Agenda reports pack
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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11 August 2026 NOTICE OF MEETING A meeting of the ARGYLL AND BUTE HSCP FINANCE AND POLICY COMMITTEE will be held BY MICROSOFT TEAMS on TUESDAY, 18 AUGUST 2026 at 10:30 AM, which you are requested to attend. BUSINESS 1. APOLOGIES FOR ABSENCE 2. DECLARATIONS OF INTEREST (IF ANY) 3. MINUTES (Pages 3 - 6) Argyll and Bute HSCP Finance and Policy Committee held on 19 May 2026 4. FINANCE AND POLICY COMMITTEE ANNUAL REPORT - 2025/26 (Pages 7 - 16) Report by Chair, Finance and Policy Committee 5. UNAUDITED ANNUAL ACCOUNTS 2025/26 (Pages 17 - 56) Report by Head of Finance 6. BUDGET MONITORING - 3 MONTHS TO 30 JUNE 2026 (Pages 57 - 70) Report by Head of Finance 7. BUDGET OUTLOOK AND MEDIUM-TERM FINANCIAL PLANNING: 2027/28 TO 2029/30 (Pages 71 - 108) Report by Head of Finance 8. FINANCIAL RISKS 2026-27 (Pages 109 - 114) Report by Head of Finance 9. INFRASTRUCTURE UPDATE - JULY 2026 (Pages 115 - 126) Report by Head of Finance and Senior Manager Strategic Estates Development and Sustainability 10. DATE OF NEXT MEETING Tuesday 20 October 2026 at 10.30am Argyll and Bute HSCP Finance and Policy Committee Contact: Hazel MacInnes, Senior Committee Officer Tel:01546 604269 Public Document Pack
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MINUTES of MEETING of ARGYLL AND BUTE HSCP FINANCE AND POLICY COMMITTEE held BY MICROSOFT TEAMS on TUESDAY, 19 MAY 2026 Present: Councillor Dougie McFadzean (Chair) Graham Bell Fiona Thomson Attending: Evan Beswick, Chief Officer, Argyll and Bute HSCP Fiona Broderick, Staffside Lead, Argyll and Bute HSCP (Health) Charlotte Craig, Business Improvement Manager, Argyll and Bute HSCP Eilidh Gallagher, Head of Primary Care, Argyll and Bute HSCP Nikki Gillespie, Head of Complex Care and Registered Services, Argyll and Bute HSCP James Gow, Head of Finance, Argyll and Bute HSCP Fiona McCallum, Committee Services Officer, Argyll and Bute Council Alison McGrory, Associate Director of Public Health – NHS Highland, Argyll and Bute HSCP James Mullins, Associate Nurse Director - Argyll and Bute, NHS Highland Caroline Robertson, Head of Hospitals and Community Care, Argyll and Bute HSCP 1. APOLOGIES FOR ABSENCE Apologies for absence were received from Karen Leach, Councillor Gary Mulvaney and Kenny Matheson. 2. DECLARATIONS OF INTEREST There were no declarations of interest intimated. 3. MINUTES The Minutes of the meeting of the Argyll and Bute HSCP Finance and Policy Committee held on 17 March 2026 were approved as a correct record. 4. BUDGET MONITORING - 12 MONTHS TO 31 MARCH 2026 AND PROVISIONAL YEAR END The Committee gave consideration to a report providing a summary of financial performance against budget for the 2025/26 year. Decision The Finance and Policy Committee noted – Page 3 Agenda Item 3
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1. that the HSCP was reporting a £2.9m or 0.7% underspend against budget for 2025/26; 2. that represents a significant improvement in financial performance as a consequence of delivery of savings and the financial recovery plan along with favourable year end NHS inter-board charges; 3. that general reserves increased from £2.6 to £4.7m as a result of the improved financial performance; and 4. savings of £8.0m had been delivered, 90% of target. (Reference: Report by Head of Finance dated 19 May 2026, submitted) 5. SOCIAL CARE FEES AND CHARGES - BUDGET 2026/27 The Committee gave consideration to a report seeking formal approval for the introduction of a new fee of £5 per week for the Responder Service. The report also advised of a request for approval from Argyll and Bute Council for an increase in the weekly fee cap on Social Work / Social Care Fees. Decision The Finance and Policy Committee – 1. noted that the Responder Service was to be maintained as a 24 hour, 7 day per week service; 2. noted the responder service was non-statutory and would cost £2.0m in 2026/27; 3. endorsed the introduction of a £5 per week charge for the responder service and noted the IIA; 4. noted that the HSCP expected to implement the charge from September 2026 so there was sufficient time to implement and communicate the change and fee waiver process; 5. endorsed the increase in the social care weekly charging cap from £145 to £167 from 6 July 2026; 6. noted that Argyll and Bute Council approved the above changes to fees and charges at Council on 29 April 2026; and 7. noted that there remained some degree of risk in respect of the responder service charge. (Reference: Report by Head of Finance dated 19 May 2026, submitted) 6. SOCIAL WORK / SOCIAL CARE FINANCIAL PLANNING 2027/28 The Committee gave consideration to a report providing an early overview of the budget outlook for social work and social care services for 2027/28. Page 4
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Decision The Finance and Policy Committee – 1. noted that the Council was commencing financial planning for 2027/28; 2. noted that the HSCP was engaged in this process and was forecasting a budget gap of circa £3.2m which would require to be addressed through the development of further savings plans and / or additional resourcing; 3. noted there was a high degree of uncertainty and risk regarding funding and costs for 2027/28; and 4. noted that the HSCP intended to report its full 3-year outlook to the next meeting. (Reference: Report by Head of Finance dated 19 May 2026, submitted) 7. DATE OF NEXT MEETING The date of the next meeting was noted as Tuesday 18 August 2026. Page 5
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1 Finance & Policy Committee Date of Meeting: 18 August 2026 Title of Report: Finance and Policy Committee Annual Report - 2025/26 Presented by: Chair, Finance and Policy Committee The Finance and Policy Committee is asked to: • Consider and approve the draft Committee Annual Report for 2025/26. • Request that the final report is placed on the agenda of the next meeting of the IJB, subject to any amendments. 1. EXECUTIVE SUMMARY 1.1 1.2 1.3 In line with the principles of good governance, an Annual Report is prepared by the Finance and Policy Committee for submission to the Integration Joint Board (IJB). The purpose is to provide the IJB with assurance that the Committee has evaluated its activity and performance. It also provides a further opportunity for the Committee to raise any matters of concern to the Board. This report is the Annual Report of the Finance and Policy Committee for Financial Year 2025/26. The Committee met on eight occasions, more than usual due to the requirement to implement a financial recovery plan and the challenge associated with the budget proposals for 2026/27. All minutes were submitted to the IJB and published within their papers. Scrutiny of financial performance was maintained throughout the year, and the Committee welcomed the improved financial position including the delivery of savings and implementation of the recovery plan. The Committee has considered the service impact of all of the decisions made and acknowledges that this has been a challenging time for Board Members, staff, and officers. Finance has remained a very high-grade strategic risk and is expected to continue to do so, for some time. The Committee has been supported by the Council’s Committee Services Team. This report provides a summary of the work of the Committee and an evaluation of its effectiveness. The Committee considers that its work has contributed to improved financial management and performance of the Health and Social Care Partnership (HSCP). The outlook remains extremely challenging particularly as the public reform agenda develops in the context of increasing service demands and constrained budgets and staffing. Emerging pressures such as the Service Level Agreement with NHS Greater Glasgow and Clyde (NHSGGC) present additional strategic risk to the HSCP and its services. Page 7 Agenda Item 4
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2 1.4 The Committee believes that it has performed well in its oversight of Finance and is therefore able to provide assurance to the IJB that it has operated effectively. It has provided a clear leadership role in managing the financial challenged and has ensured that the approach to this has been evidence based, carefully considered, and consulted upon. It has also helped ensure an effective partnership approach was maintained throughout. 2. RECOMMENDATION 2.1 The Finance and Policy Committee is recommended to: • Consider and approve the draft Committee Annual Report for 2025/26. • Request that the final version of the annual report is placed on the agenda of the next meeting of the IJB, subject to any amendments. 3. DETAIL OF REPORT 3.1 3.2 3.2.1 This report provides an overview of the following aspects of the work of the Finance and Policy Committee: • Summary of the Committee Meetings • Committee Self Evaluation & Improvement • Committee Membership and Remit • Evaluation by the Chair Finance and Policy Committee Meetings This section provides a summary of the items of business considered at each meeting. Meetings were held electronically, and the Committee met eight times during 2025/26. The IJB is provided with the minutes of each meeting, as a matter of course. This provided Members with the opportunity to raise issues or question the Chair, in respect of the work of the Committee. Additional meetings were scheduled due to the need to approve the formal recovery plan and to ensure that the challenges and complexities associated with setting the budget for 2026/27 were carefully considered. Meeting 1: 29 May 2025 This additional meeting was established primarily to consider and endorse the recovery plan prior to approval by the IJB. • The Committee reviewed the proposed financial recovery plan in detail prior to IJB approval. This related to Social Work Services and was formally required in response to a significant overspend in 2024/25 and pressure on the current budgets. • Related to the financial challenge, the Committee considered the first formal report proposing the Threshold of Care policy change. The overall approach was endorsed, and it was noted that detailed IJB consideration and public consultation would be required. • The IJB Finance Bulletin published by Audit Scotland was considered and it was noted that this provided a bleak summary of the financial challenges facing the sector. Page 8
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3 3.2.2 3.2.3 3.2.4 • Finally, members welcomed the detailed stage 1 report on the strategic review of care homes and endorsed the progression of the project in partnership with the Council and Hub North. Meeting 2: 24 June 2025 • The Committee endorsed its’ annual report for 2024/25, highlighting the challenging nature of the year from a financial performance perspective with overspending reported. • The Committee reviewed the un-audited accounts for 2024/25 and considered the management accounts for that year. Concern was noted in respect of the significant overspending on social care services and agency staffing costs. • A progress report was also considered in relation to the Transformation Programme. It was noted that this was still in a transition phase; the Committee expressed its commitment to driving service transformation and re-design as a necessary response to the environmental context. Meeting 3: 16 September 2025 • The Month 4 Management Accounts and Financial Risks for the year were reviewed. A forecast overspend was reported totalling £1.5m (Social Work £0.7m, and NHS Services £0.8m). It was noted that the implementation of the recovery plan and the Threshold of Care policy change were critical to addressing this. • A report on the budget outlook and medium-term financial planning was noted. This report reiterated the severity of the financial challenge facing the HSCP, in the coming years. The scale of the 2026/27 budget gap was noted as being of particular concern, and management were requested to develop plans for urgently addressing the Social Work / Social Care element of the budget gap. • A revised Reserves Policy was approved in response to a recommendation from the Audit and Risk Committee. This maintained the aspirational general reserves target of 2% of annual spend whilst acknowledging that this was unlikely to be delivered in the current context. • A further report on the Threshold of Care policy was considered in detail by the Committee, who reluctantly agreed that this required to be progressed. • The meeting considered a further update in respect of the Transformation programme. Meeting 4: 27 October 2025 • The 6-month management accounts were considered, with a small improvement in the projected overspending of £1.3m across all services. Good progress with the current savings plan was appreciated and it was noted that recovery actions would continue to be implemented. • The first iteration of the Social Work / Social Care budget proposals was considered in detail. The challenging nature of the options and Page 9
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4 3.2.5 3.2.6 the process was discussed, at length. The requirement for public consultation, engagement with partners and the full IJB were highlighted as priorities. The reporting provided a timeline for the process, a series of savings options for consideration, and the medium-term outlook, to inform the discussion. • The Committee had requested an analysis of the budget to outline the split between budgets considered to be largely fixed or outwith the control of the HSCP and those that are discretionary in nature. Whilst highlighting that the split is not clear cut in all cases, the report suggested that around 12.5% of the Social Work budget was non- discretionary, with 50% of the Health budget considered as non- discretionary. It was appreciated that this analysis was useful in better understanding the link between managing spend, the provision of statutory services, and the requirement to provide access to NHS services. • The Committee considered a progress report on the Single Authority Model. The partnership approach to this, between the Council, NHS Highland, and the Scottish Government, was noted. Meeting 5: 18 November 2025 • The main purpose of the meeting was to again discuss the budget proposals in advance of consideration by the IJB, and commencement of public consultation. The challenging nature of this discussion and concerns about impacts were fully aired. • An updated financial risks report was provided along with a verbal update on the Month 7 management accounts; this indicated some improvement with the overspend reducing and some early signs the recovery actions were having a positive impact on financial performance. • The second stage of the care home strategic review was discussed. Again, the robust nature of the analysis was welcomed, and progression of the project was again endorsed. The importance of a robust public engagement process was highlighted. • The Committee welcomed an update report on infrastructure with the progression of several key projects including: - Key worker accommodation, in collaboration with the Council and Shelter. - Campbeltown Hospital radiography and fuel tank replacements. - Fire improvement and lab refurbishment in Lorne and Islands Hospital (LIH). - Refurbishment of Tigh a Rudha Care Home. The report reviewed the infrastructure risk rating (per the Strategic Risk Register), and it was agreed to maintain this at ‘very high’ due to the level of risk associated with the ageing infrastructure and lack of funds to address all backlog maintenance issues. It is noted that this is a national issue, with a shortage of capital resource. Page 10
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5 3.2.7 3.2.8 3.3.9 Meeting 6: 20 January 2026 • The Month 8 Management Accounts showed further improvement in the forecast. However, concern was expressed that measures taken to reduce spend did appear to be having some impact on services. This report also provided an update on the national picture in respect of HSCP overspending. • A positive report on reduced locum and agency staffing spend within NHS services was welcomed, as this was contributing to the improving financial position. Medical staffing costs within LIH were considered to be the biggest challenge, at present. • The Committee considered a budget update report, and two reports on budget proposals were considered as confidential items due to their sensitive nature. These related to the Responder Service contract, and contracts with Third Sector partners. Meeting 7: 24 February 2026 • The Month 10 Management Accounts were welcomed as they indicated further improvement with spend projected close to budget and an indication that the recovery actions were likely to further improve the year-end position. Strong progress on the delivery of savings was also noted. • The Committee considered a concerning report outlining the potential implications of the re-basing process undertaken by NHSGGC in respect of the SLA. It was noted that costs were likely to be significantly increased and that the HSCP was engaged with NHS Highland, NHSGGC, and the Scottish Government on the implications. The Committee noted that this would take some time to resolve and would be highlighted as an escalating risk to the IJB. The activity analysis was welcomed but it was noted that more detailed work would be required to understand costs and activity. • A detailed report on Care at Home services and the implementation of the Threshold of Care policy change was provided. The Committee is committed to ensuring the impact of policy changes are reported on and assessed. The report noted that there had been adverse implications for delayed discharges and unmet need, as a consequence of managing the service within budget. Recruitment and continued reliance on agency staffing (lack of commissioned service provision in some areas) was highlighted, as a further challenge. Meeting 8: 17 March 2026 • The main purpose of the meeting was to review all of the final budget proposals and impact assessments prior to consideration of the budget by the IJB. This included a review of the early findings from the public engagement process. The Committee endorsed the reports and the approach taken; the HSCP had been able to amend its proposals, as additional funding was provided by Council and in response to the consultation feedback. The difficult nature of the budget setting had been acknowledged throughout the process. • The Committee welcomed a further improvement in the Management Page 11
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6 Accounts with NHS service forecasting a £1m underspend, as funding allocations and some national charges were confirmed. Social Work / Social Care budget performance was also improving. • A further update report on the Care Homes Strategic Development project was considered, noting that public consultation was due to commence in summer 2026. The report highlighted the complex nature of the governance arrangements with the Council responsible for capital funding and property. • An updated IJB Financial Bulletin, published by Audit Scotland was included on the agenda. This re-iterated the challenges IJBs across Scotland are facing. 3.3 Committee Self-Evaluation and Improvement 3.3.1 3.3.2 3.4 3.4.1 3.4.2 3.4.3 3.5 3.5.1 The Self-Evaluation Action Plan has been fully implemented. It is acknowledged that financial management is likely to be a high risk for the IJB, in the coming years, and that the measures required to manage the risk will be very challenging to implement. Board development sessions, public communications, and a carefully considered approach will be required to deliver the changes necessary. It will be important that the Board and Management Team continue to work collegiately on addressing the challenge in a considered way. The Committee will also hold its meetings in public from 2026/27 to further improve public accountability and openness. Committee Membership and Remit Membership comprises of six IJB Members plus one professional advisory. At the time of this report/currently, five places are filled with one Member vacancy, but throughout most of the year all Member places were filled. In addition, there are three required attendees – the Chief Officer, the Chief Finance Officer, and a Staffside representative. Other Officers attend, as required. Councillor Dougie McFadzean acted as Chair throughout the year. In February 2025, the remit was revised and deemed to be appropriate. The Committee has ensured that its work is consistent with its remit, and this enables the Committee to provide assurance to the IJB that it has fulfilled its role effectively throughout 2025/26. Evaluation by the Chair The Committee has met regularly, has operated effectively, and has contributed to ensuring that financial management, financial risk management, and oversight of the transformation and savings programme has continued. The Committee would like to acknowledge the work of Officers in continuing to provide detailed and clear reports, which have supported its work. 2025/26 was a particularly challenging year due to the scale of the budget challenge facing the IJB and the on-going high levels of demand for services. Page 12
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7 3.5.2 3.5.3 3.5.4 3.5.5 The work of the Finance and Policy Committee clearly evidences the IJB’s commitment to managing its finances in an open and transparent way. It has comprehensively fulfilled its remit in terms of oversight of finances, considered by the IJB to be a high-priority strategic risk. The Committee has provided appropriate challenge to Officers and has been able to take important decisions, when required. The Committee has played a leadership role in driving the budget process and the development of saving proposals for the 2026/27 budget. It has also been effective in enabling more detailed discussion of financial matters prior to formal consideration and approval by the full IJB. This work has enabled members to influence council budget setting which in turn has helped safeguard services. The Committee has focussed increasingly on ensuring that the HSCP is engaged with both partners in respect of its financial challenges. It has also taken a leadership role in the consideration of the actions that are likely to be required in the future, in response to the pressure of increased demand (demographic change), continued workforce shortages, increasing costs, and insufficient funding. The scale of the challenge facing the HSCP is significant and must be considered in the context of the national situation facing NHS Boards, Local Government, HSCPS, and commissioned service partners. Financial performance for the year ended 31 March 2026 was much improved in comparison with the prior year. The approach to robust oversight of the finances and working with Management to ensure that appropriate decisions were taken and implemented, with the support of the IJB, were critical in delivering change and financial improvement. The Threshold of Care policy change, the approval of the budget and oversight of the extensive public engagement process are clear examples of where this approach has worked. The committee has clearly had to manage many competing priorities and has had to take forward proposals that have adversely impacted upon service delivery, service users, and partners. It also acknowledges that there are opportunities for learning from the experiences of the 2025/26 year. I am pleased to commend the work of the Committee to the IJB and to provide assurance that, in my opinion, the Committee has operated effectively throughout the year and has discharged its responsibilities diligently. This opinion is formed on the basis of the totality of the evidence considered by the Committee throughout the year. The Committee has worked closely with Management to address the challenges in a proportionate, evidence- based and considered manner. I would also like to acknowledge the role Committee Members, Committee Services, and Officers of the HSCP, have played in facilitating the work of the Committee. The additional pressures and increased number of meetings have been necessary but have also placed an additional burden on Officers, Staff and Board Members. 4. RELEVANT DATA AND INDICATORS 4.1 Minutes of Finance & Policy Committee meetings, the accounts for 2025/26, and related papers. Page 13
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8 5. CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 This document contributes to good governance of the IJB and provides assurance to the Board that the Finance and Policy Committee is operating effectively and in a manner that is consistent with its Terms of Reference. 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – The Committee has considered multiple reports relating to financial performance and planning. It has also been kept informed of the national context. 6.2 Staff Governance – The Committee has considered staff governance issues, as part of its scrutiny of savings and transformation projects. 6.3 Clinical Governance – None. 7. 7.1 8. PROFESSIONAL ADVISORY Consideration should be given to this report. EQUALITY AND DIVERSITY IMPLICATIONS 8.1 9. 9.1 None directly from this report. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE None. 10. RISK ASSESSMENT 10.1 The Committee has reviewed financial risks in detail throughout the year. In terms of the wider strategic risk relating to financial sustainability, this remains a very high-grade risk due to the overall context with public funding, impact of inflation, workforce constraints, and increasing service demand. 11. PUBLIC AND USER INVOLVEMENT AND ENGAGEMENT 11.1 The Committee scrutinised the revised approach to budget consultation and considered the feedback form the public consultation. The budget process for the 2026/27 year was high profile, engaged with more people than any previous year and this resulted in demonstrable changes being made to the budget proposals as finally approved by the IJB. 12. CONCLUSIONS 12.1 12.2 The Finance and Policy Committee is asked to consider this report and request that it is placed on the next agenda of the IJB, following any amendments. This report concludes that the Finance and Policy Committee has performed its role effectively and diligently throughout 2025/26. It recognises that the year has been a particularly difficult one in respect of the development of Page 14
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9 the budget and financial recovery plan. However, financial performance has improved with increased scrutiny of the IJB finances. It is acknowledged that there are further challenges ahead and an uncertain future context as the public sector reform agenda progresses. However, these challenges are system-wide and the HSCP is navigating these in an appropriate way. Work on medium-term financial sustainability and continuing progress with strategic change projects will remain a priority for the Finance and Policy Committee, the Leadership Team, the IJB, and the stakeholders, in the coming months, and years. 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) N/A REPORT AUTHOR AND CONTACT: Chair, Finance and Policy Committee Page 15
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1 Finance & Policy Committee Date of Meeting: 18 August 2026 Title of Report: Unaudited Annual Accounts 2025/26 Presented by: James Gow, Head of Finance The Finance & Policy Committee is asked to: • Review the Unaudited Annual Accounts noting that these have been approved by the Audit & Risk Committee and published. • Note that the IJB is reporting a favourable financial outturn and an increase in its reserves. 1. EXECUTIVE SUMMARY 1.1 The Integration Joint Board is required to produce a set of annual accounts. The Audit & Risk Committee formally approved the Unaudited Accounts prior to issue to the External Auditors and being made available for public inspection by 31 June. 1.2 In respect of financial performance, the accounts are presenting a favourable outturn as the HSPC operated within budget and delivered well on its savings plan. As a result of the underspend, general reserves have increased and earmarked reserves have also increased as funding has been provided by Government via NHS Highland to fund future liabilities and costs. A more detailed analysis of spend against budget was provided to the IJB at its meeting on 27 May 2026. 2. Recommendations • Review the Unaudited Annual Accounts noting that these have been approved by the Audit & Risk Committee and published. • Note that the IJB is reporting a favourable financial outturn and an increase in its reserves. 3. DETAIL OF REPORT 3.1 The IJB is required to produce an audited set of annual accounts. The purpose of this report is to provide the Committee with an opportunity to review the un- audited accounts, any suggested changes can be taken into account during the audit process with changes made in advance of the audited accounts being approved and published November. Page 17 Agenda Item 5
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2 3.2 The accounts provide a summary of financial performance along with the governance statement, a performance summary, remuneration details for senior staff and also provide information on risk. 3.3 It is likely that there will be some amendments to the unaudited accounts as the audit progresses. In respect of financial performance, an operational underspend of £2.9m or 0.7% against budget is reported. A summary of spend patterns over the past 5 years is provided below: 2021/22 2022/23 2023/24 2024/25 2025/26 £'000 £'000 £'000 £’000 £’000 Employee Costs 101,153 111,382 125,466 131,785 138,901 Premises 10,009 11,260 11,236 12,103 14,129 Supplies and Services 15,183 15,253 20,029 19,630 21,513 Transport 3,201 3,918 4,153 4,539 4,390 Third Party Payments 148,745 155,004 163,926 176,241 185,700 Income -19,104 -18,458 -21,019 -21,508 -22,118 Primary Care Services 52,930 53,137 55,287 58,098 60,766 Other 248 285 317 395 333 Total Spend 312,365 331,781 359,395 381,293 403,614 Total Funding 326,975 327,575 362,284 382,151 413,957 Increase / (Decrease) in reserves 14,610 -4,206* 2,889 868 10,343 *deficit due to recovery of covid reserves Spend increased by £22m or 5.8% against the prior year with direct staff costs accounting for 34% of net expenditure. The increases are largely due to inflationary pressure with premises costs increasing by more due to project spend such as the Campbeltown radiography and Coll key worker accommodation projects. Otherwise spend patterns appear relatively stable. 3.4 Whilst there was an underspend against the total resources allocated to the IJB of £10.3m, this is largely due to the allocation of funds to cover future payroll costs relating to agenda for change within the NHS. The underspend against the operational budget was £2.9m, as reported to the IJB and summarised on page 6 of the accounts. General reserves increased as a consequence of the underspend, from £2.6m to £4.7m but remain below the 2% target (circa £8m). Spend on projects and commitments from general reserves has been more than offset by the underspend. Spend on NHS services has also continued to grow faster than spend on Social Care (6.4% NHS increase / 4.1% Social Work / Social Care increase). Page 18
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3 3.5 The balance sheet debtor is equivalent to the reserves held by NHS Highland and Argyll and Bute Council. These have largely been earmarked for specific purposes and an analysis is included in Note 6. The high value reserves are to fund future pay related costs (agenda for change) and to support future sustainability and system flow within NHS services. 3.6 In the current context it is welcome that the HSCP has achieved its financial performance targets and holds general reserves at the year end. The accounts also provide an overview of the governance framework and a high level summary of performance and risk. The Greater Glasgow and Clyde SLA is highlighted as a strategic financial risk. In the medium term the HSCP has a deficit budget and is still not operating on a financially sustainable basis. This requires to be addressed and will be a particular area of external audit interest. In respect of the Going Concern judgement, the reserves held by the IJB and the plans currently in place to deliver savings mean it is appropriate to assume that the IJB remains a Going Concern. 4. RELEVANT DATA AND INDICATORS 4.1 Information contained within the accounts is derived from the financial systems of NHS Highland and Argyll and Bute Council. The audit of the IJB accounts is supported by the audits of both partners. 5. CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 The annual accounts are a key statutory reporting and accountability requirement. They communicate both financial and key service delivery performance information in an accessible public document. 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – The unaudited accounts present a favourable overview of the HSCPs financial performance during 2025/26 and the position at the year end. Page 19
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4 6.2 Staff Governance – None 6.3 Clinical Governance – None 7. Professional Advisory 7.1 Professional leads have had the opportunity to consider the contents of this report and the draft Annual Accounts. 8. EQUALITY & DIVERSITY IMPLICATIONS 8.1 None 9. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE 9.1 None 10. RISK ASSESSMENT 10.1 There are no changes to the risk register arising from the contents of this report. 11. PUBLIC & USER INVOLVEMENT & ENGAGEMENT 11.1 The unaudited annual accounts have been publicly available for inspection and their publication advertised. There has been some press and community interest in the underspend and responses to these have been issued explaining the nature of the underspend. 12. CONCLUSIONS 12.1 This report summarises the draft accounts for the year ended 31 March 2026 and provides an opportunity for members to comment on them prior to publication. 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 Page 20
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5 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) SLT Unaudited Annual Report and Accounts 10/06/26 Endorsed Audit & Risk Committee Unaudited Annual Report and Accounts 16/06/26 Accounts approved and requirement for comms engagement required. REPORT AUTHOR AND CONTACT James Gow, Head of Finance james.gow@argyll-bute.gov.uk APPENDIX 1: Unaudited Annual Accounts for the year ended 31 March 2026 Page 21
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Commonly known as Argyll and Bute Health & Social Care Partnership UN-AUDITED ANNUAL ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2026 Page 23
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ARGYLL AND BUTE INTEGRATION JOINT BOARD ANNUAL ACCOUNTS CONTENTS Page 1 Page Management Commentary 2 Statement of Responsibilities 12 Annual Governance Statement 14 Remuneration Report 21 Financial Statements: - Comprehensive Income and Expenditure Statement - Movement in Reserves Statement - Balance Sheet 23 Notes to the Financial Statements: 1. Material Accounting Policies 2. Events After the Reporting Period 3. Taxation and Non-Specific Grant Income 4. Debtors 5. Related Party Transactions 6. Usable Reserve: General Fund 7. Critical Judgements and Uncertainty 8. Audit Fees 26 Independent Auditors Report 33 Page 24
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 2 1. INTRODUCTION This document provides the Financial Statements of the Argyll and Bute Integration Joint Board (IJB) for the year ended 31 March 2026 and reports on performance. The main purpose is to demonstrate the stewardship of public funds entrusted to the HSCP for the delivery of its Strategic Plan. The requirements governing the format and content of the annual accounts are contained in The Code of Practice on Local Authority Accounting. These Accounts have been prepared in accordance with the Code. The Management Commentary provides an overview of the IJB’s financial position and operational performance for the year. This section also provides a summary of the risks which may impact in the future. The IJB has had a positive year from a financial perspective. It has operated within its budget, delivered savings and increased its general reserves. The delivery of the savings programme has been challenging but necessary to ensure the medium-term financial sustainability of the HSCP. The reserves held by the IJB are mostly earmarked for specific future costs, projects and investments and provide some degree of financial resilience and mitigate financial risk to partners in 2026/27. Additionally, reserves have been allocated to support the budget in 2026/27 to maintain services as far as is possible in the face of the cost and demand pressures currently challenging the Health and Care sector. This approach is not sustainable in the longer term and the HSCP continues to develop and implement its savings plans to ensure that it can remain sustainable. Current service provision is configured in a way that is not affordable, therefore service change and delivery of further efficiency savings will remain priorities in the coming years. This is consistent with longer term planning outlined by the Scottish Government in its medium-term financial strategy and public sector reform agenda. 2. THE INTEGRATION JOINT BOARD (IJB) The Argyll and Bute Health and Social Care Partnership (HSCP) is responsible for the planning and delivery of all community and acute health and social care services for adults and children. This includes services we deliver directly and a range of services which are purchased from external providers including NHS Greater Glasgow and Clyde. The Partnership is a distinct legal entity with a board of governors, the IJB which has responsibility and accountability for the planning, resourcing and oversight of the delivery of integrated services as described in its Strategic Plan. The IJB was delegated resources and responsibility for Health and Care service delivery from 1 April 2016. Membership of the IJB includes eight voting members with four Elected Members nominated by Argyll and Bute Council and four Board Members of NHS Highland. In addition, there are non-voting appointees representing other sectors and stakeholder groups, such as the Third Sector, Independent Sector, Patients and Service Users, Carers, individuals with lived experience and staff. The Scottish Government are in the process of further strengthening representation from these groups by giving them full voting rights as IJB members in 2026/27. Page 25
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 3 Argyll and Bute is home to 86,000 people, covers an area of 690,946 hectares and is the second largest local authority by area in Scotland. It has 23 inhabited islands, with 17% of the population living on islands. Argyll and Bute provides a number of unique opportunities for those who live and work here, however we also face a number of challenges. The geography associated with dispersed communities in remote and rural areas and islands presents a challenge in delivering services within the resources available. Of the population, 69% live in “remote” or “very remote” areas and 45% live in areas in the 20% “most deprived for geographic access to services”. Argyll and Bute also has a higher proportion of older people than Scotland as a whole, with 12.4% aged 75 and over compared to 8.5% in Scotland. The costs associated with providing comprehensive services to an ageing population continue to increase and demographic change is having an impact on demand for services and our ability to recruit staff to deliver those services. 3. HEALTH AND SOCIAL CARE PARTNERSHIP STRATEGIC PLAN The HSCP vision and priorities for health and social care are outlined in its new Joint Strategic Plan (JSP) 2026-2031. The new plan has been developed throughout the year and included a period of extensive engagement to ensure that stakeholders and communities had the opportunity to influence the plan. The new plan has also had to take account of the current context which is characterised by continuing increasing demand, financial and staffing constraints. The JSP can be accessed at: https://www.nhshighland.scot.nhs.uk/about/argyll-and-bute-health-and-social-care-partnership/argyll- and-bute-hscp-publications Our Vision is that: “People in Argyll and Bute live healthy, independent lives in resilient communities. Individuals are enabled and supported to thrive and fulfil their potential through integrated, person centred health and social care that is delivered close to home, focused on prevention, and informed by the people who use it.” Page 26
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 4 4. PERFORMANCE MANAGEMENT AND REPORTING The Integrated Performance Management Framework and dashboard has been developed to ensure performance and improvement activity is reported in an accessible way and provides a holistic overview of performance against a range of internal performance indicators and the National Health & Wellbeing Outcomes. The performance measures continue to be refined to improve their relevance and reliability which in turn helps enable improvement. The monitoring and reporting process ensures the HSCP is able to report performance against strategic priorities and provide nationally reported data on performance under the following headings: 1. National Health and Wellbeing Outcome Indicators 2. Ministerial Steering Group Performance Indicators 3. Unscheduled Care 4. Delayed Discharges 5. IPMF Performance Indicators (operational performance) The Annual Performance Report provides a detailed overview of the progress that has been made in addressing health and care priorities, this is available on the website. The process of managing COVID related backlogs of diagnosis and treatment and returning services to previous levels continues to be challenging. The situation is being exacerbated by the demographic change further driving increasing demand for services. The Scottish Government has requested all Health Boards focus upon manging down delayed discharges from hospital and waiting lists, particularly very long waits. As a consequence of our reliance on NHS Greater Glasgow and Clyde (NHS GG&C) for specialist hospital services, our planning has been Page 27
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 5 undertaken in partnership with them. The following table summarises key performance measure regarding waiting times: Total on Waiting List @ March 25 Total on Waiting List @ March 26 Length of Wait (weeks) March 2025% > 12 Weeks March 2026% >12 Weeks Target % March 2025% > 52 Weeks March 2026% > 52 Weeks Target % Consultant Outpatient Clinics 1,932 2,266 49% 34% 46% 6.9% 1.8% 0% The HSCP would not wish anyone to be waiting long periods to access services, however this remains the situation that many continue to find themselves in across Scotland. Performance against targets improved in 2025/26 and the proportions of people waiting more than 12 weeks for an outpatient appointment reduced to below target and the number waiting more than 52 weeks reduced to 1.8% of those waiting or around 40 people, again a significant improvement. These waits relate to direct acute care activity and there are additionally residents awaiting treatment with other Health Boards. The overall number of people on waiting lists increased, but the numbers waiting for very long periods has reduced. The rural and small scale nature of many services continue to present a challenge to the ability of the HCSP to increase service provision in the short term. The Annual Performance Report provides a more comprehensive overview of performance and benchmarks. The IJB is prioritising the re-mobilisation of services to reduce long waits and maintain system flow, including the management of delayed discharges from hospitals. 5. FINANCIAL PERFORMANCE 2025-26 The delivery of savings and the financial recovery plan have been critical in delivering a positive financial outturn. The HSCP operated within budget and was able to build up its general reserve slightly to improve its financial flexibility and resilience. An overall underspend against budget totalling £2.9m or 0.7% is reported and will be carried forward to help the IJB manage its finances in future years. Reserves increased as a result of additional funding received towards the end of the year and due to the underspend. These funds are earmarked and are being held largely to pay for expected future costs and to fund committed projects. These are also required to fund the budget deficit in 2026/27 and to support service sustainability. General reserves, which are available for the IJB to use at its discretion, increased from to £2.6m to £4.7m or just over 1% of annual spend. General reserves remain below the target set out in the reserves policy (2%). The overall financial resilience of the IJB has improved slightly as a consequence of the small underspend. The broader context within which the HSCP is currently operating is extremely challenging with increasing financial pressures being experienced. The HSCP has relied on Page 28
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 6 non-recurring savings to fund its services and is spending in excess of recurring resourcing. The HSCP is going through a process of taking action to bring spend back into alignment with funding. This will take a number of years and will have an impact on services and is being planned and delivered in the context of: • on-going inflationary pressure (pay costs and commissioned service costs); • increasing demand as a consequence of demographic change and social factors; and • persistent workforce recruitment and retention challenges. Enhanced financial management processes are in place to maintain focus upon managing the situation including: • Vacancy management; • Increased controls and reporting of agency and locum spend; • Enhanced approval process for agency staffing; • Care at Home efficiency processes which restricts delivery of care to budgeted hours; and • Implementation and monitoring of the ceiling of care policy. The future challenges facing health and social care services include: • Ageing demographic resulting in increasing demand for older adult services; • cost increases relating to pay, home-care and residential care contracts continuing to exceed funding increases; • reductions in capacity in the independent sector as providers continue to withdraw citing financial viability and staffing issues; and • Continued lack of availability of staff resulting in increased costs as services are supported by agency staff. The cost is exacerbated by accommodation shortages and costs. The final outturn for 2025/26 was an underspend against budget of £2.9m. This has been carried forward to fund cost pressures and the budget gap in 2026/27. The following table summarises financial performance analysed between Health and Social Work services: Service Actual £000 Budget £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 100,483 100,540 57 0.1% HEALTH SERVICES TOTAL 295,698 298,555 2,857 1% GRAND TOTAL 396,181 399,095 2,914 0.7% Allocation to General Reserves - NHS 2,857 Allocation to General Reserves – Social Work 57 Year End Balance 399,095 399,095 0 0% Page 29
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 7 Savings Delivery The budget included a savings target of £8.9m. During the year £8.0m or 90% of the target was delivered. The savings programme is managed and reported rigorously throughout the year and savings delivery contributed to the improved financial position and helps the HSCP move towards financial sustainability in the longer term. There were a small number of projects which were not delivered during the year and these remain priorities for the future. Given the longer term outlook, it is anticipated that the IJB will be required to develop further savings projects. Financial Statements Comprehensive Income and Expenditure Statement This statement shows the cost of providing services according to accepted accounting practices. There are no statutory or presentational adjustments which affect the application of the funding received from partners, therefore the movement in the General Fund is solely due to the transactions summarised in the Comprehensive Income and Expenditure statement. Reconciliation of Comprehensive Income and Expenditure Statement to Financial Outturn: The table below reconciles the surplus on the provision of services of £10,343k as noted in the Comprehensive Income and Expenditure Statement to the financial outturn: £000 £000 Surplus on Provision of Services 10,343 Less Statutory Adjustments that don’t feature in financial outturn 0 Movement in General Fund Balance 10,343 Reserves released for the delivery of services (5,643) New Earmarked Reserves 15,986 Increase in General Fund Balance 10,343 Movement in Reserves Statement This statement shows the movement on the IJB’s Reserves. It has one reserve, its General Fund, a resource backed reserve which can be used to fund future expenditure. The balance increased from £20.7m to £31.1m. These resources have generally been earmarked for specific purposes, including to fund the revenue budget in 2026/27. The IJB spent £5.6m of its reserves during the year including spend on a number of projects as detailed in note 6, including: • Children’s Acute Mental Health Services £244k. • Delivery of E Health projects £245k. • Hospital at Home £414k. • The Prevention Programme £258k. • Campbeltown Hospital / X Ray £352k. Page 30
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 8 • Final phase of the Tiree Care Home and care service remodelling £209k to deliver a more sustainable model on the island. The Reserves Policy is that a prudent level of General Fund reserve is 2% of annual spend, this equates to £8m. As at 31 March 2026 general reserves were below this level at £4.7m. Earmarked reserves increased as a consequence of new resource allocations to fund agenda for change pay liabilities, service sustainability, system flow and primary care improvement. Note 6 provides detail on the reserves and the purposes for which they are earmarked. Balance Sheet The Balance Sheet shows the value of the IJB’s assets and liabilities as at 31 March 2026. It does not hold fixed assets or invest capital resource, these responsibilities sit with the partner bodies. There are explanatory notes which accompany the Balance Sheet. The net worth of the IJB as at 31 March 2026 is £31.1m, supported by the General Fund. The balance consists of Short Term Debtors relating to earmarked reserves for delegated services and recognises the amounts owed to the IJB by NHS Highland and Argyll and Bute Council. There are no provisions recognised on the Balance Sheet. NHS Highland made a year-end provision for annual leave of £1.3m (£1.2m in the prior year) for HSCP staff. It also made a provision of £0.1m for potential regrading costs and £0.2m for IR35 liabilities relating to medical staff. Argyll & Bute Council have made a provision for £77k for potential liabilities relating to rates increases regarding Children’s and Families care packages and £168k relating to a backlog of energy cost billing. All provisions are reflected in the outturn position. There are historic provision balances and contingent liabilities relating to services provided prior to 1 April 2016, these will be recognised as required in the partner Annual Accounts. There could be further consideration of funding requirements for the IJB where the historic funding of these provisions are insufficient and may affect future IJB funding arrangements. 6. FINANCIAL OUTLOOK, RISKS AND PLANS FOR THE FUTURE Budget 2026-27 The 2026/27 budget for was approved by the IJB in March 2026 following extensive public engagement. The budget relies upon a savings programme totalling £8m and the use of reserves. The approval of the savings programme has been particularly challenging as it has required reductions in services and constraints upon the resources allocated to third sector partners. Argyll and Bute Council allocated additional resources to the HSCP to mitigate the impact of the budget savings. It is anticipated that further savings will be required in the future and work on this is on-going. Service Transformation and the delivery of the approved savings program are key to ensuring services are delivered in sustainable way. While the budget position is extremely challenging, the HSCP has operated within the resources that have been available to it for the past six years. Page 31
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 9 It has also built up a small degree of financial resilience. Operating on a financially sustainable basis is a strategic priority, significant work is required to address the underlying deficit, particularly within NHS services as Greater Glasgow and Clyde are increasing charges for services delivered to Argyll & Bute residents. The Transformation Board receives regular updates on the agreed transformation programmes and projects, funding has been set aside to fund strategic change projects. The new Joint Strategic Plan recognises this difficult context. Medium to Longer Term Outlook Looking to 2027/28 and beyond, it is anticipated the Scottish public sector will continue to face financial challenge. For Health and Social Care, increasing demand driven by demographic change combined with costs driven by pay and general inflation is expected to mean that cost pressures will exceed funding increases. This context has been outlined by Audit Scotland, the Institute for Fiscal Studies and the Scottish Government in its Medium-Term Financial Strategy and its intention to drive public sector reform. The impact of inflation and reducing real terms value of public funding are likely to present a challenge when coupled with increasing demand for services, workforce shortages and an ageing demographic. The HSCP will continue to update its medium-term financial planning as the future policy direction and impact of the reform agenda becomes clear. Financial pressures will require to be managed through continuing value for money, charging for services, efficiency improvement, the implementation of new ways of working and some reductions in service delivery. NHS services are operating with an underlying deficit and there is an additional pressure in respect of the SLA with Greater Glasgow and Clyde. The situation is not sustainable and spend reduction is required. It is anticipated that cash releasing efficiency savings of 3% or around £12m per year will be required. Financial Risks The IJB has a robust approach to Risk Management and responsibility for oversight of financial risks and mitigations sit with its Finance & Policy Committee. Financial risks are considered and reported on a regular basis. Key financial risks which have an assessed value of £500k or more have been identified. The main financial risk facing the IJB (and NHS Highland) relates to the increased charging for services provided by NHS Greater Glasgow and Clyde: Identified Risk Estimated Value £000 Summary of Mitigations Increased SLA charges from NHS Greater Glasgow and Clyde. £12m in 2026/27. £16m recurring. Diligence regarding activity levels and costs. Engagement between NHS Highland, NHS Greater Glasgow and Clyde and Scottish Government. Consideration of potential actions to reduce scale of charge or make compensating changes to local services. Page 32
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 10 Sustainability of service providers – providers reduce or close provision resulting in additional costs such as increased agency and accommodation as the HSCP is required to identify alternative ways of providing services. £750k (£0.5m- £1.5m range) On-going dialogue, monitoring and review. Engagement with partners. The Care at Home service transformation project and consideration of new ways of working in some localities Inflation – macroeconomic conditions and on-going conflicts which may result in pay and non-pay inflation exceeding budgeted allowances. £500k (£0.5m- £1.5m range) Allowance made for inflation in the budget, performance monitoring, continuous review of contract rates and pricing. Delivery of savings. Monitoring of energy cost and travel impact of increased fuel prices. Staff recruitment – inability to recruit staff across NHS and social care services results in on-going utilisation of agency staffing. £500k (£0.5m- £1.5m range) Workforce strategy, targeted recruitment action, development of improved accommodation options. Savings – failure to deliver the savings programme in full during the year contributes to a budget overspend and failure to achieve financial objectives. £500k (£0.5m- £1.5m range) Project management processes and funds held in reserve. Service Demand – Older adult service demand continues to increase driving spend above budget on residential care and care @ home £500k (£0.5m- £1.5m range) Care at home efficiency, monitoring of care home occupancy and potentially restrictions of service. The macroeconomic environment remains a risk, whilst the implications for the HSCP of higher inflation can be modelled and are understood, the impact upon some of the most vulnerable in the communities served by the HSCP is of concern. Increased poverty and impacts on health and well-being can be expected, this in turn may further increase service pressures along with the adverse impact covid lockdowns have had. The HSCP continuously seeks to consider its strategic context and is undertaking specific work to examine how it can manage the service impact of demographic change. Additionally there are a number of government policies and new legislation which will have direct and indirect financial implications for the HSCP. The process of horizon scanning and modelling the financial implications, examples include: • The Care Reform Act; • Keeping the Promise; and • The Health and Care Staffing Act. The HSCP has identified the following high grade strategic risks: • Sustainability of commissioned service providers; • Workforce recruitment and retention; • Infrastructure condition and suitability; • Long term financial sustainability; and • Socio-economic situation and cost of living crisis. Page 33
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 11 7. CONCLUSION The Integration Joint Board’s final outturn position for 2025/26 was a small underspend against its budget. This is welcome and has enabled the HSCP to slightly increase its general reserve balance. The delivery of the savings programme and the recovery plan have been critical in improving the financial performance. Whilst financial targets have been achieved in 2025/26, there remains significant challenges ahead and the impact on the services that can be afforded and delivered is of concern. The IJB still has a structural deficit relating to its NHS services which requires to be addressed along with NHS Highland. The HSCP ended the year with total reserves of £31.1m including its general reserves of £4.7m, these are mostly committed to funding the 2026/27 budget gap, service sustainability and agenda for change staffing costs. The environment remains challenging as there are ongoing service pressures. The impact of inflation and cost of living crisis is resulting in people requiring increasing levels of health and social care support. The public funding environment is expected to worsen and will make it increasingly challenging to operate current services on a financially sustainable basis. The identification and delivery of efficiency savings is crucial, this will inevitably result in further reductions in the service offer. The demographic changes now being experienced will result in an incremental increase in demand for service each year, financial and staffing constraints mean that this cannot be managed without service change and a shift towards increasing preventative approaches. Making best use of the resources available is now critical to ensure that the HSCP can continue to deliver services in the best possible way for the communities it serves. 8. ACKNOWLEDGEMENTS We would take this opportunity to acknowledge the effort in producing the Annual Accounts and to record our thanks to members of the Integration Joint Board and staff for their continued hard work and support. Graham Bell Evan Beswick James Gow Chair Chief Officer Head of Finance Date TBC Date TBC Date TBC Page 34
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Statement of Responsibilities Page 12 THE INTEGRATION JOINT BOARD’S RESPONSIBILITIES: The Integration Joint Board is required: - to ensure the Annual Accounts are prepared in accordance with the legislation (The Local Authority Accounts (Scotland) Regulations 2014), and so far as is compatible with that legislation, in accordance with proper accounting practices (section 12 of the Local Government Act 2003); - to make arrangements for the proper administration of its financial affairs and to secure that the proper officer of the board had responsibility for the administration of those affairs (section 95 of the Local Government (Scotland) Act 1973). In this organisation, that officer is the Head of Finance; - to manage its affairs to secure economic, efficient and effective use of its resources and safeguard its assets; and - to approve the Annual Accounts for signature. I confirm that these Annual Accounts were approved for signature by the Argyll and Bute Integration Joint Board at its meeting on Date TBC. Signed on behalf of the Integration Joint Board: Graham Bell Chair Date TBC Page 35
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Statement of Responsibilities Page 13 THE CHIEF FINANCIAL OFFICER’S RESPONSIBILITIES: The Chief Financial Officer (Head of Finance) is responsible for the preparation of the Integration Joint Board’s Annual Accounts in accordance with proper practices as required by legislation and as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code). In preparing the annual accounts the Chief Financial Officer is responsible for: - selecting suitable accounting policies and applying them consistently; - making judgements and estimates on a reasonable basis; - complying with legislation; - complying with the Local Authority Code of Practice (in so far as it is compatible with legislation). The Chief Financial Officer is also required to: - keep proper accounting records which are up to date; and - take reasonable steps to ensure the propriety and regularity of the finances of the Integration Joint Board. I certify that the financial statements give a true and fair view of the financial position of the Argyll and Bute Integration Joint Board as at 31 March 2026, and its income and expenditure for the year then ended. James Gow Head of Finance 16 June 2026 Page 36
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 14 INTRODUCTION The Annual Governance Statement explains Argyll and Bute Integration Joint Board’s (IJB) governance arrangements and reports on the effectiveness of its system of internal control. SCOPE OF RESPONSIBILITY The IJB is responsible for ensuring that its business is conducted in accordance with the law and appropriate standards, that public money is safeguarded, properly accounted for and used economically, efficiently and effectively. In discharging these responsibilities, the IJB has put in place arrangements for governance of its affairs which includes a system of internal control. This is based on an ongoing process designed to identify, prioritise and manage risk. The system aims to manage risks effectively and proportionately to deliver the IJB’s objectives. The IJB places reliance on the NHS Highland and Argyll and Bute Council systems of internal control. These support compliance with both organisations’ policies and promote achievement of their aims and objectives, as well as those of the IJB. The system can only provide reasonable and not absolute assurance of effectiveness. GOVERNANCE FRAMEWORK The IJB is an independent legal entity from both Argyll and Bute Council and NHS Highland, with a separate governance framework. The IJB comprises eight voting members with four Elected Members nominated by Argyll and Bute Council and four Board members of NHS Highland. In addition there are a number of non-voting appointees representing other stakeholder groups, such as the Third Sector, Independent Sector, Patients and Service Users, Carers and Staff. The arrangements for the operation, remit and governance of the IJB are set out in the Integration Scheme which has been prepared and approved by Argyll and Bute Council and NHS Highland. The IJB, via a process of delegation from the Health Board and Local Authority has responsibility for the planning, resourcing and operational delivery of all integrated health and social care services within Argyll and Bute. The scheme of integration was revised, as required by legislation, and was approved by Scottish Government on 23 March 2026. It is published on the Council and NHS Highland websites. The funding available to the IJB is dependent on the funding made available to and by Argyll and Bute Council and NHS Highland. The IJB is therefore reliant on both partners for the resources to deliver health and social care services. The main features of the governance framework in place during 2025-26 were: • The Integration Scheme outlines the scope and functions of services that are delegated, the clinical and care governance, strategic planning, financial and operational management arrangements. Page 37
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 15 • The IJB operates within an established procedural framework. The roles and responsibilities of Board members and officers are defined within Standing Orders, the Integration Scheme, Financial Regulations and Standing Financial Instructions; all subject to regular review. • The strategic vision, mission and values of the IJB are set out in the Strategic Plan and are aligned to the health priorities outlined by the Scottish Government in the Population Health Framework. • Effective partnership working with the Council and NHS Highland ensures delivery of the Strategic Objectives, through information sharing and clear lines of responsibility. • Members of the IJB subscribe to, and comply with, the Standing Orders and Code of Conduct. The Standards Officer is responsible for advising and guiding members of the Board on issues of conduct and propriety. A register of interests is held for Board members and senior officers. • Appropriate training, development and induction is provided for all new IJB members. Performance Development and Review schemes are in place for all staff through each partner agency, the aim of which is to focus on their individual performance and development and contribution to meeting service objectives. • Four Locality Planning Groups have been established and meet quarterly, they aim to provide an effective mechanism for local leadership of service planning and a way for localities to influence how resources are allocated in their area and allow them to contribute to the development and delivery of the Strategic Plan. • Effective scrutiny and decision making is supported by the formal submission of reports, findings and recommendations by Audit Scotland, Inspectorates and the Internal Audit service. • The decision making structure whereby the committees of the IJB have agreed Terms of Reference. These include the Clinical and Care Governance Committee, Audit and Risk Committee, Finance & Policy Committee, Strategic Planning Group and Locality Planning Groups. Terms of reference and the annual reporting framework are formally approved by the IJB and are reviewed regularly. • The output from committees is publicly available and reported through minutes being considered by the IJB. All committees self-assess their performance and provide an annual report to the IJB. • The Integrated Performance Management Framework focusses on embedding a performance management culture throughout the organisation with regular reporting to the IJB. The IJB prepares an Annual Performance Report, this is submitted to Scottish Government and is publicly available. • Reliance on the procedures, processes, policies and operational systems of Argyll and Bute Council and NHS Highland where these are not operationally delegated. The IJB key governance documents are subject to periodic review. • The legislative framework requires the Chief Officer to be a single point of overall strategic and operational advice to the IJB and to be a member of the Senior Management Teams of Argyll and Bute Council and NHS Highland. • Robust Risk Management processes are in place and the IJB have set their risk appetite to ensure management actions align risk management priorities. IJB meetings take place on a hybrid basis with in-person attendance encouraged, most committee meetings continue to take place by remote conferencing. This continues to be an efficient way of Page 38
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 16 conducting business considering the geography of Argyll & Bute. Members of press and public were enabled to attend IJB meetings, and the recording of each meeting was subsequently published alongside the minutes. THE SYSTEM OF INTERNAL FINANCIAL CONTROL The governance arrangements described operate on the basis of a system of internal controls. This is based on a framework of regular management and financial information, financial regulations, administrative procedures, management supervision and a system of delegation and accountability. Development and maintenance of the system is undertaken by managers within the IJB. During 2025-26 this included the following: - Financial Regulations and guidance relating to financial processes and procedures, these were updated in May 2024. - Formalised budget setting process, a three-year budget outlook and identification of new savings projects. - Regular review of detailed financial performance reports. - Formal programme and project management discipline. - Regular Finance and Policy Committee meetings to provide scrutiny of the financial position and progress with savings and service transformation. - An effective and independent Internal Audit function. - Integrated financial reporting and financial risk management. - An extensive public engagement process to inform the development of the 2026/27 budget. The system of internal financial control can provide reasonable and not absolute assurance and is designed to manage risk to a reasonable level. Responsibility for maintaining and operating an effective system of internal financial control rests with the Head of Finance. The IJB’s financial management arrangements conform to the governance requirements of the CIPFA statement: ‘The Role of the Chief Financial Officer in Local Government (2016)’. In relation to managing the risk of fraud and corruption the IJB relies upon the financial regulations, processes and procedures put in place and operated by both partners. Its Audit & Risk committee review arrangements for managing fraud risk, including through the work of its internal and external auditors. These arrangements are considered to provide adequate assurance on the management of fraud risk and are considered to be compliant with CIPFA’s Code of Practice on Managing the Risk of Fraud and Corruption. UPDATE ON GOVERNANCE IMPROVEMENT ACTIONS A number of areas for development in respect of governance have been progressed and this has resulted in a marked improvement in the way in which the IJB operates and is governed. The action plan is now fully implemented, highlights included the development of the Workforce plan, the roll out and on-going development of the Integrated Performance Management System, the development of the engagement strategy and training and development for IJB members. Page 39
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 17 DATA PROTECTION The HSCP is committed to the highest standards of Data Protection and has put in place arrangements to ensure compliance with the General Data Protection Regulations with NHS Highland and Argyll & Bute Council. There was one notifiable data breach impacting upon a single client in 2025/26 and one data breach in the prior year which was resolved, and upon investigation, no personal data had been disclosed. INTERNAL AUDIT The IJB is required to put in place adequate and proportionate internal audit arrangements to provide independent assurance on risk management, corporate governance and system of internal control. Following a competitive tendering process, Argyll and Bute Council Internal Audit Service were contracted as internal auditors for the IJB from 1 April 2021. This contract was extended for a further period of three years from 1 April 2024. The IJB complies with “The Role of the Head of Internal Audit in Public Organisations” (CIPFA) and operates in accordance with “Public Sector Internal Audit Standards” (CIPFA). The Chief Internal Auditor reports directly to the IJB Audit and Risk Committee with the right of access to the Head of Finance, Chief Officer and Chair of the IJB Audit and Risk Committee on any matter. The annual programme of internal audit work is based on a strategic risk assessment and is approved by the IJB Audit and Risk Committee. The role of the Audit and Risk Committee is to provide the IJB with independent assurance on the adequacy of the risk management framework, the internal control environment and the integrity of the financial reporting and annual governance processes. Membership of the Audit and Risk Committee includes six members of the IJB. Professional advisors, the internal auditor and external auditor support the committee and attend where appropriate. The approved Audit Plan for 2025/26 included reviews of: • IJB Governance Arrangements • Partnership Governance • Workforce Planning • Payroll procedures for Care at Home • Care Assessment and Resources Allocation – Adult Care In addition, the Committee considered a wide range of reports including several published by Audit Scotland. It also reviews performance in implementing audit recommendations. As at the end of the year the HSCP had implemented 11 of its outstanding recommendations with a total of 17 outstanding at the year end. The implementation of the outstanding recommendations is a priority for the management team. The Chief Internal Auditor provides the Audit Committee with an annual report on audit activity for the Integration Joint Board. The annual report includes an independent opinion on the adequacy and effectiveness of the systems of governance and internal control. For financial year Page 40
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 18 2025/26 the overall conclusion of the Internal Auditor is to provide a reasonable level of assurance on the adequacy of internal controls and governance arrangements within the IJB. The Chief Internal Auditor also summarised concerns about the financial challenges facing the HSCP in the longer term which will require both savings to be identified and effective delivery of these savings in order to maintain financial sustainability and minimise the financial risk to both parent bodies. The Annual Internal Audit Report also notes that financial sustainability continues to be an issue throughout the Health and Social Sector as reported on several occasions by Audit Scotland. BEST VALUE The IJB has a statutory duty to provide best value as a designated body under section 106 of the Local Government (Scotland) Act 1973. The Annual Performance Report sets out how the IJB fulfilled its obligations for best value in that year. The Annual Performance Report is publicly available. A short summary against the 8 best value themes is given below: Vision and Leadership The IJB and Senior Leadership team set clear direction and strategy as expressed in the Strategic Plan and Commissioning Strategy. There are strong mechanisms for contributions from the Locality Planning Groups and the Strategic Planning Group into these documents. The IJB approved its new joint strategic plan and its budget and savings plan for the 2026/27 financial year. Governance and Accountability The IJB has an open and transparent governance system in place. It seeks to continually develop and improve in response to emerging good practice and independent audit review. Support for the system of governance is provided by Argyll and Bute Council, this ensures that it is properly administered. Comprehensive and clear Board minutes and papers continue to be published and meetings are open to the public. The IJB has agreed to make sub-committee meetings open for public attendance to further improve its open and transparent approach to governance. Effective use of resources The Finance & Policy Committee meet regularly to scrutinise performance against budget, the delivery of savings and the Transformation Programme. Improving financial management and governance has been a priority for a number of years, steps taken have contributed to the improved financial performance and resilience. It continues to seek to identify ways of improving efficiency and has been able to invest in longer term service transformation. The financial and demographic challenges facing the health and social care sector are resulting in increasing pressure on finances service and its staff. There is an ongoing focus on efficiency, savings and service reductions as a consequence. Partnership and Collaborative Working Page 41
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 19 Effective partnership working is a core element of the way in which the IJB has been established. The IJB works closely with NHS Highland and Argyll and Bute Council. The Chief Officer is a member of both Strategic Management Teams. In addition the HSCP works closely with third sector partners and its commissioned service providers by holding regular meetings with strategic partners and stakeholders. This has continued throughout 2025/26 and illustrates an ethos of partnership working and co-production. Examples of effective partnership working during include the purchase of the Kintyre Care Centre, the remodelling of care services and the care home on Tiree, the outcomes from the Coll Collaborative Group, the establishment of the Prevention Programme and participation in several place-based programmes. However, it is acknowledged that partnership working has become more challenging as a consequence of the budget decisions which have had to be made by the IJB, these have had an adverse impact on the resourcing provided to 3rd sector partners. Community Responsiveness The Locality Planning Groups ensure that local concerns are considered and feed into the Strategic Plan. The Engagement Strategy ensures that consultation and engagement is carried out before policy changes are agreed. Most recently this has been demonstrated in the high levels of public engagement in the budget engagement process and in the development of the new Joint Strategic Plan. A commitment to co-production is an underlying theme and work is now underway to develop new models of service delivery with community based partners. Fairness and Equality A commitment to fairness and equality is at the core of the IJBs purpose, strategy and vision. The HSCP provides a wide range of essential and critical services to the most vulnerable in society. Equality Impact Assessments on new projects plans and strategies include an assessment of socio-economic impacts and islands impacts. Sustainability & Carbon Reduction Carbon reduction remains an important objective for all public bodies. There are a number of strands to the approach including: • Remote provision of services and remote working to reduce travel for staff and service users. There has been extensive use of Near Me for remote consultations where appropriate, and continued utilisation of Microsoft Teams; • The use of drones for transporting items such as laboratory samples from islands and remote areas; • Increasing electric vehicle charging infrastructure and investment in the electrification of the fleet; • Securing of funding to roll out installation of LED lighting; • Investing in management capacity to develop a strategic approach to the HSCP estate to develop capital schemes to reduce carbon emissions; • The commissioning of consultancy services to identify opportunities for carbon reduction across the estate; Page 42
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 20 • Identification of property backlog maintenance and improvement issues to enable a fabric first approach to energy reduction; and • The rationalisation of the estate through improved co-location arrangements. Performance, Outcomes & Improvement The HSCP reports performance in a holistic way and it has implemented its Integrated Performance Management Framework, this remains subject to further improvement and development. The HSCP continues to work to increase activity levels and address the backlog of treatment and diagnosis and long waits in particular. A further priority remains the management of delayed discharges from the acute sector, within Argyll & Bute and from Greater Glasgow & Clyde. REVIEW OF EFFECTIVENESS The IJB has responsibility for conducting, at least annually, a review of the effectiveness of the governance arrangements including the system of internal financial control. This is informed by: - The work of officers within the IJB. - The work of Internal and External Audit. - External review and inspection reports. - The compliance with statutory guidance issued for the integration of services. - Recommendations from the Audit Committee. CONCLUSION AND OPINION ON ASSURANCE Appropriate governance arrangements are in place and operated effectively throughout 2025/26. Continuous improvement and development is ongoing to ensure that the Partnership is able to deliver on its strategic objectives and operate on a financially sustainable basis. The annual report and accounts outline the financial challenge and risk, common to the health and care sector nationally at present. The HSCP has been able to fund its activity and has managed the financial challenges facing it relatively well. It has also been able to improve its general reserve position to provide some degree of financial contingency and resilience for future years. Addressing the longer-term financial sustainability of the HSCP remains a priority along with maintaining quality safety and access to services. The Annual Governance Statement outlines a number of key evidence sources which support the view that reasonable assurance can be placed upon the adequacy and effectiveness of the IJB’s systems of governance. Graham Bell Evan Beswick Chair Chief Officer Date TBC Date TBC Page 43
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Remuneration Report Page 21 1. INTRODUCTION The Local Authority Accounts (Scotland) Amendment Regulations 2014 (SSI No.2014/200) require local authorities and IJBs to prepare a Remuneration Report within the annual accounts. The information disclosed in the Remuneration Report is subject to external audit and the text is reviewed by external audit to ensure its consistency with the Financial Statements. 2. INTEGRATION JOINT BOARD The IJB comprises eight voting members appointed in equal numbers by the Health Board and Council. The partners appoint a Chair and Vice Chair in accordance with the Integration Scheme and the Public Bodies (Joint Working) (Integration Joint Boards) (Scotland) Order 2014. Article 4 of the Order provides for the Chair to be appointed by NHS Highland or Argyll and Bute Council from among the voting members nominated by NHS Highland and the Council. The Vice Chair is appointed by the constituent authority who did not appoint the Chair. The NHS Board and the Council have responsibility for these appointments on an alternating basis and the NHS Board and the Council may change the person appointed by them as Chair or Vice Chair during an appointing period. NHS Highland Appointed Mr Graham Bell as Chair from 1 April 2025. Argyll and Bute Council appointed Cllr Dougie McFadzean as Vice Chair from 1 April 2025. In addition there are professional advisors and stakeholder members who are non-voting members of the Integration Joint Board. The IJB does not provide any additional remuneration to the Chair, Vice Chair or any other board members relating to their role. The IJB does not reimburse the relevant partner organisations for any voting board members costs. Travel and subsistence costs for all Board Members are re- imbursed in line with the policies of the Council and Health Board. The IJB does not have responsibilities, either in the current or future years, for funding any pension entitlements of voting IJB members. Therefore no pension rights or disclosures are provided for the Chair or Vice Chair. 3. OFFICERS OF THE IJB The IJB does not employ staff in its own right, however specific post-holding officers are non- voting members of the Board. Under Section 10 of the Public Bodies (Joint Working) (Scotland) Act 2014 a Chief Officer for the IJB has to be appointed and the employing partner has to formally second the officer to the IJB. The Chief Officer is regarded as an employee of the IJB although the contract of employment is with NHS Highland. No other staff are appointed by the IJB under a similar legal regime. Other non-voting board members who meet the criteria for disclosure are included below. The following table sets out the remuneration disclosures for 2025-26 for senior officers: Page 44
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Remuneration Report Page 22 Total 2024-25 £ Senior Officer Salary (Inc Fees and Allowances) £ Taxable Expenses £ Total 2025-26 £ 100,151 Chief Officer – Evan Beswick 102,368 102,368 94,854 Head of Finance – James Gow 98,446 967 99,413 195,005 Total 200,814 967 201,781 4. PENSION BENEFITS In respect of officers’ pension benefits the statutory responsibility for any future contributions rests with the employing partner organisation. Therefore there is no pension liability reflected on the IJB balance sheet for its officers. The IJB has a responsibility for funding the employer cash contributions each year. The Chief Officer is a member of the NHS Pension Scheme, costs for the pension scheme contributions and accrued pension entitlements are shown in the table below: 2024-25 2025-26 In-year Pension Contributions £ Accrued Pension Benefits £ In-year Pension Contributions £ Accrued Pension Benefits £ 21,821 Pension 22,000 Lump Sum 0 Chief Officer – Evan Beswick 23,033 Pension 26,000 Lump Sum 0 6,486 Pension 8,000 Lump Sum 0 Head of Finance James Gow 6,399 Pension 11,000 Lump Sum 0 5. DISCLOSURE BY PAY BANDS Pay band information is not separately provided as all staff pay information is disclosed above. 6. EXIT PACKAGES There were no exit packages agreed for senior officers during 2025/26 and none in the prior year. Graham Bell Evan Beswick Chair Chief Officer Date TBC Date TBC Page 45
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Financial Statements Page 23 COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT The statement below shows the cost of providing services for the year according to accepted accounting practices. CIES 2025-26 2025-26 Gross Expenditure £000 Gross Income £000 Net Expenditure £000 Services Provided by NHS Highland 313,005 (10,140) 302,865 Services Provided by Argyll & Bute Council 112,725 (11,976) 100,749 Cost of Services 425,730 (22,116) 403,614 Taxation and Non-Specific Grant Income (note 3) (413,957) (Surplus) or Deficit on Provision of Services (10,343) Total Comprehensive (Income) and Expenditure (10,343) The movement in the General Fund balance is solely due to the transactions shown in the Comprehensive Income and Expenditure Statement. Consequently an Expenditure and Funding Analysis is not provided in these accounts. CIES 2024-25 2024-25 Gross Expenditure £000 Gross Income £000 Net Expenditure £000 Services Provided by NHS Highland 294,530 (10,001) 284,529 Services Provided by Argyll & Bute Council 108,261 (11,507) 96,754 Cost of Services 402,791 (21,508) 381,283 Taxation and Non-Specific Grant Income (note 3) (382,151) (Surplus) or Deficit on Provision of Services (868) Total Comprehensive (Income) and Expenditure (868) Page 46
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Financial Statements Page 24 MOVEMENT IN RESERVES STATEMENT This statement shows the movement on the IJB reserves. The movements which arise due to statutory adjustments which affect the General Fund balance are separately identified from the movements due to accounting practices. Movements in Reserves During 2025-26: General Fund Balance £000 Total Reserves £000 Opening Balance at 31 March 2025 (20,747) (20,747) (Surplus) / Deficit on Provision of Services (10,343) (10,343) (Increase) / Decrease in Year 2025-26 (10,343) (10,343) Closing Balance at 31 March 2026 (31,090) (31,090) Movements in Reserves During 2024-25: General Fund Balance £000 Total Reserves £000 Opening Balance at 31 March 2024 (19,879) (19,879) (Surplus) / Deficit on Provision of Services (868) (868) (Increase) / Decrease in Year 2024-25 (868) (868) Closing Balance at 31 March 2025 (20,747) (20,747) Page 47
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ARGYLL AND BUTE INTEGRATION JOINT BOARD Financial Statements Page 25 BALANCE SHEET The Balance Sheet shows the value of the IJB’s assets and liabilities as at the balance sheet date. The net assets of the IJB are matched by the reserves held by the IJB. 31 March 2025 Note 31 March 2026 £’000 £’000 20,747 Current Assets: Short Term Debtors 4 31,090 20,747 Net Assets 31,090 20,747 Usable Reserve: General Fund 6 31,090 20,747 Total Reserves 31,090 James Gow Head of Finance 16 June 2026 Page 48
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Page 26 1. MATERIAL ACCOUNTING POLICIES 1.1 General Principles The Financial Statements summarise the transactions of the Integration Joint Board for the 2025/26 financial year and its position as at 31 March 2026. The Integration Joint Board was established under the requirements of the Public Bodies (Joint Working) (Scotland) Act 2014 and is a Section 106 body as defined in the Local Government (Scotland) Act 1973. The Financial Statements are therefore prepared in compliance with the Code of Practice on Local Authorities Accounting in the United Kingdom 2025-26, supported by International Financial Reporting Standards (IFRS), unless legislation or statutory guidance requires different treatment. The accounts are prepared on a going concern basis, which assumes the Integration Joint Board will continue in operational existence for the foreseeable future. The historical cost convention has been adopted. 1.2 Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular: - Expenditure is recognised when goods or services are received and their benefits are used by the IJB. - Income is recognised when the IJB has a right to the income, for instance by meeting any terms and conditions required to earn income, and receipt of the income is probable. - Where income and expenditure have been recognised but settlement in cash has not taken place, a debtor or creditor is recorded in the Balance Sheet. - Where debts may not be received, the balance of debtors is written down. For the IJB annual accounts a debtor and/or creditor will be recorded where the partner contributions differ from the actual net expenditure in year, this allows any surplus or deficit on the provision of services to be transferred to the reserves held by the IJB. Where any in-year overspend exceeds reserves available the partners will make additional in-year payments, in this instance a creditor will not be recognised as future funding would be adjusted to reflect any future repayment. 1.3 Offsetting of Debtors and Creditors The IJB does not hold cash and cash equivalents. Instead the funding partners utilise, as directed by the Integration Joint Board, the amount of funding due to the Integration Joint Board to pay for services. The Integration Joint Board and the funding partners have confirmed that there is a ‘right of offset’, and that there is an intention to allow settlement of balances to be undertaken on a net basis. On this basis the Integration Joint Board’s financial statements present the balances due to and from the funding partners on a net basis rather than as separate creditors and debtors. 1.4 Funding Page 49
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Page 27 The Integration Joint Board is primarily funded by funding contributions from the statutory partners, Argyll and Bute Council and NHS Highland. Expenditure is incurred as the Integration Joint Board commissions specified health and social care services from the funding partners for the benefit of service recipients in Argyll and Bute. 1.5 Cash and Cash Equivalents The Integration Joint Board does not operate a bank account or hold cash. Transactions are settled on behalf of the Integration Joint Board by the funding partners. Consequently the Integration Joint Board does not present a ‘Cash and Cash Equivalent’ figure on the balance sheet. The funding balance due to or from each partner at 31 March is represented as a debtor or creditor on the Integration Joint Board’s Balance Sheet. 1.6 Employee Benefits The Integration Joint Board does not directly employ staff. Staff are formally employed by the funding partners who retain the liability for pension benefits payable in the future. The Integration Joint Board therefore does not present a Pensions Liability on its Balance Sheet. The Integration Joint Board has a legal responsibility to appoint a Chief Officer. Details on the arrangements are provided in the Remuneration Report. The charges from the employing partner are treated as employee costs. Where material the Chief Officer’s absence entitlement at 31 March is accrued, for example in relation to annual leave earned but not taken. 1.7 Provisions Provisions are liabilities of uncertain timing or amount. A provision is recognised as a liability on the balance sheet when there is an obligation as at 31 March due to a past event; settlement of the obligation is probable; and a reliable estimate of the amount can be made. Recognition of a provision will result in expenditure being charged to the Comprehensive Income and Expenditure Statement and will normally be a charge to the General Fund. Where NHS Highland or Argyll and Bute Council recognise provisions in relation to services included in the Integration Scheme these are disclosed in the IJB’s Annual Accounts. 1.8 Reserves The Integration Joint Board has a Reserves Policy in place which details the nature and use of reserves. The Integration Joint Board’s only Usable Reserve is the General Fund. The balance of the General Fund as at 31 March shows the extent of resources which the Integration Joint Board can use in future years. 1.9 Indemnity Insurance The Integration Joint Board has indemnity insurance for costs relating primarily to potential claim liabilities regarding Board member and officer responsibilities. NHS Page 50
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Page 28 Highland and Argyll and Bute Council have responsibility for claims in respect of the services that they are statutorily responsible for and that they provide. Unlike NHS Boards, the Integration Joint Board does not have any ‘shared risk’ exposure from participation in the Clinical Negligence and Other Risks Indemnity Scheme (CNORIS). The Integration Joint Board’s participation in the CNORIS scheme is therefore analogous to normal insurance arrangements. Known claims are assessed as to the value and probability of settlement. Where it is material the overall expected value of known claims taking probability of settlement into consideration, is provided for in the Integration Joint Board’s Balance Sheet. The likelihood of receipt of an insurance settlement to cover any claims is separately assessed and, where material, presented as either a debtor or disclosed as a contingent asset. 1.10 VAT Status The IJB is a non-taxable person and does not charge or recover VAT on its functions. 2. EVENTS AFTER THE REPORTING PERIOD The Annual Accounts were authorised for issue on [date TBC]. Events taking place after this date are not reflected in the financial statements or notes. Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Annual Accounts are authorised for issue. Two types of events can be identified: • Those that provide evidence of conditions that existed at the end of the reporting period, the Annual Accounts are adjusted to reflect such events. • Those that are indicative of conditions that arose after the reporting period – The Annual Accounts are not adjusted to reflect such events, but where a category of events would have a material impact disclosure is made in the notes of the nature of the events and their estimated financial effect. There are no events to report after the reporting period end. 3. TAXATION AND NON-SPECIFIC GRANT INCOME The following taxation and non-specific grant income was recognised in the Comprehensive Income and Expenditure Statement: 31 March 2025 31 March 2026 £’000 £’000 Page 51
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Page 29 80,875 Funding Contribution from Argyll and Bute Council 85,494 301,276 Funding Contribution from NHS Highland 328,463 382,151 Taxation and Non-specific Grant Income 413,957 The funding contributions from the partners above excludes any funding which is ring- fenced for the provision of specific services. Such funding is presented as income in the Cost of Services in the Comprehensive Income and Expenditure Statement. 4. DEBTORS 31 March 2025 31 March 2026 £’000 £’000 18,500 NHS Highland 28,850 2,247 Argyll and Bute Council 2,240 20,747 Total Debtors 31,090 Amounts owed by the partners are stated on a net basis. Debtor and Creditor balances recognised by the funding partners but not yet settled in cash terms are offset against the funds they are holding on behalf of the IJB. 5. RELATED PARTY TRANSACTIONS The Integration Joint Board has related party relationships with NHS Highland and Argyll and Bute Council. In particular, the nature of the partnership means that the IJB may influence, and be influenced by, its partners. The following transactions and balances included in the Integration Joint Board’s accounts provide additional information on the relationships. Transactions with NHS Highland: 2024-25 £000 2025-26 £000 (301,276) Funding Contributions received from NHS Highland (328,463) 284,529 Expenditure on Services Provided by NHS Highland 302,865 (16,747) Net Transactions with NHS Highland (25,598) There are key management personnel employed by NHS Highland, these costs are included in the expenditure on services provided. The non-voting Board members employed by NHS Highland include the Lead Nurse, Clinical Director for Argyll and Bute, Public Health Specialist, Lead Allied Health Professional, Lead Pharmacist, Staff Representative and representatives from primary care and medical services. Details of remuneration, where required, is provided in the Remuneration Report. Transactions with Argyll and Bute Council 2024-25 £000 2025-26 £000 Page 52
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Page 30 (80,875) Funding Contributions received from Argyll and Bute Council (85,494) 96,754 Expenditure on Services Provided by Argyll and Bute Council 100,749 15,879 Net Transactions with Argyll and Bute Council 15,255 There are key management personnel employed by Argyll and Bute Council, these costs are included in the expenditure on services provided. The non-voting Board members employed by Argyll and Bute Council include the Chief Financial Officer (Head of Finance), Chief Social Work Officer and a Staff Representative. Details of remuneration, where required, is provided in the Remuneration Report. Support services, such as human resources, financial services, information technology and accommodation are not included in the delegations from Argyll and Bute Council. These are provided free of charge as ‘services in kind’ and not included in the expenditure of the IJB. 6. USABLE RESERVE: GENERAL FUND The IJB holds a balance on the General Fund which will normally comprise of three elements: 1. Funds that are earmarked or set aside for specific purposes. In Scotland, under Local Government rules, earmarked reserves are accounted for separately but remain legally part of the General Fund. The identification of earmarked reserves may include: • future use of funds for a specific purpose, as agreed by the Integration Joint Board; or • reserves for unspent revenue grants or contributions which were allocated for a defined purpose. 2. Funds which are not earmarked for specific purposes, but are set aside to deal with unexpected events; and 3. Funds held in excess of the target level of reserves and identified earmarked sums. Such reserves can be spent or earmarked at the discretion of the Integration Joint Board. The following table details the movements on the General Fund: 2024-25 2025-26 Balance at 31 March 2025 Transfers Out Transfers In Balance at 31 March 2026 £000 £000 £000 £000 18 Technology Enabled Care 0 0 18 407 Alcohol & Drugs Partnership 242 201 366 Page 53
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Page 31 105 Best start maternity services 0 8 113 178 Supporting improvements to GP premises 113 0 65 30 Scotgem funding 0 0 30 0 Long COVID Service 0 298 298 491 Primary Care Improvement Funding 125 602 968 37 Trauma Network 0 0 37 167 PFG School Nursing 0 0 167 90 District Nurse Posts 0 0 90 429 E-health Strategy Funding 245 145 329 14 Perinatal MH Funding 14 0 0 28 Mental Health Officer Training 0 0 28 37 Type 2 Diabetes Framework 37 0 0 79 Trauma Training Programme 0 18 97 145 Oban Accommodation Funding 0 0 145 250 Primary Care Education Fund 0 0 250 468 Additional Band 2-4 Staffing 39 0 429 229 Nursing Support for Care Homes Funding 17 0 212 165 Mental Health Facilities Funding 0 0 165 190 Waiting Times Funding and Improving Flow 190 1,145 1,145 55 Medical Assisted Treatment Standards 0 0 55 56 Psychological Therapies 56 0 0 159 Dementia Post Diagnostic Support 11 0 148 0 Community Glaucoma Service 0 39 39 19 Mental Health Recovery Services 19 0 0 495 Whole Family Wellbeing Fund 0 126 621 50 SARCS Programme 0 0 50 44 Multi Disciplinary Teams Funding 0 150 194 622 Children’s Mental Health Services (CAHMS) 244 0 378 11 Children’s Oral and Dental Health 0 0 11 21 Criminal Justice Fund 0 0 21 76 Health Checks – Learning Disability 0 0 76 39 Social Work Workforce 0 0 39 414 Hospital at Home Project 414 1,263 1,263 192 Public Dental Service 0 0 192 39 Digital Therapies 15 0 24 7,181 Agenda for change reserve 2,861 8,977 13,297 4,697 Sustainability & Value 0 100 4,797 2,576 General Reserves – Earmarked for Service Transformation & Budget Gap 743 2,914 4,747 Page 54
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Page 32 444 General Reserves – Earmarked for Prevention Programme 258 0 186 20,747 General Fund 5,643 15,986 31,090 7. CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTY In preparing the 2025/26 Annual Accounts, the IJB may have to make certain judgements about complex transactions or those involving uncertainty about future events. There are no critical judgements or material estimation uncertainties included within the Annual Accounts for 2025/26. 8. AUDIT FEES The fee payable in respect of the external audit of the accounts for the year ended 31 March 2026 was £36k (£34k in respect of the 2024/25 audit). Forvis Mazars did not receive any fees for non-audit work. Page 55
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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 Page 57 Agenda Item 6
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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. Page 58
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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 Page 59
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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. Page 60
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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. Page 61
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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. Page 62
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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. Page 63
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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 Page 64
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ARGYLL AND BUTE HEALTH AND SOCIAL CARE PARTNERSHIP APPENDIX 1 REVENUE BUDGET MONITORING SUMMARY - YEAR TO DATE POSITION AS AT 30 JUNE 2026 Reporting Criteria: +/- £50k or +/- 10% For information: The Council don't do monthly based accrual accounting, whereas Health do. On the Council side, there may be a mismatch between year to date actual and budgets, due to timing differences as to when invoices are paid. Health do monthly based accrual accounting, therefore, you should see a correlation in the year to date position and the year end outturn position. Service Actual £000 Budget £000 Variance £000 % Variance Explanation COUNCIL SERVICES: Chief Officer 437 204 (233) (114.2%) The variance is due to timing differences in third party payments. Service Development 110 121 11 9.1% Outwith reporting criteria. Looked After Children 2,358 2,055 (303) (14.7%) Overspend is due to the demand and costs for childrens residential placements. Child Protection 817 905 88 9.7% The underspend is due to multiple vacancies across the teams. Children with a Disability 231 246 15 6.1% Outwith reporting criteria. Criminal Justice 493 488 (5) (1.0%) Outwith reporting criteria. Children and Families Central Management Costs 852 862 10 1.2% Outwith reporting criteria. Older People - Homecare 3,137 3,459 322 9.3% The YTD variance is due to current known costs for care at home packages. Older People - Internal Residential 1,941 1,793 (148) (8.3%) The overspend is due to staff overtime and agency to cover vacancies. Older People - External Residential 2,124 2,071 (53) (2.6%) The variance is due to known commitments for care home placements. Older People - Other 2,235 2,161 (74) (3.4%) The overspend is due to timing differences in third party payments. Physical Disability 923 883 (40) (4.5%) Outwith reporting criteria. Learning Disability 3,640 3,679 39 1.1% Outwith reporting criteria. Mental Health 874 799 (75) (9.4%) The variance is due to timing differences in third party payments. Adult Services Central Management Costs 213 222 9 4.1% Outwith reporting criteria. COUNCIL SERVICES TOTAL 20,385 19,948 (437) (2.2%) HEALTH SERVICES: Explanation Hospital & Community Care Services 19,063 18,897 (166) (0.9%) The YTD overspend is due to continuing agency staff usage, predominently to cover medical staff vacancies in Lorn & Isles Hospital Complex Care & Registered Services 5,541 5,589 48 0.9% Outwith reporting criteria. Children & Families Services 3,396 3,330 (66) (2.0%) The overspend is due to out of area maternity referrals. Commissioned Services - NHS GG&C 21,755 21,276 (479) (2.2%) The adverse variance is due to slippage / non-achievement of the SLA savings target Commissioned Services - Other 1,340 1,342 2 0.1% Outwith reporting criteria. Primary Care Services inc Dental 8,117 8,378 262 3.1% Underspend is due to vacancies. Other Primary Care Services 3,082 3,082 0 0.0% Outwith reporting criteria. Prescribing 6,410 6,313 (97) (1.5%) The YTD variance is due to a reduction in drug rebates. Public Health 699 746 47 6.2% Outwith reporting criteria. Lead Nurse 557 533 (23) (4.4%) Outwith reporting criteria. Management Service 964 946 (18) (1.9%) Outwith reporting criteria. Planning & Performance 670 711 40 5.7% Outwith reporting criteria. Budget Reserves 0 300 300 0.0% The saving is due to slippage as a result of project/recruitment delays. Budget Reserves - Committed 0 0 0 0.0% Outwith reporting criteria. Income (565) (520) 45 (8.6%) The underspend is due to seasonal activity / income. Estates 3,077 2,934 (143) (4.9%) The overspend is due to unplanned but essential Estates works HEALTH SERVICES TOTAL 74,104 73,855 (249) (0.3%) GRAND TOTAL 94,489 93,803 (686) (0.7%) Page 65
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ARGYLL AND BUTE HEALTH AND SOCIAL CARE PARTNERSHIP APPENDIX 2 REVENUE BUDGET MONITORING FORECAST OUTTURN - AS AT 30 JUNE 2026 Reporting Criteria: +/- £50k or +/- 10% Service Annual Budget £000 Forecast Outturn £000 Variance £000 % Variance Explanation COUNCIL SERVICES: Chief Officer 1,298 1,081 217 16.7% Forecast underspend reflects unallocated centrally held budgets. Service Development 588 583 5 0.9% Outwith reporting criteria. Looked After Children 8,960 9,616 (656) (7.3%) The forecast overspend reflects current known demand for residential placements. Child Protection 4,245 4,117 128 3.0% The forecast underspend is due to a number of vacant posts in each of the area teams and known commitments in the contact and welfare service. Children with a Disability 1,011 776 235 23.2% The forecast underspend is due to current level of commitments known at present. Criminal Justice 338 345 (7) (2.1%) Outwith reporting criteria. Children and Families Central Management Costs 4,692 4,661 31 0.7% Outwith reporting criteria. Older People - Homecare 21,137 21,073 64 0.3% The forecast underspend reflects current known demand for home care packages partially offset by the use of agency staff to cover sickness absence and vacancies. Considerable risk in respect of agency staff / provider failure. Older People - Internal Residential 8,866 8,932 (66) (0.7%) The forecast overspend is due to increased use of agency staff covering staff absences partially offset by over recovery of income. Older People - External Residential 14,173 14,271 (98) (0.7%) The forecast overspend reflects the latest demand for service based care packages. Older People - Other 10,742 10,743 (1) (0.0%) Outwith reporting criteria. Physical Disability 3,552 3,669 (117) (3.3%) The forecast overspend is based on anticipated costs for approved packages of care for PD clients. Learning Disability 22,614 22,325 289 1.3% The forecast underspend reflects known commitments for current approved packages of care and greater than budgetted income projections. Mental Health 4,903 5,244 (341) (7.0%) The forecast overspend reflects known comittments for residential care packages partially offset by underspend in addictions/substance misuse. Adult Services Central Management Costs 984 900 84 8.5% The forecast underspend reflects vacant posts in the team and lower than anticipated contract payments. COUNCIL SERVICES TOTAL 108,103 108,336 (233) (0.2%) HEALTH SERVICES: Explanation Hospital & Community Care Services 74,336 74,912 (576) (0.8%) The forecast overspend is due to agency medical staff usage in LIH Complex Care & Registered Services 22,590 23,163 (573) (2.5%) The forecast overspend is due to out of area inpatient placements Children & Families Services 13,277 13,462 (185) (1.4%) The forecast overspend is due to out of area maternity referrals. Commissioned Services - NHS GG&C 89,105 99,264 (10,159) (11.4%) The forecast overspend is due to the NHS GG&C proposed SLA rebased payment being inexcess of identified funding & unachieved savings Commissioned Services - Other 5,746 5,746 0 0.0% Outwith reporting criteria. Primary Care Services inc Dental 33,310 33,740 (430) (1.3%) The forecast overspend is due to agency costs within 2c practices Other Primary Care Services 12,150 12,150 0 0.0% Outwith reporting criteria. Prescribing 25,789 25,789 0 0.0% Outwith reporting criteria. Public Health 2,466 2,466 0 0.0% Outwith reporting criteria. Lead Nurse 2,133 2,161 (28) (1.3%) Outwith reporting criteria. Management Service 3,950 3,910 40 1.0% Outwith reporting criteria. Planning & Performance 2,842 3,057 (215) (7.6%) The forecast overspend is due to unachieved savings. Budget Reserves 2,450 0 2,450 100.0% The forecast underspend is due to anticipated slippage on reserves funded projects. Budget Reserves - Committed 14,172 14,172 0 0.0% Outwith reporting criteria. Income (2,021) (2,021) 0 0.0% Outwith reporting criteria. Estates & Depreciation 12,007 12,157 (150) (1.2%) The forecast overspend is due to unachieved savings, inflation on fuel costs and unplanned repairs. HEALTH SERVICES TOTAL 314,302 324,128 (9,826) (3.0%) GRAND TOTAL 422,405 432,464 (10,059) (2.3%) Page 66
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# Appendix 3a - Fully Complete Savings Budget Ref. Savings Description £' 000 Social Work / Care 2526-16 Reduced Agency Costs - (2025/26 Recovery Plan) 45 2526-14 Community Transport Helensburgh (2025/26 Recovery Plan) 25 2627-8 Community Transport Helensburgh (Full year impact) 51 2627-1 2627 -1 Social Work Staffing Children Families and Justice (post held vacant) 113 2627-2 2627 -2 Social Work Staffing Children Older Adults (post held vacant) 113 2627-3 2627 -3 Social Work Staffing PD/LD/MH (post removed from establishment) 90 2627-5 2627 -5 Additional ADP Funding to support services 32 2627-6 Mobile team contract saving 450 2627-7 Inflation uplifts removed from contracts 41 2627-9 Scottish Care 44 2627-10 Carers Centres contract savings 165 2627-11 Care & Repair contract reduction 25 2627-12 Alzheimers Scotland contract saving 118 2627-15 Increase in Fees and Charges to clients & other residential care income 180 2327-17 Threshold of Care - full year impact 500 2627-13 Mitigation Funding -180 SERVICE TOTAL 1,812 Health AB2021-64 Dunoon Forensic Medical Examiner Contract 50 AB2122-33 Labs - managed service contract 40 AB2223-9 Forensic Service Contracts 20 AB2627-01 Prescribing - Dapagliflozin 250 AB2627-03 Budget Reserves - slippage 250 AB2627-07 Energy usage reductions 100 AB2627-09 Additional recharge income 40 AB2627-15 Cowal OOH FME 90 SERVICE TOTAL 840 Total Fully Complete 2,652 Page 67
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Appendix 3b - LIVE SAVINGS PROGRAMME Target Declared Remaining RISK NOTES Ref. Savings Description £' 000 £' 000 £' 000 Social Work 2324-14 Reduce external placement budget by one (C&F) 160 160 No expectation this will be achieved at present 2526-8 Additional Income from Adoptions (25/26 Recovery Plan) 100 100 Not deliverable due to court ruling - requires to be offset within service budgets 2526-13 Day Services Review 200 200 Review to report autumn 2026 and make recommendations 2627-4 Lorne Campbell Court 200 200 Service change progressing 2627-16 New Charge for Responder Service 160 160 Project plan in place - charging to commence winter 2026. SERVICE TOTAL 820 820 Health AB2021-4a/b Admin & Clerical 120 120 Vacancy monitoring group to look to hold posts until saving achieved AB2021-20 Centralised booking of medical records - reduction in admin costs 97 97 as above AB2122-66 Savings from building rationalisation 63 63 Was dependent upon cancelled Dunoon project, more co-location now potential option AB2223-5 Estates Staffing Structure 129 129 NHSH now seeking to progress AB2324-26 Childrens & Families Staffing and service re-modelling 250 250 has been delivered non-recurring from vacancy savings in recent years AB2627-02 Review of External Healthcare Referrals 300 100 200 AB2627-05 Review of Contracts 7 7 AB2627-06 Prescribing Savings - pricing and switches 200 59 141 AB2627-08 Care & Repair Helensburgh addnl contract 36 36 AB2627-11 Non pay budgets - service targets 363 15 348 AB2627-12 3% Reduction on SLA GG&C 2,159 2,159 Work on-going GG&C aware of target which has been set nationally SERVICE TOTAL 3,724 174 3,550 4,544 174 4,370 200 59 141 1,508 115 1,393 2,836 0 2,836 Page 68
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Opening Reserves £ Spend during 2026/27 £ Additional Reserves 2026/27 £ Closing Reserves Balance £ 17,802 17,802 0 365,587 5,200 360,387 114,126 105,773 8,353 65,441 65,441 30,188 30,188 377,370 117,900 259,470 967,604 138,100 829,504 36,825 36,825 0 166,774 99,360 67,414 89,515 49,515 40,000 329,454 132,175 197,279 28,221 28,221 97,769 97,769 145,000 145,000 250,000 250,000 20 20 429,129 429,129 149,757 149,757 165,284 165,284 0 34 34 1,144,885 1,144,885 55,052 55,052 148,010 148,010 0 85 85 50,000 50,000 621,476 621,476 194,353 28,000 166,353 1,432,711 1,432,711 38,990 38,990 20,667 20,667 62,386 62,386 24,323 24,323 38,744 38,744 191,589 191,589 191,589 1,262,854 1,262,854 75,244 57,640 17,604 10,827 10,827 0 297,594 297,594 4,797,000 4,797,000 186,300 186,300 0 41,168 41,168 3,273,199 2,404,000 869,199 13,296,797 2,586,200 10,710,597 Appendix 4 - Reserves Technology Enabled Care (Near Me) ADP Funding Best Start Supporting Improvements to GP Premises Scotgem Funding Childrens Mental Health Services (CAHMS) Primary Care Funding Trauma Network Tranche 1 / Tranche 2 PFG School Nursing District Nurse Posts E-health Strategy Funding Mental Health Officer Training / Recovery Trauma Training Programme Oban Accommodation Primary Care Education Fund Fleet Decarbonisation Additional Band 2-4 Staffing Nursing Support for Care Homes Mental Health Facilities Diabetic Technologies Waiting Times, Cancer Waiting Times & Improving Flow Medical Assisted Treatment Standards Dementia Post Diagnostic Support Eating Disorders SARCS Programme Whole Family Wellbeing Fund Multi Disciplinary Teams General Reserves - Service Transformation & Estates Social Work Workforce Criminal Justice Fund Nurse Director Support for Care Homes Digital Therapies Community Glaucoma Service GDS element of the Public Dental Service Hospital at Home Learning Disability Health Checks Recovery Children's Oral Hlth & Dent(Childsmile) Long Covid Project / ME Sustainability & Value Prevention Programme General Reserves - Revenue Funding General Reserves - Estates & Transformation Projects Agenda for Change and nurse regrading Reserve Total 31,090,154 6,480,500 0 24,801,243 Held by NHS 28,850,320 6,480,500 0 22,561,409 Held by Argyll & Bute Council 2,239,834 0 0 2,239,834 Total 31,090,154 6,480,500 0 24,801,243 Page 69
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1 Finance & Policy Committee Date of Meeting: 18 August 2026 Title of Report: Budget Outlook and Medium-Term Financial Planning: 2027/28 to 2029/30 Presented by: James Gow, Head of Finance The Finance & Policy Committee is asked to: • Consider the budget outlook for 2027/28 to 2029/30 and note the risk and uncertainty regarding cost and funding assumptions. • Note the forecast budget gap of £34m for 2027/28 including £18m relating to the SLA with NHS GG&C. • Note that work on the savings plan and approach to managing the NHS deficit is continuing in partnership with the Council and NHS Highland. • Consider the strategic implications of the budget gap outlined in this report • Endorse the timeline and process outlined in this report. • Note expenditure control measures continue to be implemented. 1. EXECUTIVE SUMMARY 1.1 1.2 1.3 This report provides an updated budget outlook for 2027/28 and the following two years. It takes into account recent Government policy documents and nationally utilised assumptions in respect of funding and inflation uplifts. It is anticipated that the Scottish Government will publish its budget in December 2026 and will have also set out its public sector reform agenda by then. The HSCP will be in a better position to refine its financial modelling, at that time, however this will be too late to put in place service change plans in time for budget approval by the IJB in March 2027. As has been highlighted in financial reporting documents and by the External Auditor, the HSCP is not operating on a financially sustainable basis and, as a result, it is now required to make significant cost reductions. It does not expect to be able to finance current levels of spend in future years, particularly within health services. The situation has worsened as SLA costs have escalated and the Scottish Government have reduced their baseline funding uplift from 3% to 2%. The financial plan and savings programme will continue to evolve, as funding allocations are confirmed by Government and partners. The outlook aims to provide a framework for the development of the 2027/28 budget whilst placing it in a medium-term context. While the Scottish Government has recently published strategic direction / policy documents relating to Health and Social Care, funding levels have not been increased and there is no clear Page 71 Agenda Item 7
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2 commitment to fund increasing demand and costs within the system. At a high level there is still a commitment to protect and invest in Health and Social Care, however, the previous commitment to real terms funding increases is not feeding into formula funding allocations when the impact of inflation and increasing demand is taken into account. 1.3 1.4 The situation across the Health and Social Care remains unsustainable with many IJBs and Health Boards reporting deficits. The financial context continues to worsen, and further efficiency and cost savings are required. Few opportunities remain for housekeeping or operational savings, and most further savings require service change along with proportionate impact assessments and consultation. Urgent work is required to develop and consult / engage on firm savings proposals to seek to balance the budget with the expectation that enhanced financial control measures and additional funding (NHS) will also be required. The scale of the NHS budget gap is such that it is now the case services to Argyll & Bute residents are costing well in excess of formula funding and the increase in costs for acute care presents a strategic risk to local service delivery. Appendix 1 provides recent summary financial data for HSCPs. There is a high degree of risk that short-term financial measures may impact on the strategic imperative to support preventative measures in health and social care, or reduce the effectiveness of the care system, resulting in further demand and cost pressure in the medium term. The development of the financial strategy needs to align with the JSP and service change aimed at reducing cost and shifting to preventative models of service provision. 2. INTRODUCTION 2.1 The purpose of this report is to update the medium-term financial outlook / plan and to provide a timeline for the budgeting process leading up to approval of a budget in March 2027. It summarises the context and aims to ensure that the HSCP has a realistic financial outlook upon which to base its planning decisions. The financial plan aligns with the new Joint Strategic Plan which has been developed in the context of anticipated resource constraint. The report includes the following sections: • Financial & Strategic Context • Current Financial Position • Revenue budget modelling & assumptions • Budget Gap and Savings Target • Transformation & Investment • Reserves • Scenarios and Risks 3. 3.1 DETAIL OF REPORT Strategic Context The Scottish Government published its spending review along with a number of strategic and policy documents: - Health and Social Care Service Renewal Framework - Scotland’s Population Health Framework Page 72
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3 - Scotland’s Fiscal Outlook: Medium Term Financial Strategy It has indicated that public sector reform is to be prioritised, it is not yet clear exactly what this means for the Health and Social Care Sector beyond the development of sub-national (regional) planning across 2 areas; East and West. Argyll & Bute and NHS Highland are within the West area. The National Care Service proposals are not progressing. The regional approach provides a framework for consideration of the SLA and re-charging mechanism. There may be further structural implications associated with reform adding to uncertainty and risk. The health and care sector continues to be under severe service demand pressure and is broadly understood to be operating on an un-sustainable basis financially. The pressure is deriving from: - Demographic change and service demand. - Staffing recruitment and retention challenges. - Financial pressures, systemic overspending, reducing reserves and increasing budget gaps. - Failure to deliver sufficient cash releasing savings quickly. - Public services not sustainable and reduction in the public sector workforce is required alongside public sector reform. Inflation has reduced but is above target and remains a risk, the long-term impact of the conflict in the middle east is still to be fully understood. CPI is 2.6%, with RPI at 3.0%. Inflation is expected to remain high enough to put pressure on budgets during the planning period. Pay rates for NHS and Local Authority staff and uplift for care staff are still to be set from April 2027. Planning assumptions will be clearer in December. The NHS NRAC formula is still to be updated; this improved slightly in recent years for Argyll & Bute. The HSCP cannot wait until December to progress budget planning as there will be insufficient time for governance and engagement processes to take place prior to budget approval in March 2027. There are new legislative requirements and duties, the Care Reform Act, and The Promise, being two examples. These may result in further cost pressures if there is no additional funding to support new rights for people and obligations upon the HSCP to provide service. The HSCP has a new Joint Strategic Plan (JSP), this reflects the financial context. The implementation of the JSP will require to be aligned with the medium term financial plan. It is clear that the shifts in spending priorities will take time and are complex to manage. 3.2 Financial Position Financial performance in 2025/26 was favourable and increased reserves slightly to cover the deficit in 2026/27. As a consequence the 2026/27 budget appears manageable (excluding the SLA with Greater Glasgow & Clyde). Due to the different context for the two elements of the budget, NHS budgets and Council budgets will likely follow different processes with different expectations. General reserves as at the end of 2025/26 were: Page 73
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4 Discretionary Reserves £'000 Social Work General Reserve 1,432 NHS General Reserve 3,315 Total 4,747 These are below the 2% target and £2.4m of the NHS reserve is being used to support the NHS revenue budget in 26/27. Financial restrictions remain in place. Some of these are likely to be implemented more rigorously: - Care at home efficiencies – no net increases in care at home hours delivery. - Weekly vacancy monitoring reviews. - Direct leasing of key worker accommodation. - Reductions in agency staffing, where possible. - Contract reviews. - Limited new commitments from reserves other than to fund budget gaps or new government priorities. - Appointment of Reviewing Team to review care packages. These actions are, in some cases, related to the savings programme approved by the IJB already, such as the threshold of care and the reductions to 3rd sector contract costs. 3.3 Revenue Budget 2027/28 to 2029/30 3.3.1 3.3.2 Services are largely funded by allocations made by the Scottish Government to Local Authorities and NHS Boards. They pass on funding for delegated services. Allocations are predominantly based upon formulae which take into account factors such as population demographics, levels of deprivation, and rurality. Local planning assumptions are based upon those used nationally within the NHS and by Argyll & Bute Council. The following sections outline the financial outlook within each service; these are essentially providing a net expenditure budget if we continue to operate, as we are. They take into account assumptions on pay and non-pay inflation, a small allowance for increasing demand from demographic change and current trend data along with other known service changes and cost pressures. All figures are based upon a mid-range scenario, prior to publication of the Scottish Budget there will remain uncertainty. Social Work Budget The Social Work / Social Care Budget is being prepared in the context below: • Council allocated substantial extra resource to the HSCP in 2026/27. • £1m of this extra resource is non-recurring. • The 2026/27 savings plan targeted older adult budgets (care at home / threshold of care) and the 3rd sector (carers centres and older adult community services) disproportionately. Page 74
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5 • It is expected that, due to the net value of assets held in the Strathclyde Pension Fund, there will be a further reduction in employer contributions. • The Council are forecasting a large budget gap and a repeat of new money for social care is not expected. • Recent provider failure will require new operating models, and additional cost, to deliver care at home services. • Changes arising from the care homes strategic work will not impact until future years (2030 onwards). • It is assumed that SG will fully fund the increase in the minimum pay rate for care staff. The table below summarises estimated incremental pressures on Social Work / Social Care budgets based on a mid-range scenario. Modelling will continue as spend patterns are shifting. There is a small allowance for unknown cost and demand pressures, this will be allocated to the most appropriate services as the budget cycle proceeds. There are mitigations which narrow the gap but there is risk with the assumptions. It is important that the HSCP has a realistic view of its likely gap to ensure that expectations regarding the budget proposals are as accurate as possible. The starting point is the current year budget which is in balance but is supported by £1m in non-recurring funding. There are also service risks, mainly associated with the care at home service which could potentially put further upward pressure on costs. As general reserves are below the 2% target these are being held in contingency and are not considered to be available for reducing the budget gap. Social Work Cost and Demand Pressures 2027-28 £000 2028-29 £000 2029-30 £000 Pay inflation @ 3% for 2022/28 and then 2% per annum 1,282 2,162 3,060 Incremental pay increases 158 316 474 Non-Pay Inflation 984 2,023 3,119 Children and Families demand – looked after children 100 175 250 Mental Health Demand 100 175 250 Older People Demand Growth (1%pa) 486 980 1,481 Allowance for unknown cost and demand pressures 200 400 600 Minimum Pay Rate / Free Personal Care Uplift (TBC) 3.000 6,000 9,000 Removal of non-recurring council funding (TBC) 1,000 1,000 1,000 Total Social Work Cost and Demand Pressures 7,310 13,231 19,234 Offset by additional funding: Inflation on NHS Resource Transfer 307 620 939 Minimum pay rate uplift / RLW (TBC) 3,000 6,000 9,000 Total Additional Funding (3,307) (6,620) (9,939) New Budget Gap 4,003 6,611 9,295 Mitigations Removal of transition funding budget for 3rd Sector (180) (180) (180) Full year impact responder charging (no increase 27/28) (140) (140) (140) Inflation on Fees and Charges – Council approval required (180) (380) (600) Potential pension cost reduction – not confirmed (900) (900) (900) Anticipated Savings Requirement 2,603 5,011 7,475 Page 75
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6 3.3.3 The next stage in the process is to identify options for addressing the gap. The severity of savings delivered in 2026/27 make it difficult to propose more. The table below lists some high-level initial options, they are not budget proposals at present and further analysis is required. The approach is to minimise further impacts on Older Adult services and upon the 3rd sector. This makes it more likely that savings will require to relate more to services that support people with lifelong conditions (LD/PD/MH) and Children and Families. This approach is informed by potential technology solutions which are currently under development. Social Work – Potential Savings Options 27-28 £000 2028-29 £000 2029-30 £000 Better use of technology and in area placements to reduce LD/PD/MH Client Packages. Budget is £19m 3% saving 27/28 570 570 570 3% further saving on above in 28/29 570 570 Limit inflation uplift on 3rd Sector contracts to 1.5% 50 100 150 Efficiency from care at home scheduling and redesign (1% / 2% / 3%) 210 420 630 Key Worker Accommodation 150 150 150 Total 980 1,810 2,070 Further options are required along with a more detailed analysis of the ones outlined above. The context of increasing delayed discharges, increasing waits for service, continuing examples of provider failure and the level of complaints all require to be taken into account. It is also important that the HSCP reviews its management and support service costs to minimise further adverse impacts on service delivery. The IJB is only likely to be able to propose a balanced Social Work / Social Care budget if it further reduces services and spend. Actions are likely to have adverse whole system implications and are likely to be contrary to the policy framework. Community engagement in respect of any further service reduction is likely to be challenging. Specific work is on-going to try and address the longer term challenges, some of this will improve efficiency towards the end of the current 3 year horizon: • Care at home redesign and technology solutions. • The strategic care home review. • Development / enhancement of technology enabled care. • Improved workforce planning, development and recruitment processes. £400k is still available to fund transformation projects. Health Budget The NHS outlook remains extremely difficult, in addition to the underlying deficit, there are new cost pressures and the NHS uplift assumption was reduced to 2% per annum. Incremental budget planning is provided based upon current national assumptions: • 2% uplift in baseline funding. • pay increases and costs associated with agenda for change (reduced working week and re-gradings) are fully funded. • no change to NRAC formula assumed. Page 76
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7 • Expectation of 3% annual efficiency savings target. This situation has been emerging for some time as the underlying deficit has been funded by reserves and dis-investment in services has not progressed alongside investment in hospital at home and unscheduled care. The approach to addressing this requires further consideration by NHS Highland and Scottish Government. The HSPC is in a situation now where substantial retraction from local service delivery would be required to balance the budget. Key elements contributing to the worsening position include: • 2% funding uplift is only £5.5m in extra funding in 27/28. • National services and National Business systems cost increase is £1.3m • Pay inflation is estimated at £2.2m • Inflation on drugs is £2m • Other local inflationary uplifts are £2.7m • There are cost pressures which could total £18.6m relating to charges from Glasgow for acute services. • The underlying deficit is £8.5m which has not been addressed. Priorities for managing this include: • Design of dis-investment approaches and re-evaluation of services. • Analysis of activity in the Glasgow acute sector to reduce where possible and address costs where these appear high. Establish if there is activity that can be delivered locally (within NHSH) at little marginal cost and removed from the SLA. • Systems re-design to reduce delayed discharges in Glasgow. • Seek to ensure 3% efficiencies are delivered re the SLA. • Engage with NHSH and Scottish Government as significant dis-investment in community services to fund acute services does not appear to be the policy intention. • Minimise cost pressures, review approach to financial controls and vacancy management. • Review available reserves to contribute to gap. The JSP indicates that there should be a shift of resource towards preventative approaches. This is not modelled due to the scale of the budget deficit. NHS Cost and Demand Pressures 2027-28 £000 2028-29 £000 2029-30 £000 Pay Inflation Uplift – assume fully funded 2% 2,220 4,484 6,794 Pay Increments 100 200 300 New prescribing & Hospital Drugs Inflation – 6% 1,972 3,914 5,984 Inflation- Commissioned Services, SLAs, Business Contracts 665 1,212 1,775 Resource Transfer Inflation 307 620 939 Inflation on PFI Contract (RPI assumption) 124 249 379 Energy, Estates & Utilities Inflation 133 318 513 Fleet cost pressures 100 100 100 High Cost Care Packages 330 692 1,057 Others 267 346 428 NSD Topslice – cost pressures 500 900 1,300 MS 365 Licenses 100 200 300 Page 77
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8 Patient Transport 200 200 200 National Business Systems 771 1,399 1,649 Labs and Radiology – new contracts (reporting) 200 200 200 Allowance for unknown cost and demand pressures 0 1,000 2,000 Depreciation 170 377 587 Total Health Cost and Demand Pressures 8,159 16,411 24,505 GG&C SLA Rebasing 12,000 12,000 12,000 Potential non-delivery of SLA 3% saving 2026/27 2,159 2,159 2,159 Inflation on GG&C SLA 2027/28 -29/30 4,459 8,276 12,268 Total Impact of SLA 18,618 22,435 26,427 Less baseline uplift @ 2% (5,499) (11,206) (17,027) Assumed New Medicines Cost 4,770 9,540 14,310 Less New Medicines Funding (4,770) (9,540) (14,310) Add underlying / recurring deficit 8,533 8,533 8,533 Assumed Savings Shortfall 500 500 500 Estimated Total Budget Gap 30,311 36,673 42,938 Estimated budget Gap excluding SLA 11,693 14,238 16,511 Indicative 3% saving on baseline 8,700 8,800 8,900 There is a presumption that there will be no new increases to the net staffing establishment (including for the staffing act). Addressing this scale of gap requires significant dis-investment. The £12m gap is equivalent to around 4% of NHS spend. However, approximately 50% of the budget is considered to be largely uncontrollable by the HSCP including the baseline SLA budget and much of the primary care and drugs budgets. There are many other constraints on managing this including: • The Health and Care Staffing Act. • Commitment to no compulsory redundancies. • Planning with people and consultation requirements. • Requirement to provide universal access to NHS services. • Organisational change processes. Options for reducing the scale of the deficit are being developed and will include: • Review of reserves • Re-evaluation of approach to vacancy management • Consideration of ability to fund discretionary projects • Estimation of realistic level of drugs savings and rebates • Review of services across the area to consider dis-investment opportunities. • Requirement for additional resource – SG will likely be required to provide some additional baseline resource for the NHS due to scale of deficits nationally. Sub-national planning processes could impact upon the approach. For example if finance and recharges are consolidated then the nature of the negotiation may change from the contract and payments to the most rational way of organising services across the region to deliver savings. Page 78
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9 3.3.4 Summary Budget Gap and Savings Target This report provides an indicative budget gap for planning purposes. It is clear the scale of the gap is such that the HSCP faces an unrealistic challenge to implement sufficient change by 2027/28, to address it. There is also a systemic contradiction between the vision set out in the Health and Social Care Service Reform and Population Health Frameworks, and our current understanding of resourcing. The impacts of achieving financial balance upon the communities we serve would be substantial. The progress made in the last year to address the Social Care budget means this gap is more manageable but is 4% of spend and will still require difficult decisions to be proposed, engaged upon and implemented. Total Budget Gap - Mid Range Scenario 2027/28 2028/29 2029/30 £m £m £m Social Work budget gap before savings 4.0 6.6 9.2 NHS Budget Gap before savings excluding SLA pressures 11.7 14.3 16.5 Total NHS Budget Gap before savings 30.3 36.7 42.9 Total Budget Gap 34.3 43.3 52.1 Based on a mid-range scenario, the budget gap is estimated at £34m. In consultation with both partners and Scottish Government it is likely that the following will be required: • on-going financial recovery measures. • new savings and service reduction. • additional funding / financial support. • moratorium on new investments and minimising cost pressures. 3.3.5 Timeline & Process Initial consideration of 2027/28 budget by Finance & Policy and SLT August 26 CFO / Finance Leads Engagement with both partners August 26 CFO / CO / Finance Leads Initial report on SLA to IJB September 26 Head of Planning / Head of NHS Finance Development of options and potential impacts – Social Work Savings October 26 / November SLT Development of NHS Savings proposals October / November 26 SLT Consideration of initial options by Finance & Policy & IJB November SLT / F&P Public engagement period November 26 – December 26 CFO / Bus Improvement / Public Page 79
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10 Health / SLT / Engagement Officer Finalisation of budget proposals and IIA’s Jan 27 – Feb 27 SLT Approval of budget by IJB March 27 CO / CFO / Chair Update reports will be provided to each meeting of the Finance & Policy Committee. The following graph illustrates the spend trajectory over recent years and the projections, going forward. This clearly shows that spend has increased year on year as costs and demands have increased. Health spend has increased at a faster rate than for social care. Developments such as primary care improvement, increased vaccinations, new drugs and treatments, additional staffing, inflation on drug costs and more generous pay settlements have all contributed to this increasing imbalance in resourcing and spend. The gap between available resourcing and projected spend (if we continue to operate as we are) is increasing. Health and social care demand is correlated to the number of older adults, addressing the financial situation at the same time as providing for demographic change (and shifting resource to invest in prevention) is exceptionally difficult, the table below summarises the older adult population projections: Age Group 2023 2028 2033 2038 2043 2048 65 to 74 12,779 13,565 14,469 13,773 11,382 10,028 75 to 84 8,332 9,098 9,222 9,833 10,444 9,855 85+ 2,814 3,089 3,711 3,899 4,024 4,323 We can expect demand for adult services to increase incrementally each year well into the 2040’s. The 75+ age group is expected to increase by 16% over the next 10 years (1.6% per year) with the 85+ group increasing by more. While 0 50 100 150 200 250 300 350 400 450 500 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 Health & Social Care Spend - Actual and Forecast £m Social Care £m NHS £m Page 80
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11 funding models allocate resources to areas based on demographics, the total budget is not being uplifted for this. The HSCP is being pushed to reduce services and capacity at a time when demand is known to be increasing. 3.4 Transformation and Investment Argyll & Bute Council allocated £500k to support transformation projects; plans for investing this are in development. Care @ Home services have been prioritised, particularly in areas where there appears to be poorer levels of efficiency or high use of agency staffing. The HSCP no longer has much scope to progress infrastructure projects other than those funded by partners. 3.5 Reserves General reserves are below the aspirational level set in the Reserves policy. The best-case scenario is that there will be a small balance to be held to manage risk and as a contingency, subject to financial performance being in line with budget in the current year. It is expected that it will take some time before the HSCP is operating on a sustainable basis and is able to plan to return general reserves to target. 3.6 Scenarios and Risk 3.6.1 Identified risks are summarised below, using the standard assessment of probability and impact: Risk Like. Impact Mitigations HSCP unable to identify and deliver sufficient savings in 2027/28 to balance the budget. 5 5 25 Development of savings plans and engagement with both partners. Implementation of existing savings plan. Demographic or population changes reduce the formula funding to the HSCP. 3 4 12 The formula improved in 2026/27, no particular reason why there should be an adverse impact in 2027/28. Reductions in non- statutory provision leads to increased cost of future statutory provision 5 4 20 Impact assessments and consultation on proposals. Savings options not supported by IJB 4 4 16 Transparent approach to financial planning and regular updates on scale of financial challenge. One or both of the partners do not pass on anticipated funding allocated to Health and Social Care. 3 4 12 On-going partnership working and consultation. Reduced risk as both partners engaged in financial challenge. Cost and Demand pressures increase further or are not funded to the 4 5 20 Engagement in sector networks, modelling based Page 81
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12 3.6.2 extent assumed in the model. on Spending Review figures and draft Budget. Increases in pay rates or employer on-costs are in excess of those allowed for in the budget. (the assumed pension saving doesn’t materialise 4 4 16 Possible challenge if inflation remains high or increases. This will not be within the control of the HSCP Service costs increase due to providers withdrawing from the market and / or ongoing workforce shortage. 5 4 20 Commissioning strategy and engagement with partners and care providers. Workforce planning and management of agency / locum contracts. Additional funding to improve terms and conditions. Funding reduced due to reserves held by HSCP and/or across sector. 2 4 8 Opportunity reduced as sector reserves are reducing. Budget gap too large to enable this. System wide challenges result in decisions to control recruitment and spend being made outwith the control of the HSCP. 4 5 20 Ensure that implications of such decisions are communicated and understood. Ensure budget aligns with JSP. Savings options are explored which turn out to be unnecessary and cause real and reputational harm as funding allocations are greater than modelled. 2 4 8 Engagement with sector networks and partners. Public Sector Reform substantially changes the nature of financial governance for these services in 27/28 3 5 15 It is assumed that any proposed changes will require consultation making implementation more likely in 2028/29 or later. There are service and financial risks related to both partners. NHS Highland have a significant structural deficit and Argyll & Bute Council are also having to identify savings, again due to funding allocations growing at a slower pace than costs. This presents risk to HSCP financial plans and to the level of service the HSCP and communities receive from partners. There is also an expectation that real terms cuts for other public services. Scenarios The figures presented are based upon modelling of the mid-range outlook. A worst-case scenario for health assumes a 1% additional efficiency saving is required. For Social Work, the table below summarises a potential worst case which reflects increased inflation assumptions which are not funded: Page 82
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13 2027-28 £m 2028-29 £m 2029-30 £m Mid-Range Budget Gap 34.3 43.3 52.1 Health Worst Case Additional 3.1 6.2 9.4 Social Work Worst Case Additional 1.5 3.1 4.9 Worst Case Budget Gap 38.9 52.6 66.4 In the event that the outlook improves or if the Scottish Budget allocates additional resource the HSCP would be less reliant on additional funding and would move closer to a sustainable model. 3.6.3 Workforce Workforce risks are considered in the Workforce Plan. Labour shortages are likely to continue constrain the ability of the HSCP to deliver services and improvement. The financial plan requires a reduction in workforce numbers; the Scottish Government has indicated the size of the workforce should reduce and it is not going to be possible to deliver balanced budgets and efficiency improvement without an impact on staffing structures. It is hoped that the HSCP will be able to reduce the vacancies it has within existing structures and reduce its reliance on agency and locum staff to implement more cost effective, stable, safe, and sustainable staffing. 3.7 4. Alignment with Strategic Planning The medium-term financial plan sits alongside a range of HSCP strategic and operational planning documents. These include the Joint Strategic Plan and Commissioning Strategy. The impact of the changing strategic direction recently communicated by government will impact on the future direction of health and social care provision. Funding assumptions do not currently align with strategic service aspirations and the scope for the HSCP to re-allocate resources when it is attempting to manage systems pressures and a large funding shortfall. The new JSP also reflects this context. RELEVANT DATA AND INDICATORS 4.1 The budget outlook is based on a number of assumptions. These are drawn from the Scottish Government Health Department assumptions, local modelling and guidance provided by policy teams. The assumptions are considered carefully and will be reviewed and updated. There will be variations between the assumptions made at this stage of the budget planning process and the eventual funding allocations and cost and demand pressures. 5. CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 The Integration Joint Board has a legal responsibility to set a balanced budget which is aligned to the delivery of the JSP and to ensure the financial decisions are in line with priorities and promote quality service delivery. This requires to be considered when options are developed to balance the budget and address the funding shortfall. This will require to be progressed with both funding partners, Scottish Government and sub-national planning frameworks. Page 83
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14 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – There is a significant budget gap that requires to be addressed; the HSCP is required to set a balanced budget. 6.2 Staff Governance – None directly, but there is a strong link between HR management and delivering financial balance. 6.3 Clinical Governance – None. 7. 7.1 7.2 8. PROFESSIONAL ADVISORY The development of the savings plan in response to the budget outlook is being progressed in consultation with Professional Advisory Leads and the full Leadership Team. 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 from this report. Some of the proposals to address the estimated budget gap will require integrated impact assessments and can be expected to have adverse impact upon those with protected characteristics within the terms of the Equalities legislation. 9. 9.1 10. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE None. RISK ASSESSMENT 10.1 There are risks associated with medium-term financial planning. These are quantified within the worst-case scenario and further detail is provided within the report. Financial sustainability risks are increasing to a strategic level as a consequence of the increased SLA cost. The risk is that the HSCP will be required by SG to manage down local services to compensate for increased charges for acute care. 11. PUBLIC AND USER INVOLVEMENT AND ENGAGEMENT 11.1 Public engagement in relation to the 2026/27 budget was extensive with multiple in person events and a much higher level of public input than in previous years. Page 84
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15 The HSCP can demonstrate that the engagement resulted in changes to the budget proposals and contributed to an improved approach in very challenging circumstances. As this took place relatively recently it is intended that the budget engagement will be more limited for the 2027/28 budget process with the focus of in-person events being in relation to actual proposals rather than the generality of the budget. This is part of the extensive engagement plan. 12. CONCLUSIONS This document provides an updated budget outlook for 2027/28 to 2029/30. It outlines the key assumptions, cost pressures, and risks. It also provides an indication of the scale of the budget gap facing the HSCP. It highlights a severe financial challenge in relation to NHS services which has been building in recent years. Reserves are being depleted, and inflation has eroded the real terms value of budgets. The step increase in SLA costs has been driven by a re-basing of activity and costing by NHS GG&C. This issue means that services within Argyll & Bute are costing well in excess of baseline health funding. This is a strategic risk to local services. Recent efforts to manage down social work / social care spend has been effective in moving these services to a more sustainable position, particularly with the assistance of additional resourcing provided by the Council. However, there is on-gong requirements for further savings alongside longer term service change and investment in technology. The identified budget gap requires to be addressed in a variety of ways which take into account the health and care needs of the population as well the imperative to balance the budget and fund expenditure plans. The assumptions underpinning the modelling summarised in this report will be updated throughout the coming months. At present, it is clear that the HSCP continues to face a stark financial challenge in respect of NHS services in particular. The constraints on change will mean that this will take some time to deliver and return towards a sustainable position. 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 AUTHOR NAME: James Gow, Head of Finance james.gow@argyll-bute.gov.uk Page 85
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16 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) Strategic Leadership Team Budget Outlook 10 August 2026 Noted – requirement to develop proposals acknowledged Finance & Policy Committee Budget Outlook 18 August 2026 TBC Appendix 1 – IJB Financial Position Page 86
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Health and Social Care Scotland JULY 2026 IJB Financial Position FINANCE UPDATE 2026/27 Page 87
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OFFICIAL 1 OFFICIAL Contents Key Messages 2 Purpose 3 Introduction 4 Financial Position 6 Cost Pressures 9 Recovery Actions 11 Implications for Services and Outcomes 14 Conclusions and Next Steps 19 Page 88
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OFFICIAL 2 OFFICIAL Key messages ⚠ URGENT The 2026/27 position is unsustainable: £475m of financial pressure is now being managed across Scotland’s health and social care system, with limited reserves remaining and a growing reliance on one-off measures. ⏱ IN-YEAR IMPACT Without additional recurring funding, high-impact reductions will be felt in-year, not at some future point. Recovery actions will reduce care at home, care home placements, packages of care, staffing, early intervention and prevention support. ↔ WHOLE-SYSTEM PRESSURE The impact will not be contained within IJB budgets. Reduced social care capacity will increase pressure across the whole system, including unpaid carers, hospital discharge, primary and community care, councils, NHS partners and commissioned providers. ↓ SERVICE REDUCTION IJB savings are more directly felt as service reductions. With fewer internal efficiency levers than NHS Boards and Councils, financial plans are more likely to have a direct impact on frontline care and support. ✚ PREVENTION AT RISK Prevention is being squeezed at the point it is most needed. As resources are redirected to statutory and crisis services, investment in early intervention and prevention is reduced, weakening long-term sustainability and storing up greater demand and cost for future years. ⚖ REALISTIC EXPECTATIONS National expectations and available resources are no longer aligned. Without sustainable funding and realistic national expectations, IJBs will continue to reduce services and shift risk onto people, unpaid carers, providers and partners. Page 89
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OFFICIAL 3 OFFICIAL Purpose This report sets out the financial position of Integration Joint Boards for 2026/27, highlighting the scale of the financial challenges facing Scotland’s health and social care system. It aims to provide a clear understanding of key cost pressures, the actions being taken to manage these, and the impact on services and outcomes. Transformation, prevention and service redesign are essential parts of the solution, and work is already underway across IJBs to change models of care and support. However, the scale of the redesign required is not deliverable at the pace needed to close the recurring financial gap in-year. The report is intended to support informed decision-making by outlining the implications of current funding levels and identifying the risks to the sustainability of health and social care services. The challenge is no longer simply one of financial sustainability. Integration Authorities are increasingly required to choose between maintaining essential statutory services and delivering national policy ambitions. Without additional recurring investment, both cannot be achieved. The report seeks to inform discussions between government, partners and stakeholders on what can be realistically delivered within available resources, and the changes required to ensure long-term sustainability. Page 90
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OFFICIAL 4 OFFICIAL Introduction Integration Joint Boards (IJBs) are the public bodies responsible for planning how local health and social care resources are used. In simple terms, they sit between NHS boards and councils and direct how available funding should be used to deliver community health services, adult social care and, in some areas, children’s services. Most of the money used by IJBs comes from NHS boards and councils, with services then delivered either directly or through commissioned providers. This means the system is interconnected: when costs rise or savings are required in one part of health and social care, the consequences are often felt elsewhere in the wider system as well. That wider system context is important for interpreting this report. If an IJB reduces care at home, delays a package of care, limits care home placements or scales back preventative services, the effect is not confined to one budget line. It can increase pressure on unpaid carers, make discharge from hospital more difficult, place additional strain on primary care and community services, and create financial and operational risk for commissioned providers. Equally, when funding is absorbed by rising demand, inflation, workforce costs and new policy commitments, there is less available to invest in early intervention and prevention that could reduce demand in future years. The risks if no action is taken are illustrated below: In its most recent national bulletin, Audit Scotland stated that Scotland's IJBs are in a "critical financial position", with financial pressures and demand for services continuing to outstrip funding growth and savings achieved. Audit Scotland said IJBs will need to make "difficult decisions" about service delivery, including redesigning, reducing or discontinuing services, and should be transparent with the public about the consequences. The central issue in 2026/27 is therefore not simply that IJBs face financial pressure, but that the level of pressure requires substantial savings, service change and non- recurring measures to keep budgets in balance. A significant proportion of those Page 91
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OFFICIAL 5 OFFICIAL actions relate to social care. For external stakeholders, the key question is what level of savings is being taken out of the system this year, where those savings are falling, and what impact that will have on people, carers, providers and the wider public sector. Health and Social Care Scotland commissioned this analysis of the 2026/27 budget position. All 31 IJBs provided information which has been reviewed to show the scale of the financial challenge, the actions being taken to address it, and the likely implications for services and outcomes across the system. Page 92
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OFFICIAL 6 OFFICIAL Financial Position Key Point: IJBs face a £475m funding pressure with depleted reserves (67% hold no contingency reserves) leaving very limited capacity to absorb risk or sustain services. This is a recurring pressure with more than £1.3bn of recurring pressure managed over the last three years alone. IJBs receive funding annually as agreed contributions from council and NHS board partners. Each year the level of funding received depends on the financial position and budget decisions of those partners. While Scottish Government have provided additional investment for social care in 2026/27, the funding is primarily for the Real Living Wage policy. This funding is passed on to the commissioned providers to ensure their staff are paid at least the living wage and does not provide for any additional investment in social care to meet increased demand as more people need support and have more complex needs or to support the development of more sustainable models targeting early intervention and prevention. The budget for 2026/27 totals £12.2bn and includes financial pressure across the 31 IJBs of £474.87m. This pressure equates to 3.86% of the total budget, with individual pressures ranging from 1.7% to 12.73%. The financial challenge facing Integration Authorities is not a one-year issue. More than £1.3bn of recurring financial pressure has been managed over the last three years and medium-term projections indicate continued growth in demand, workforce costs and complexity of need. Although there is variation in the proportion of the pressure in each IJB area because this pressure has built over the years and IJBs have taken significant actions to reduce spend and find alternative funding, such as the use of reserves, transformation of services, and the reduction of serves, all areas face considerable challenges in sustaining delivery while meeting the needs of local communities. Exhibit 1 Financial pressure as percentage of budget 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% Aberdeen City Aberdeenshire Angus Argyll and Bute City of… Clackm anna… Dum fries and… Dundee City East Ayrshire East… East Lothian East… Falkirk Fife Glasgow City Highland Inverclyde M idlothian M oray North Ayrshire North… Orkney Perth and… Renfrewshire Scottish Borders Shetland South Ayrshire South… W est… W estern… W est Lothian Page 93
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OFFICIAL 7 OFFICIAL Reserves are a key component of overall funding strategy to ensure long term financial stability and sustainability. Contingency reserves are a critical part of this and are extra funds set aside to deal with unexpected costs and financial risks. General practice advises that contingency reserves should be held at 2 to 4% of the funding available. In the absence of a contingency reserve, IJBs must consider their Integration Authorities Integration Scheme and will need to rely on additional contributions from partners to address unfunded cost pressures. In recent years reserve balances have been used to offset the financial pressure facing IJBs leading to a depleted position. 67% of IJBs now have no contingency reserve balance with the remaining contingency reserves totalling £102.39m or 0.84% of budget, far below the best practice level. Exhibit 2 Contingency reserve balance as percentage of funding 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% Aberdeen City Aberdeenshire Angus Argyll and Bute City of Edinburgh Clackmannanshire and Stirling Dumfries and Galloway Dundee City East Ayrshire East Dunbartonshire East Lothian East Renfrewshire Falkirk Fife Glasgow City Highland Inverclyde Midlothian Moray North Ayrshire North Lanarkshire Orkney Perth and Kinross Renfrewshire Scottish Borders Shetland South Ayrshire South Lanarkshire West Dunbartonshire Western Isles/Nan Eilean Siar West Lothian Contingency Reserve As Percentage of Budget Page 94
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OFFICIAL 8 OFFICIAL Financial sustainability risks have been recognised by a majority of auditors in their reporting on the annual audit of IJBs. IJBs have a strong understanding of the drivers causing the cost and demand pressures and the steps which should be taken to improve sustainability - including building reserve balances and investing in early intervention and prevention - however without additional investment this is not possible. Page 95
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OFFICIAL 9 OFFICIAL Cost Pressures Key Point: Costs are rising as more people need care and their needs are more complex, compounded by workforce costs and inflation, this is expected to worsen as the population ages. The financial challenge is recurring rather than short-term or exceptional. Existing cost pressures are described below: (i) by service area and (ii) by cost driver. Analysis of the total pressure by service area is available from 28 of the 31 IJBs. Providing insight into £442m of the £475m or 93% of the total. Exhibit 3 Financial pressure by service While Older People is the single largest category, when considered as a whole, the services which support the adult population exceed this area of pressure. Services such as those supporting people with learning disabilities for example can be lower volume but very high-cost packages of care. When evaluated by cost driver, demand and complexity of need is the highest category of pressure, responsible for over 21% of the total value, this considers the number of people who need services and the level and range of support those people require. Followed by staffing pressures at 18%, related to employee cost pressures, values are shown in exhibit 4. 1.04 2.02 3.24 4.10 5.66 12.86 15.36 18.99 33.84 34.96 51.32 51.90 101.40 138.20 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 Homeless Services FHS Criminal Justice Addiction Services Hosted Services Physical Disability Resources Children's Services Mental Health Adult Community Services Learning Disability Prescribing Other Older People Page 96
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OFFICIAL 10 OFFICIAL The ‘other’ category includes a range of drivers including inflationary pressures, non- pay cost increases and pension related costs, while the non-delivery of savings category relates primarily to savings programmes due to be delivered in 2025/26. Prescribing is a significant pressure in each presentation of data, when viewed by cost driver the lower figure - £47.54m to the £51.90m in Exhibit 3 – is due to inclusion of some prescribing related costs within the non-delivery of savings category. Exhibit 4 Financial pressure by cost driver The projected population change facing Scotland, according to the National Records of Scotland, is one which over the 25 years to mid-2049 sees a growing population 75 years and older and a falling population in general with particular drops in children and young adults. This shift in demographics is likely to exacerbate the current pressures with additional support required due to age related conditions and a falling working age population. 1.56 7.47 42.97 45.35 47.54 69.37 74.16 85.79 100.67 0.00 20.00 40.00 60.00 80.00 100.00 120.00 Reserves Delays in Demand/Packages Commencing Prices Demographics Prescribing Non-delivery of savings Other Staffing pressures Demand/Complexity of Need Page 97
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OFFICIAL 11 OFFICIAL Recovery Actions Key Point: Recovery actions rely heavily on reducing services, particularly in social care, alongside workforce reductions and the use of reserves because IJBs have limited ability to achieve savings through internal efficiencies alone. Reserves account for almost 10% of the funding solution, nearly double the 5% reliance previously highlighted by Audit Scotland as a concern, while contingency reserves are depleted. The data submitted included approximately 150 individual lines describing how IJBs are planning to address the 2026/27 financial challenge. These actions are not all the same. Some are direct savings from reducing, redesigning or constraining services; some are workforce or efficiency measures; and some reflect additional funding, transfers or the use of reserves rather than savings released from the system. While IJBs have a range of delegated health and social care services, savings being taken out of the system fall disproportionately on social care. Across the country, the most significant area of direct savings is service and care delivery. This shows the effect of balancing budgets through reduced activity, fewer placements, care package reviews and a reduction in preventative services. It is worth noting that NHS Boards face financial challenges and associated recovery and savings plans as set out in ‘the Grid’. However, a significant proportion of NHS Boards savings programmes are typically focused on areas such as corporate services, asset management, energy efficiency, procurement and large-scale digital initiatives. While these measures can be complex and challenging to deliver, their impact on service users/patients may be less immediately visible than reductions in commissioned services. By contrast, as commissioning bodies, IJBs have more limited opportunities to achieve savings through internal efficiencies alone and therefore need to reduce the level, scope, or volume of services commissioned in order to achieve financial balance. While pressures arise from NHS services, e.g. prescribing pressures, savings being taken out of the system to restore overall balance primarily relate to social care. Exhibit 5 A summary of savings and actions to meet the financial pressure Page 98
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OFFICIAL 12 OFFICIAL Contract Management includes £22.04m of actions identified as contract reductions. Workforce and Staffing actions account for £47.95m of savings related to the reduction of staffing levels, controls on additional staffing costs, a review of staffing and vacancy management actions. While workforce related actions account for a significant proportion of recovery actions it is becoming increasingly challenging due to recruitment pressures, workforce shortages and changes to employment legislation. The Employment Rights Act 2025 strengthens workforce protections, consultation requirements and redundancy obligations. While these developments are important protections for employees, they increase complexity, implementation timescales and financial risks associated with workforce reduction programmes. Other Efficiencies at £81.54m includes many small local projects and reductions in non-pay costs, travel, general efficiencies etc. Service and Care Delivery changes deliver £116.30m and represent the most direct reduction in activity and support across the system. Many of these actions fall on social care and include: • Reduced care at home activity • Reduction in the purchase of care home placements • Reductions in early intervention services • Reviews of packages of care • Service review/redesign • Prescribing savings 22.04 47.95 81.54 116.30 100.08 45.60 61.36 474.87 0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 400.00 450.00 500.00 Page 99
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OFFICIAL 13 OFFICIAL Income and Funding at £145.68m includes: • Additional partner funding • Funding passthrough and budget transfers • Increased charging and income maximisation Reserves to the value of £45.6, or 9.7% of actions to bridge the funding gap. This has increased from 5% in 24/25 which at that level was raised as a concern by Audit Scotland. The increase is reflective of the continued and cumulative pressure being faced by IJBs. A Residual balance of £61.36m remains with actions of recovery to be determined. Page 100
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OFFICIAL 14 OFFICIAL Implications for Services and Outcomes Key Point: The scale of the savings required mean less care and support is available. This will lead to longer waits, unmet need and more pressure on families, carers, hospitals and other services. The most important issue for 2026/27 is the scale of savings and recovery measures now being required to keep health and social care budgets in balance. While the current financial pressure amounts to £474.87m in 2026/27, the equivalent figures were £457m in 2024/25 and £449m in 2025/26. This means that more than £1.3bn of pressure has had to be managed over the last three years. Given that much of this challenge is recurring, the effect compounds year after year, requiring repeated savings, service redesign and the removal of capacity from the system. The scope for further efficiencies without service impact is now very limited. As a result, a significant part of the 2026/27 response is being delivered through actions that affect service capacity and access, especially in social care. The national picture includes the following reductions: • £33.82m Reduced care at home activity, the equivalent to more than 1.2m hours of homecare activity • £9.27m Reduction in the purchase of care home placements, the equivalent of over 250 care home beds • £41.42m Reduced staffing, the equivalent of 840 band 5 nurses These reductions sit alongside wider redesigns and reviews of services and packages of care. They illustrate that the response to financial pressure is increasingly about reducing activity, narrowing access to services, slowing service growth and limiting preventative support. The requirement to deliver recurring savings has implications both for the internal operations of the IJB and for the services experienced by service users, carers and communities. Internally the savings identified reduce staffing levels, placing additional pressure on workforce capacity for business support services and directly provided care services. A reliance on vacancy management and tighter controls on expenditure can also impact the pace of service development and improvement activity and continuing to operate services in this way has a profound impact on the workforce. For service users and communities, reductions in care at home activity, care home placements and early intervention services increase the likelihood of longer waits, unmet need and higher levels of crisis. The consequences are then felt elsewhere: Page 101
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OFFICIAL 15 OFFICIAL unpaid carers carry greater pressure, hospital discharge can become more difficult, community and primary care services can face additional demand, and councils and NHS partners can experience increased operational and financial strain. Savings programmes will have a direct impact on commissioned providers, with organisations such as the Coalition of Care and Support Providers in Scotland (CCPS) advising the funding position has already pushed the sector to the brink. IAs are committed to working with our providers but must do so within the resources available, without additional investment in Health and Social Care there is a risk to the ability of providers to continue delivering services which would reduce choice for service users, risk continuity and stability of care and expose Local Authorities and IJBs to additional operational and financial risk as providers of last resort. Alongside transformation and the reduction of existing services the current financial pressures have a significant impact on how IJBs can effectively invest in services which will deliver long term improvements and protect the future of health and care in Scotland. Investment in early intervention and prevention is critical to improve outcomes, support independence, reduce pressure on unpaid carers and avoid higher-cost demand elsewhere in the system. However, when budgets are under severe strain, these services are often the part of the system with least protection once legal responsibilities and crisis responses have been prioritised. The 2026/27 actions identify £7.29m of savings from early intervention and preventative services, which risks storing up future demand and weakening the long-term sustainability of health and social care. These decisions are not taken lightly but rather are a direct result of the scale of the challenge presented to IJBs and the requirement to deliver a balanced budget which meets all legal responsibilities. An increase in overall resources is required to allow for investment in prevention while ensuring services are delivered which meet the needs of those most at risk currently. As outlined above, IAs face significant challenges in meeting current levels of demand with the funding available. However, maintaining the status quo is not sufficient to meet Scotland’s future health and social care needs. As such, IAs remain committed to continuous improvement and transformation, including supporting the delivery of Scottish Government policy ambitions. While funding is at times provided to support new policies and service developments, this is not always consistent and rarely meets the full cost of implementation. This creates an ongoing tension between the ambition to fully deliver national policy Page 102
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OFFICIAL 16 OFFICIAL objectives and the requirement to maintain a balanced budget while continuing the provide essential care and support services. Financial sustainability and delivery of national policy ambitions are increasingly disconnected with raised public expectations on a range of new developments for example; Care Reform which, if not fully funded, will significantly increase the funding gap. The current financial environment affects the ability of IAs to invest at the scale required to support national ambitions. Without sufficient recurring resources, there is increasing tension between responding to current statutory demand and keeping operational services safe, and investing in the approaches required to deliver long- term policy ambitions. Integration Authorities are increasingly being required to choose between: Maintaining Essential Services Delivering National Ambitions Meeting statutory demand Prevention and early intervention Protecting social care capacity Population Health Framework Supporting unpaid carers Care Reform Managing hospital discharge Community-based care expansion and reducing delayed discharge Maintaining provider sustainability Public Service Reform While Integration Authorities (IAs) remain committed to maximising the impact of existing resources, efficiency measures alone are unlikely to deliver the pace and scale of change required to secure long-term sustainability. The Public Bodies (Joint Working) (Scotland) Act 2014 established a clear ambition for integration: to improve outcomes through the strategic planning and delivery of services around the needs of individuals and communities, supported by a progressive shift in the balance of care from institutional and acute settings towards prevention, early intervention and community-based support. Central to this ambition was the concept of set-aside acute resources, intended to provide Integration Authorities with meaningful influence over the planning and deployment of hospital resources and to support the reallocation of investment towards community-based models of care. However, despite progress in integration and a continued commitment to its underlying principles, the practical mechanisms required to enable significant resource transfer from acute services into communities have remained limited. As a result, many Integration Authorities continue to carry responsibility for delivering transformational change without having sufficient control over, or access to, the resources needed to accelerate that change. Page 103
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OFFICIAL 17 OFFICIAL Delivering the ambitions of integration requires the effective use of existing resources alongside targeted investment to support service redesign, transitional double-running costs, workforce development and the strengthening of community capacity. Without this, Integration Authorities are increasingly required to balance the delivery of new policy commitments against meeting the wider needs of their populations, creating a risk that progress in one area is achieved only at the expense of another. A sustainable and preventative health and social care system will require both renewed commitment to the principles of integration and the investment necessary to make the intended shift in resources a practical reality. This tension also seen for example in the work relating to the Coming Home agenda and wider aim of supporting people within their communities. While there is agreement with the principles and a desire to ensure people are where they want to be, with their support structures around them living as full and independent a life as possible, this creates significant additional financial pressure. Below is an example from one IJB area In year one this is an increase of £0.54m from the current NHS cost and a £1.22m additional cost for the IJB as the budget used to support the service user does not transfer from the inpatient to community setting. With inflation and increased costs related to Fair Work commitments this cost will continue to increase. While it is recognised this is the correct action for the service users a consequence is the reduction of the overall pool of funding available to support the wider community. Key Point: Shifting support from inpatient settings to community-based care does not necessarily mean this care is delivered at lower cost. In some cases, the community model is the right outcome for the person but costs more to deliver, Page 104
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OFFICIAL 18 OFFICIAL particularly where the funding associated with the inpatient placement does not transfer with the individual. This means IJBs can be asked to absorb a higher cost while the original hospital cost is not released to fund the new community support. In circumstances where funding does transfer this is typically less than the required amount, reducing the size of the deficit but not fully offsetting the pressure to be absorbed locally. Each increase in costs, whether from prescribing, increasing population, inflation, increasing staff costs or new policy commitments that are not fully funded, further narrows the room to invest in reform and prevention. The result is a cycle in which resources are repeatedly redirected towards immediate pressures to deliver on legal responsibilities, while opportunities to reduce future demand across hospitals, community services and social care are squeezed out. Page 105
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OFFICIAL 19 OFFICIAL Conclusions and Next Steps The 2026/27 position should be understood not simply as a statement of financial pressure, but as a statement of the scale of savings, service change and non- recurring measures now required across Scotland’s health and social care system. With £474.87m of pressure, very limited contingency reserves and a continued reliance on one-off solutions, the current approach is becoming increasingly difficult to sustain. A significant proportion of the response year on year falls on social care through reduced care at home activity, fewer care home placements, staffing reductions, package reviews and reduced preventative support. These actions will have tangible implications for people who need support, unpaid carers, staff, commissioned providers and partner organisations across the wider system. The impact of the actions to deliver savings are not contained to IJB budgets alone and will reach across the system in terms of redirected pressures, sector performance and a shift towards more reactive and potentially more costly interventions further down the line. IJBs remain committed to delivering high-quality care and supporting people to live independently in their communities and are proactively seeking every opportunity to maintain and protect essential services whilst seeking out more sustainable options through various initiatives; • Service prioritisation and review to ensure continued ‘fit for purpose’ and evidencing maximum impact against strategic objectives • Strengthening community led approaches, maximising capacity and local opportunities • Exploring opportunities in digital innovation and technology enabled care • Exploring opportunities in collective commissioning However, capacity to resource the above is constrained with recurring pressures and without more sustainable recurring funding IJBs will continue to make difficult decisions, increasingly focused on maintenance of essential only statutory services. While difficult decisions are required to achieve financial sustainability, the evidence shows that investment in social care is cost-effective and helps reduce demand on acute services. Recent work with Health Improvement Scotland on their Return on Investment (ROI) Project clearly demonstrated directing unscheduled care funding towards social care had a positive impact on demand and capacity within the acute sector. The Independent Review of Adult Social Care Services in Scotland highlighted that ‘strong and effective social care support is foundational to the flourishing of everyone in Scotland and a good investment in our economy and in our citizens’ but in order to Page 106
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OFFICIAL 20 OFFICIAL maximise the potential of social care support, a paradigm shift was required where new thinking and decision making was based on; • Social care being seen as an investment • Social care workforce having parity with public sector partners in terms of workforce pay, terms and conditions, career path and progression • An approach that is preventative and anticipatory • Enabling rights and capabilities rather than managing need • Commissiong and procurement based on collaboration rather than competition The current funding available for the delivery of social care services and consequential financial and service delivery decisions being made by IJBs does not align with the ambition of “parity of esteem” as a vital foundational principle of social care reform. The financial challenges outlined in this report are likely to continue in the absence of additional funding, required to maintain existing service levels, reflecting the combined impact of demographic growth, increasing complexity of need, inflationary pressures and other unavoidable costs. It will therefore be increasingly important to work in partnership with government and other stakeholders to develop a shared and realistic understanding of what can be sustainably delivered within available social care resources. This will provide an opportunity to align public expectations with the realities of current and future service provision, ensuring services remain effective and sustainable, and protecting the future of Scotland’s health and social care system. Looking ahead, there is a need for: • Sustainable recurring funding, protecting the future of social care and recognising that this will positively impact on longer term pressures in other areas including acute health services • Investment in prevention and early intervention activities, which is not only the right thing to do but is the most cost-effective model for the longer term future of public services • Continued service transformation, to drive forward efficiencies and ensure services continue to be fit for purpose while maximising the use of digital innovations • Collaborative working with partners and Scottish Government, as the impact of reduced community health and social care services impacts across the whole system and the achievement of government ambitions • Nationally supported and driven change on expectations, considering the expectations of citizens, what a sustainable funding model may look like and where funding will be generated Page 107
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OFFICIAL 21 OFFICIAL The question facing us all is no longer whether Integration Authorities can continue finding savings. The question is whether the current level of health and social care support expected by the public can continue to be delivered within the resources available. The Community Health and Care system has moved beyond a discussion about efficiencies and transformation. The scale of recurring financial pressure now requires decisions about what level of social care Scotland can realistically afford and what national ambitions can realistically be delivered. Page 108
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1 Finance & Policy Committee Date of Meeting: 18 August 2026 Title of Report: Financial Risks 2026-27 Presented by: James Gow, Head of Finance The Finance & Policy Committee is asked to: • Consider the 2026/27 financial risks identified and note the mitigations. • Note the risk relating to the SLA is a strategic risk and has been included in the financial forecast. 1. EXECUTIVE SUMMARY 1.1 The regular review of Financial Risks is an embedded aspect of financial governance. Each risk identified has been classified as to its likelihood and quantified within a range. The register outlines the mitigations in place to manage the likelihood of the risk occurring or the consequences. 1.2 1.3 In total 6 risks which have a potential impact greater than £100k are included, these present a risk for the current year beyond the approved budget and forecasts, with the exception of the SLA risk which is included in the financial forecast although there is still substantial uncertainty about the quantum and approach to managing it. The risks have been quantified at £2.3m plus a further £10m for the SLA. The HSCP has limited funds left in reserve which it is able to use to contribute to the management of the risks (excluding the SLA) to the extent that they materialise. In the longer term, financial sustainability and public funding remain a very high graded strategic risk for the HSCP. 2. RECOMMENDATIONS 2.1 The Finance and Policy Committee is recommended to: • Consider the 2026/27 financial risks identified and note the mitigations. • Note the risk relating to the SLA is a strategic risk and has been included in the financial forecast. 3. DETAIL OF REPORT 3.1 For each risk, the likelihood has been estimated based on the matrix below: Page 109 Agenda Item 8
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2 Likelihood Probability applied Financial Range Quantified as 1 Remote 0% £100k - £300k £200k 2 Unlikely 10% £300k-£500k £400k 3 Possible 25% £500k-£1.5m £1.0m 4 Likely 50% Over £1.5m £2.5m 5 Almost Certain 75% 3.2 Alongside each risk there is an update on the current position and mitigations to manage the likelihood of the risk occurring or impact. There are risks where monitoring can take place but are difficult to mitigate and not within the control of the HSCP, such as risks associated with inflation, employer costs and levels of service demand. 3.3 The financial risks identified are detailed in Appendix 1 and summarised below: Likelihood / Range Remote Unlikely Possible Likely Almost certain Total £100k - £300k £300k - £500k £500k - £1.5m 1 4 5 >£1.5m 1 1 Total 0 0 1 4 1 6 3.4 By applying the weightings, the total estimated financial impact of the identified risks sits at £2.3m over and above the current financial forecast. 3.5 3.6 The main risks identified relate to the savings programme, children’s external placements, agency staffing and the potential additional costs to mitigate the impact of commissioned service provider failure in the care at home service. Pay awards have been settled for the current year and are therefore not perceived as a risk until the commencement of the 2027/28 year. The risk in respect of the SLA is reported in detail elsewhere but is included in this report for completeness. This has escalated beyond a level which can be managed locally within existing resources. The medium-term risk relating to financial sustainability remains as a very high or red graded risk. There are risks associated with public sector reform that could have financial implications. At the time of writing no firm proposals have been published by the Scottish Government beyond the move towards sub-national planning within the NHS. Locally work on the Single Authority model is progressing. 4. RELEVANT DATA AND INDICATORS 4.1 Financial risks have been identified based on known potential cost pressures which are not included in the budget or forecasts. Finance staff are engaged in sector networks to help identify emerging risks. Page 110
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3 5. CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 Financial risks relate to the delivery of service to meet strategic and operational priorities. 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – Each financial risk has been assessed as to its estimated impact. Any overspending has governance implications and is a financial risk to both partners as well as the IJB. This report again highlights the financial aspect of the SLA cost increase from Greater Glasgow and Clyde. The HSPC is clear that it does not consider that it is in a position to manage this in the current year. It is therefore reported as a forecast overspend to NHS Highland. The alternative would require emergency measures to reduce spend in-year. 6.2 Staff Governance – there are staff governance implications associated with several of the risks as these relate to mitigations in respect of commissioned service failure or the requirement to cover vacancies with temporary staff. 6.3 Clinical Governance – as above, fragility of some services and lack of stable staffing has clinical governance implications. 7. 7.1 8. PROFESSIONAL ADVISORY There are no recommendations which require to be consulted on with Professional Advisory leads. EQUALITY AND DIVERSITY IMPLICATIONS 8.1 None directly. 9. 9.1 10. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE None. RISK ASSESSMENT 10.1 Financial risks are detailed within the report. 11. PUBLIC AND USER INVOLVEMENT AND ENGAGEMENT 11.1 None directly. 12. CONCLUSIONS 12.1 This report summarises the key perceived financial risks facing the HSCP in the current year. There are 5 risks identified with a potential adverse impact of £2.3m not included in the budget or forecast. Additionally the risk associated with the SLA with Greater Glasgow and Clyde is estimated at £10m. This is included in the financial forecast but is also reported here due to the uncertainty in terms of the value and the approach to managing it. The Page 111
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4 other risks will require to be managed through use of reserves and identification of further savings in the first instance. 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) N/A APPENDICES: Appendix 1 – Financial Risks 2026-27 AUTHOR NAME: James Gow, Head of Finance EMAIL: james.gow@argyll-bute.gov.uk Page 112
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ARGYLL AND BUTE HEALTH AND SOCIAL CARE PARTNERSHIP - FINANCIAL RISKS 2026/27 HEALTH OR SOCIAL WORK SERVICE AREA DESCRIPTION OF RISK MITIGATIONS LIKELIHOOD FINANCIAL IMPACT £000 Quantified Risk £000s Current Position NHS NHS - Acute SLA costs are higher than budgeted as Glasgow implement their new costing / pricing model and activity review. INCLUDED IN CURRENT FINANCIAL FORECASTS Project groups established to conduct due diligence on SLA charging and activity. This is being progressed at a regional level with support from Scottish Government and NHS Highland. 5 >1,500 10,000 Due diligence underway. Working groups established including NHS Highland and Scottish Government Agencies. Report due to IJB in September to provide update. Overspend reported in financial returns (NHSH to SG)as a consequence. Focus is on minimising additional cost, planning is not being undertaken to compensate for this by reducing services elsewhere within A&B. NHS NHS - Acute Locum and agency costs remain above budget Continuing attempts to establish sustainable staffing models at LIH. 4 500-1,500 500 Attempts to recruit permanent staff on-going NHS NHS - Acute Kintyre Dialysis Service - additional costs associated with transporting patients and payments to other Boards as a consequence of not being able to staff the Kintyre unit appropriately. Consideration of different approaches to staffing models and review of Dialysis services nearing completion. 4 500-1,500 500 Consideration of different approaches to staffing models underway. Discussions with other Health Boards also progressing but lack of capacity elsewhere adding to problem. Review of dialysis services and options is nearing completion. Social Work Social Work - Children @ Families Cost of Children's Placements continues to increase - numbers and values. New forecasting model in place and agreed with Education services. 3 500-1,500 250 Budget under pressure at present and revised forecast process has been agreed and current overspend included in the forecast. The risk is that there is a further increase in external placements. Social Work Service Wide Care @ Home commissioned services failure in some areas resulting in increased costs from agency and internal delivered services. Risk service will not be able to continue to meet service demands fully and quality of service reduction. Options appraisal underway. Key worker accommodation project is aiming to mitigate housing costs associated with agency staff. Discussions with commissioned service providers on-going. 4 500-1,500 500 2 providers have / are in the process of winding up. This is impacting most acutely in Kintyre and Oban areas. The service is struggling to meet demand and secure staffing resource to deliver the care at home service. Option appraisal process underway and expectation that internal services will be required to increase in Oban in particular. HSCP Service Wide Savings plan and recovery plan savings not delivered in full. Public consultation and budget outlook to support decision making and management of savings programme. 4 500-1,500 500 Progress reported monthly. Savings related to SLA are a risk and included above. Grand Total 12,250 August 26 Page 113
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# Range Assessment Value <100 50 100-300 200 300-500 400 500-1,500 1000 >1,500 2500 Risk % 1 0% 2 10% 3 25% 4 50% 5 75% Page 114
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1 Finance & Policy Committee Date of Meeting: 18 August 2026 Title of Report: Infrastructure Update – July 2026 Presented by: James Gow, Head of Finance Malcolm McMillan, Senior Manager Strategic Estates Development & Sustainability The Finance & Policy Committee is asked to: • Note the contents of this report; • Note the progress since the increase of Infrastructure Risk to Very High on the HSCP Strategic Risk Register in June 2024; and • Note that actions are on-going to mitigate risk and make improvements where possible but considerable challenges remain. • Recommend that NHS Highland and Argyll & Bute Council ensure infrastructure risks are captured on their Strategic Risk Registers. 1. EXECUTIVE SUMMARY 1.1 The delivery of HSCP services is reliant on the physical building infrastructure from which it operates. The infrastructure is owned by both partners (NHS Highland and Argyll & Bute Council) who are also responsible for its maintenance. The purpose of this report is to: • Update the committee with progress on key projects since the last update in November 2025; and • Update the Committee on progress in managing infrastructure risk on the Strategic Risk Register classed as ‘Very High’. 1.2 Governance arrangements relating to infrastructure are complex, The Infrastructure Transformation Board was established in 2023 to strengthen HSCP governance arrangements, the board continues to meet quarterly to update and discuss priorities. However, capital spend is not delegated to the HSCP, separate and very different governance arrangements exist within the Council and NHS Highland. The HSCP is represented at the relevant groups within both partners and relationships remain positive. The overall position is that significant backlog maintenance requirements and equipment replacement needs have been identified and there is insufficient capital resource to address these (nationally and locally). The outcome of this is that the risk of failures and/or loss of capacity due to failure to meet regulatory standards is increasing. Page 115 Agenda Item 9
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2 1.3 Delivery continues within a constrained capital environment, with investment focused primarily on statutory compliance, backlog maintenance and service resilience. Nationally, the Scottish Government’s Strategic Assessment approach requires NHS Boards to demonstrate long-term infrastructure alignment prior to project approval, reinforcing prioritisation and limiting progression of non- essential schemes. 1.4 Progress is evident in funded compliance projects, including fire safety works at Lorn & Islands Hospital and Islay Hospital. However, several projects - the Cowal Community Hospital redesign, Islay roof replacement, and care home infrastructure upgrades - remain at risk due to funding constraints, scope reductions or are still at an early-stage of development. The overall programme reflects a shift toward risk-based investment, with very little capacity for major transformation projects without additional capital support. 2. Recommendations 2.1 The Finance and Policy Committee are Recommended to: • Note the contents of this report; • Note the progress since the increase of Infrastructure Risk to Very High on the Strategic Risk Register in November 2024; and • Note that actions are on-going to mitigate risk and make improvements where possible but there remain considerable long-term challenges to risk reduction. • Recommend that NHS Highland and Argyll & Bute Council ensure infrastructure risks are captured on their Strategic Risk Registers. 3. DETAIL OF REPORT 3.1 This is an update on the paper presented to this committee in June 2024 that reported on the Audit & Risk committee decision to increase the risk of infrastructure failure putting the ability of the HSCP to meet its statutory and regulatory obligations at risk as well as its ability to deliver on its strategic objectives to Very High. Whilst this report indicates that good progress continues to be made in addressing some key risks and making improvements, the risk of infrastructure failure is reduced but not judged to have reduced significantly enough to warrant a downgrading of the risk at this time. This is partly because infrastructure is continuing to age and deteriorate even as the highest risk items are addressed. Additionally, regulatory bodies appear to be paying increased attention to the quality of infrastructure, particularly in recent inspections of the care home estate and fire service inspections of hospitals. In addition to the specific progress outlined in this report, it is worth highlighting that there is also important strategic development work underway. In addition to the development of the internal infrastructure board, there is also now a strategic Argyll & Bute place board focusing on development in Lochgilphead, Rothesay and Dunoon facilitated by Hub North. The Board meets regularly and includes key partners including the HSCP, Argyll and Bute Council and NHS Highland. It is hoped that this will help ensure that new investments will be progressed in a way which is aligned to the strategic direction of partners and will present new opportunities for innovation, partnership working and shared use of facilities. It may also present opportunities for new ways of working which could help support the development of the Single Authority Model Approach. Page 116
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3 3.1.1 NHS Highland Infrastructure Improvements NHS Highland capital investment has been focused on prioritised maintenance as advised in Directorate Letter (DL) 2024 02 and 2025 15. Health Boards have been instructed to create a prioritised maintenance only investment plan referred to as the Business Continuity Investment Plan (BCIP) for which some additional funding would be allocated only for board’s top risks. Health Boards are also instructed to allocate existing annual capital allowances (Formula Capital) should be focused to the priorities identified as well. It is worth noting that formula capital still falls considerably short of what is required on an annual basis for addressing backlog maintenance alone. The BCIP process produced a list of risk assessed capital investment priorities for Argyll & Bute NHS premises and was submitted to Scottish Government in November 2024. Following this submission additional capital funding was secured for Lorn & Islands and Islay Hospital fire improvement works and for scoping a solution to the fire improvement actions required for Cowal Community Hospital. Project progress is detailed later in the report but funding for a replacement fuel tank at Campbeltown Hospital was secured and a major point of failure risk has been removed from the risk register. In terms of strategic capital development, the Scottish Government have indicated to Boards that they can now progress work on a small number of new capital projects. NHS Highland is working with Hub North on identifying priorities and it is expected that this will include replacement of Argyll & Bute Facilities. It must be noted that this will take some time to progress with initial assessments due to be considered by Scottish Government in September 2026 with successful projects not expected to start development until 2031 at the earliest. 3.1.2 Argyll & Bute Council Capital Funding Capital budgets have been agreed to 2027/2028 and have been reduced from £428k in 24/25 to £382k per annum in 27/28 for the HSCP care homes, children’s homes, learning resource centres and offices. This reduction in capital significantly hampers the ability of the HSCP to operate safe, compliant and fit for purpose facilities. Argyll & Bute Council have increased the availability of preventative maintenance funding in recognition of the challenges that all its property users face within an ageing estate. This will help with tackling reactive and preventative maintenance issues that should ease some of the burden on the capital budget, but the backlog of capital improvements remains. Care Home Strategic Assessment work is expected to provide clarity on the future of care home provision in Argyll & Bute and will assist in the prioritisation of key capital works. The output of the Strategic Assessment provides further evidence on the disparity between budget allocation and budget required to maintain properties effectively. The HSCP is working closely with the Council on our priorities, once the strategic direction for each of the existing Care Home facility is agreed the HSCP would seek to take a property-by-property approach to the refurbishment of each asset that it intends to operate in the longer term (as it has done with Tigh a Rudha care home, Tiree), in preference to a piecemeal, reactive approach. There is a potential ask for a significant capital investment for our care home estate as outlined in the Strategic Assessment programme reports presented previously. Page 117
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4 3.1.3 Key Worker Housing Progress continues on key worker accommodation, supported by close working with Argyll & Bute Council’s Housing team. Housing remains a significant barrier to recruitment across HSCP services, and a temporary part-time Housing Improvement Officer has been appointed by the HSCP to strengthen operational support, improve procedures and help staff secure suitable accommodation. Rental charges for HSCP-owned properties are also being reviewed to support future maintenance costs. Four staff have now moved into key worker accommodation in Oban, with further moves planned. Joint working with the Council, housing associations and Shelter Scotland is delivering new or improved accommodation in Tiree, Coll, Islay and Oban, reducing costs and strengthening the recruitment offer for staff relocating to Argyll and Bute. Recent service pressures, including the liquidation of a Care at Home provider, have reinforced the importance of responsive housing arrangements, with registered social landlords providing valuable support to the HSCP. Strategic Housing Fund support has been secured to redevelop the former Bowmore dental surgery into a two-bedroom key worker property on Islay, expected to be available before the end of the financial year. 3.1.4 Carbon Reduction (Net Zero) The Scottish Government have indicated that funding for energy efficiency and adoption of renewable energy measures for NHS boards will be able to apply for in FY 26/27 and 27/28 with approximately £20M available across Scotland per year. NHS Highland will receive an estimated £625k per year to invest in sustainability projects. It is hoped that the HSCP, will be able to apply for funding over the course of the coming years to reduce its carbon footprint and running costs as well as deal with some infrastructure liabilities. Additional government funding from third parties for a range of net zero projects is also available, but the lead applicants are required to be NHSH and Argyll & Bute Council. This financial year, funding has been secured from Scottish Government Sustainability Division by NHS Highland to complete a detailed decarbonisation plan for Raigmore and Lorn & Islands Hospital that will produce a route map to net zero for the sites. The scope of the project is being finalised (July 26) with completion of the report due March 2027. This will enable NHS Highland and the HSCP to understand the opportunities available that future sustainability capital funding can be applied for. Additional funding for LED lighting and lighting control measures has also been secured for this financial year. Work is on-going to de-carbonise the HSCP fleet and concurrently to provide a suitable charging infrastructure to support this. Funding was secured for the 25/26 financial year for the installation and upgrade of more chargers across Argyll & Bute NHS sites to provide greater resilience to EV fleet users. Additionally, a further 17 zero emission vehicles and 12 hybrid vehicles were procured replacing older petrol and diesel vehicles and reducing the average fleet emissions of the replaced vehicles from 101g/km to 62g/km. 3.1.5 Estates Rationalisation Page 118
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5 HSCP Estate rationalisation activity has been supported through Argyll and Bute Council's Our Modern Workspace (OMW) project since the project's inception in 2021. As part of OMW, Ellis Lodge, Dunoon, has been rationalised, with all staff relocating to the renovated Argyll House during 2025/26. This has affected HSCP social work staff across four departments. Work is ongoing to complete the rationalisation programme in Dunoon. In September 2024, the Board of NHS Highland confirmed that the former Argyll and Bute Hospital and associated land in Lochgilphead had been declared surplus to requirements and is being prepared for sale on the open market. However, some buildings remain operational, and alternative accommodation for these services would be required as part of any future sale. NHS Highland is also adopting a space utilisation policy that will provide clear guidance and governance on the efficient use of the NHS Highland estate. The HSCP is currently in discussions with NHS Highland regarding how this policy could be implemented across Argyll and Bute. 3.2 Current Projects The status of projects of strategic importance currently underway or planned are summarised below: Underway Details Governance Budget Lorn & Islands Hospital Fire Improvement Works Phase 1 &2 of 8 awaiting start date. NHSH Estates Capital team reporting quarterly to Infrastructure Board. £900K in 26/27 FY. Funded from SG Business Continuity Investment Fund. Islay Hospital Fire Improvement Works Underway. Awaiting phase 2 start date. NHSH Estates Capital team reporting quarterly to Infrastructure Board. £1,200K in 26/27 FY. Funded from SG Business Continuity Investment Fund. Cowal Community Hospital Fire Improvement Works Underway. Design works ongoing to establish a compliant layout for costing. SFRS notice requiring improvement to compartmentalisation and evacuation routes. Significant cost estimated to comply. Risk of enforcement action if no action taken. NHSH Estates Capital team reporting quarterly to Infrastructure Board. £250K secured this FY from Business Continuity Fund for design works. Birch Drive Islay (NHS owned) Project in progress. Once completed NHS A&B Estates team £220k. £145k contribution from Page 119
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6 HSCP will no longer require to lease as many third party properties on the island. reporting quarterly to HSCP Infrastructure Board. strategic housing fund. Remaining to be found from HSCP reserves. Struan Lodge Re- Wire Costs of full rewire not affordable. Measures to enable a 24-month stop gap measure accepted by ELT. Improvements to electrical protection, heating system and roof included in package of works. Fortnightly project board led by A&B Property Services, reporting quarterly to Infrastructure Board and Care Home and Housing Programme Board £291k from Argyll & Bute Council Capital allocation. Campbeltown Hospital Generator replacement and LV Panel upgrades. Upgrade of the Campbeltown hospital generator with the refurbished generator from LIH to a larger generator that can power they whole hospital is completed providing resilience to additional HSCP sites. NHS Estates team reporting quarterly to Infrastructure Board. £200k NHS Highland formula capital allocation 26/27 FY Cowal Hospital Lift Refurbishment Upgrade of both lifts in Cowal Community Hospital project underway. NHSH Estates Capital Team reporting quarterly to Infrastructure Board. £250k NHS Highland Capital formula allocation 26/27 FY. Thomson Court Temporary Generator connection point upgrades. Project to provide a generator hook up point to improve resilience for the care home during power outages. Fortnightly project board led by A&B Property Services, reporting quarterly to Infrastructure Transformation Board and Care Home and Housing Programme Board. £73K from A&BC Capital allocation. Ardfenaig Care Home Temporary Generator connection point Fortnightly project board led by A&B £31K from A&BC Capital allocation. Page 120
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7 upgrades. Project to provide a generator hook up point to improve resilience for the care home during power outages. Property Services, reporting quarterly to Infrastructure Transformation Board and Care Home and Housing Programme Board. Eadar Glinn Care Home Temporary Generator connection point upgrades. Project to provide a generator hook up point to improve resilience for the care home during power outages. Fortnightly project board led by A&B Property Services, reporting quarterly to Infrastructure Transformation Board and Care Home and Housing Programme Board. £33K from A&BC Capital allocation. Eadar Glinn Care Home Shower and Window replacements. Following Care Inspectorate comments new shower rooms and windows are being installed in the care home. Fortnightly project board led by A&B Property Services, reporting quarterly to Infrastructure Transformation Board and Care Home and Housing Programme Board. £198K from A&BC Capital allocation. Kintyre Care Centre Various Electrical Services Upgrades. Decorations and Toilet refurbishment Window Replacement Programme. Fortnightly project board led by A&B Property Services, reporting quarterly to Infrastructure Transformation Board and Care Home and Housing Programme Board. £803k from Argyll & Bute Council Capital allocation. In development Page 121
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8 Net Zero Project LED Lighting improvements Part of a funding package for nearly £1M awarded to NHS Highland. Improvements are pan A&B NHS properties. NHS A&B Estates Team reporting quarterly to Infrastructure board. £259K from SG Sustainability Directorate. Net Zero Decarbonisation Plan Part of a funding package for nearly £1M awarded to NHS Highland. This plan will provide a detailed decarbonisation plan for LIH. Thomson Gray. £250K from SG Sustainability Directorate. Islay Hospital flat roof repair/ replacement Design in development 26/27. Flat roof on Islay Hospital is beyond end of life and regularly leaks or requires repairs due to wind damage. NHS Estates Capital team reporting quarterly to infrastructure board. NHS Highland formula capital funded. Former Argyll & Bute Hospital disposal. Initial Phase completed. Further phases require additional capital funding which has been applied for. Former Hospital site falling into significant disrepair, New Mid Argyll Hospital utilises some of the original water infrastructure that is beyond end of life. Risk of failure and possible service disruption. Also, a revenue burden for security of site. NHS Estates Capital team reporting quarterly to infrastructure board. £402k in 25/26 FY from S.Gov ADEL fund to enable asbestos removal and design works for adoption of the water supply by Scottish Water. Mid Argyll Community Hospital X-Ray equipment replacement. The MAH X ray equipment was brought across from the old hospital and is now obsolete. NHS H Equipment Purchase Advisory Group (EPAG) £407K in 26/27 Financial Year from equipm budget ent formula capital. Completed Campbeltown Hospital Fuel Tank Replacement Completed. Original oil tank showing signs of failure and on risk register. Led by NHS A&B Estates Team with progress reports to Funded from 24/25 NHS Highland Capital Allocation. Page 122
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9 Good progress has been made in taking forward a number of projects designed to reduce risk, improve facilities and help address key worker accommodation concerns. The HSCP has been able to joint fund some of this work from its reserves. These are now depleted and the HSCP is no longer in a position to facilitate the development of further substantial projects in this way. Going forward the HSCP plans to seek project funding from partners and other alternative sources. 3.3 Risk The Strategic Risk Register considers infrastructure risk as ‘Very High’ putting the ability of the HSCP to meet its statutory and regulatory obligations at risk as well as its ability to deliver on its strategic objectives. In tackling this risk, progress has been made across multiple fronts improving the situation for the HSCP. This can be attributed to more staff and financial resources being provided towards HSCP priority issues but also more effective working relationships with our partner organisations. Evidence of progress is listed below: • Removal of high-risk high impact infrastructure failures such as Campbeltown Hospital oil tank. • Refurbishment of Tigh-A-Rudha Care Home to modern standards removing the risk of regulatory enforcement and improving resilience of service • Securing of additional capital funding to address Scottish Fire & Rescue Service improvement notices at Islay and Lorn & Island Hospital. Replacement now in situ. Infrastructure Board Campbeltown X- Ray replacement and re-modelling Completed. HSCP funded re-modelling. Equipment funded by NHS Highland. NHS Estates team reporting quarterly to Infrastructure Board. £528k, project delivered on time and budget. Tigh a Rudha refurbishment and remodel – Island Programme / HSCP and Council funded Completed. A&B Property Services, reporting quarterly to Infrastructure Transformation Board. £2.4M from A&B Capital, Strategic Housing Fund and HSCP reserves. Coll Houses – NHS owned with contribution from Strategic Housing Fund Completed Nurses House Completed. GP House anticipated completion date of 17th November 2025. Managed by NHS A&B Estates team reporting quarterly to Infrastructure Board. £465k. £365k of HSCP reserves, £100k of strategic housing fund. LIH Hospital Generator replacement. Larger generator and LV panel modifications enable hospital to be fully powered in outage situations. NHS Estates Capital Team / A&B Estates. £250k NHS Highland formula capital allocation Page 123
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10 • Refurbishment of housing on Coll to enable quality accommodation for key workers. • Relocation and replacement of X-ray department in Campbeltown Hospital avoiding the risk of equipment becoming obsolete while improving staff and patient experience. • Replacement of out of contract fleet vehicles ensuring continuity of community services. • Upgrade of the LV plant infrastructure at Lorn & Islands Hospital replacing obsolete and unreliable equipment to enable the Electric Vehicle charger rollout as well as improve resilience at our only Rural General Hospital. While this progress is satisfying there remains considerable complex risks from infrastructure to HSCP operations; • Scale of backlog maintenance is such that a building failure which could result in a temporary or medium-term closure is still increasing. • Cowal Community Hospital refurbishment remains in development, and funding has not yet been identified to deliver the changes required to meet the Scottish Fire & Rescue Service improvement notice and service needs. • There is insufficient funding identified to arrest the deterioration of existing infrastructure and address essential requirements; • There is a lack of a clear long-term strategy from partners and the government for dealing with infrastructure backlog; • Statutory enforcement agency warning notices and threat of enforcement are still being received with preventable infrastructure related problems cited as reasons for the issuing of notices; • Some properties continue to be unsuitable for services and NHS strategic development work has yet to resume; • Legacy infrastructure issues remain a significant problem. • Some properties are not fully compliant with current standards; • Costs of capital works have increased substantially which reduces the impact planned spend will have; and • ICT infrastructure and equipment replacement investment are also well in excess of available resources. At this point it is not possible to recommend a change to the risk status. 4. RELEVANT DATA AND INDICATORS 4.1 This report relies on various condition survey reports and in some cases high level estimates of costs. 5 CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 The availability of suitable infrastructure (buildings, ICT and equipment) is essential for the delivery and safety of service delivery and provision of appropriate working and living environments. 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – There is insufficient funding at present to address backlog maintenance requirements. Spend of reserves on projects reduces capacity to manage service spend pressures. Page 124
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11 6.2 Staff Governance – None 6.3 Clinical Governance – risks highlighted in this report have implications. 7. PROFESSIONAL ADVISORY 7.1 Professional leads are represented on the Infrastructure Board and have the opportunity to contribute to the prioritisation of projects. 8. EQUALITY & DIVERSITY IMPLICATIONS 8.1 None 9. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE 9.1 Cyber security risks are linked to investment in infrastructure but are considered through the Digital Health and Care Programme Board and are the responsibility of both partners. 10. RISK ASSESSMENT 10.1 No change to the risk register is recommended at this time. infrastructure risk should remain a Very High strategic risk. 11. PUBLIC & USER INVOLVEMENT & ENGAGEMENT 11.1 Engagement has taken place in respect of new projects, the community and partners on Tiree and Coll have been effectively consulted with during their respective projects. 12. CONCLUSIONS 12.1 This report summarises the current priorities for infrastructure projects and provides an overview of the current context, risk and condition of the facilities the HSCP is utilising. 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) N/A Page 125
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12 This report draws heavily on a number of documents considered by the Infrastructure Transformation Board. REPORT AUTHOR AND CONTACT James Gow, Head of Finance james.gow@argyll-bute.gov.uk Malcolm McMillan, Senior Manager Strategic Estates Development & Sustainability. Malcolm.mcmillan2@nhs.scot Page 126