savings target has been declared, the proportion achieved is higher at 69% for social work / social care services. 2026/27 Savings Target Achievement Balance % £' 000 £' 000 £' 000 Fully achieved 2,652 2,652 0 Remaining programme 4,544 174 4,370 Total 7,196 2,826 4,370 39% Appendix 3a lists the fully delivered savings and 3b summarises the remaining savings, risk rated: Savings regarded as low risk £141 Savings that may not be achieved in full in 2026/27 £1,393k Savings unlikely to be deliverable in 2026/27 £2,836k There are a number of savings which are going to take some time and require organisational change processes, several of these are relatively high risk at present. Progress continues to be monitored weekly through the savings review group meetings. The Threshold of Care saving has been achieved and is fully declared, however, the impact of the policy change will continue to be monitored for some time to come as there remains a number of home care clients who receive care above the threshold.
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6 3.4 3.4.1 3.4.2 3.5 4 4.1 5 5.1 6 6.1 Reserves Reserves of £31.1m were carried into 2026/27, mostly to fund future NHS service costs. To date £6.5m has been allocated leaving a balance of £24.8m. General reserves are £2.3m which is around 0.5% of annual spend and are well below the 2% aspirational target set out in the reserves policy. The HSCP is not progressing substantial new projects at present. Reserve funding for sustainability and value and agenda for change costs total £15.5m of the earmarked reserves balance. The GG&C SLA issue may require to be resolved through re-purposing of these resources. National Context The position across the IJB sector remains of concern, work is on-going nationally to update the national picture and Audit Scotland are currently undertaking an additional piece of work to provide advice to Government on the sustainability of IJBs, as well as on cost drivers within the social care sector. It is expected that the budget setting process for 2027/28 will be very challenging across the sector with further reductions in services likely to be proposed. Scottish Government are placing restrictions on NHS recruitment of senior staff as a consequence of the development of sub-national planning and public sector reform. However, they have not communicated the detail of the structural reform being considered. There are additional workstreams being established to take forward this agenda which risks diverting management time to structural change at a point in time when local service risks are very high. Despite this context, the HSCP is required to focus on the development of the implementation plan relating to its new JSP. This is still aligned to the strategic direction outlined by Government in respect of service design and delivery. RELEVANT DATA AND INDICATORS Information is derived from the financial and care management systems of both partners. CONTRIBUTION TO STRATEGIC PRIORITIES The Integration Joint Board has a responsibility to balance its budget and ensure spend and investment is aligned to the Strategic Plan. GOVERNANCE IMPLICATIONS Financial Impact – there a strategic concern in respect of the escalating cost of the SLA with Glasgow. This is a critical element of health and social care services. The activity and financial aspects of this will be reported in September. There is no agreed approach to managing the overspending at present, which sits with NHS Highland. Other than this, the HSCP is operating close to budget at this early stage in the year.
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7 6.2 6.3 Staff Governance – None but there is a strong link between HR management and delivering a balanced financial position and delivering on the savings plan. Clinical Governance – None directly, cost savings are impacting upon care volumes and/or quality. 7. 7.1 7.2 8. PROFESSIONAL ADVISORY Professional Leads have been consulted on the implications of the budget and savings programme. Professional advice is that the HSCP should aim to increase the provision of reablement and proactive Care at Home reviews. This is now being done. We are also required to develop or refocus services towards prevention. This is more challenging to achieve given current service pressures though is under active discussion within the management team. Efficiency improvement measures taken to manage the financial situation are leading to care at home not being provided to community and hospital in-patients to the same extent, or as quickly as in the past. This is leading to increased dependency and deconditioning from longer stays in hospital and blocks to discharge causing associated system flow pressures. Increased risk held in community and increased demand on unpaid carers are other consequences. Any further action to reduce social care activity levels / costs will exacerbate these issues. EQUALITY AND DIVERSITY IMPLICATIONS 8.1 None directly. 9. 9.1 10. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE None. RISK ASSESSMENT 10.1 Financial risks remain very high. The main concerns are: • SLA with Glasgow • Costs of delivering care at home services as providers hand back services. • Delivery of remaining savings. Although progress has been made, the HSCP is still not operating in a financially sustainable way, spend and service demand is exceeding resourcing. NHS services are operating well above budget and there is a very substantial budget gap facing the HSCP in 2027/28 and beyond. The current risk to NHS Highland relates mainly to the SLA and this cannot be managed by the HSCP through reduced spend due to the scale and the population health implications associated with addressing it through service reduction. The risk to Argyll & Bute Council is mitigated through the general reserves. There are risks associated with public sector reform which is under consideration but has not been communicated in any detail.
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8 11. PUBLIC AND USER INVOLVEMENT AND ENGAGEMENT 11.1 None directly, engagement relating to the budget was extensive in 2025/26. The HSCP is transparent in respect of its finances and expects to conduct a budget engagement for the 2027/28 year towards the end of 2026. 12. CONCLUSIONS 12.1 12.2 This report provides a summary of the financial position as at the end of quarter one. It is early in the year and therefore there are risks in respect of the financial forecasts. However, the HSCP is operating close to budget at present with the main concern being the increased SLA cost with Glasgow. Due diligence and analytical work is underway and will be reported to the IJB in September. The financial risk associated with this largely sits with NHS Highland. The HSCP is maintaining its approach to expenditure control and savings delivery as it does not consider that it is operating on a financially sustainable basis (SLA issue aside). Attention is now shifting towards budget proposals for the 2027/28 year and longer term planning. Resolving the SLA is a priority in this context. At present the HSCP is not working on service reductions and re-design that would remove this level of cost form local services. 13. DIRECTIONS Directions required to Council, NHS Board or both. Directions to: tick No Directions required √ Argyll & Bute Council NHS Highland Health Board Argyll & Bute Council and NHS Highland Health Board 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) SLT Budget monitoring M3 21/07/2026 Noted APPENDICES: Appendix 1 – Year to Date Position Appendix 2 – Forecast Outturn Appendix 3a and 3b – Savings Programme Appendix 4 – Reserves AUTHOR NAME: James Gow, Head of Finance EMAIL: james.gow@argyll-bute.gov.uk