Budget Monitoring - 12 Months to 31 March 2026 and Provisional Year End
Argyll and Bute Council · 19 May 2026
Back to Argyll and Bute HSCP Finance and Policy Committee — 19 May 2026 and its agenda
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1 Finance & Policy Committee Date of Meeting: 19 May 2026 Title of Report: Budget Monitoring – 12 months to 31 March 2026 and provisional year end Presented by: James Gow, Head of Finance The Finance & Policy Committee is recommended to: • Note that the HSCP is reporting a £2.9m or 0.7% underspend against budget for 2025/26. • Note this 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. • Note that general reserves increased from £2.6 to £4.7m as a result of the improved financial performance. • Note savings of £8.0m have been delivered, 90% of target. 1. EXECUTIVE SUMMARY 1.1 This report provides a summary of financial performance against budget for the 2025/26 year. Financial performance is much improved as savings and the recovery plan have been delivered. Additionally, there were several areas of improvement within the NHS budget at the year end as funding allocations, drugs rebates and national and inter-board charges were confirmed. The HSCP has therefore again operated within the resources available to it and has a relatively small general reserves balance at the year end. However, £2.5m of non-recurring savings were used to fund Social Work / Social Care services and there is still a significant underlying budget gap within NHS services. 1.2 1.3 Given the context facing health and social care, it is welcomed that the HSCP has been able to operate within the budget set and its reserves position has improved. This in turn slightly reduces short term financial risk but the HSCP is still not operating on a financially sustainable basis and there are severe financial challenges ahead along with continuing service demand pressures. The un-audited annual accounts are due to be published in June and work on these is continuing, therefore the figures contained within this report are still subject to change and external audit. A further priority is to update the medium term financial outlook and accelerate the development of plans to bring NHS spend into line with available resourcing, the reserves held will hopefully create increased scope to facilitate service change.
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2 2. Recommendations • Note that the HSCP is reporting a £2.9m or 0.7% underspend against budget for 2025/26. • Note this 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. • Note that general reserves increased from £2.6 to £4.7m as a result of the improved financial performance. • Note savings of £8.0m have been delivered, 90% of target. 3. DETAIL OF REPORT 3.1 12 Months to 31 March 2026 The table below provides the year-end figures comparing spend against budget in the usual format, there will be presentational differences between this report and the published accounts. Appendix 1 provides a further analysis of the variances: 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% 3.1.1 The year end is balanced through adjustments to general reserves. The Social Work budget assumed reliance on non-recurring pension funding totalling £2.5m to achieve balance, the outturn is that the reliance on the pension saving was used in full and there was a very small underspend of £57k that was allocated into the general reserve. The NHS underspend has resulted in an increase in the general reserves balance, this is earmarked to part fund the 2026/27 budget gap (per the March 2025 budget paper). The overall position is favourable against the budget and in comparison with performance in the prior year. There are variety of reasons for this including delivery of savings and the financial recovery plan, further detail is provided in the following sections. Social Work / Social Care Services operated within budget, the main area of concern throughout 2025/26 was in relation to Children and Families, the overspend here reduced in the latter part of the year and was offset with savings elsewhere and delivery of the recovery plan. The situation with each service is summarised below:
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3 Children and Families The Looked After Children budget was highlighted as an area of overspend throughout the year. This was due to a higher number of children in external placements and the final overspend was £1.1m on a £7.8m budget. The overspend reduced from a higher forecast early in the year as alternative arrangements were made for some children in out of area, high cost placements. Savings were made on other parts of the service budget and the net overspend was £520k against the £16.9m budget. The recovery plan saving of £100k relating to income recovery was not achieved. The service secured capital funding for the Bairns Hoose in Helensburgh and this is now operational. Towards the end of the year funding was also secured for the development of a similar facility in Lochgilphead during 2026/27. Older Adults The Older Adult Service underspent by £0.6m, a significant improvement in comparison with the situation last year. The implementation of the ceiling of care and the management down of agency costs contributed to more effective management of the budget. The underspend is however non-recurring as it is largely due to the recovery of £533k of unspent direct payments, these related to balances held by clients to cover assessed care costs which had not been spent nor recovered for some time. This financial recovery plan action delivered a bigger financial benefit that was expected. This will not be recurring but teams are now working to ensure funds are monitored more effectively so they do not build up to such an extent in future. Adult Services Budget Actual Spend Variance External Residential Placements – demand led @ national contract rate £13.4m £13.2m £0.2m Care @ Home Service £17.9m £17.8m £0.1m Internal Care Home Placements £7.8m £ 8.2m (£0.4m) Older Adults - Other £13.4m £ 12.7m £0.7m Total £52.5m £51.9m £0.6m The outturn improved at the year-end in comparison to the forecast due to additional income from client contributions and the effect of the ceiling of care. External care home placements include those placed with the independent sector within Argyll & Bute and outside the area. In addition to recovery of direct payments, another recovery plan action was to reduce spend on agency staffing, the table below summarises progress: Agency Staffing Cost Analysis 2024/25 £’000 2025/26 £’000 Care Homes Kintyre Care Centre 613 692 Gortonvogie 441 145 Tigh a Rudha 158 62 Care Homes – other internal 34 0 Care Homes Total 1,246 899
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4 Care @ Home Islay & Jura 528 469 Mull & Iona 373 310 Tiree & Coll 257 109 Kintyre 344 424 Lorn 1,249 1,037 Mid Argyll 161 93 Progressive Care Centres 67 204 Care @ Home Total 2,979 2,646 Children & Families 270 291 Social Work - Adults 208 218 Social Work – MH / LD 271 205 Total 4,974 4,259 A £715k or 14% reduction in agency staff costs was achieved in comparison with 2024/25. Staffing pressures remain in the Kintyre and Oban areas in particular. Whilst this demonstrates measurable progress, spend remains high. There is some prospect of improvement in Kintyre but the situation within the care at home service in Oban remains difficult and there is risk of increased reliance on agency staff as providers continue to hand back activity. The saving on agency has contributed to the delivery of the savings and the recovery plan but some has avoided cost pressures rather than delivered a recurring saving against budget. For comparison, spend in the 2023/24 was £3.2m and £1m the year before that. It is difficult to accurately assess how much these hours would have cost if the HSCP had been able to: • recruit and retain its own staff better. • experienced reduced absence. • had been able to commission contractors to deliver more care @ home within the contract. There are smaller levels of external agency costs borne by the independent sector which are not included in these figures, the shortage of workers is a key challenge for the future of care provision. Actions taken to achieve improved financial performance include the introduction of the ceiling of care and managing care at home hours within budget, particularly in the latter part of the year. The service impacts include increasing waits for service and an increase to delayed discharges from hospital. This is consistent with what has been observed elsewhere in the country when care at home restrictions are put in place to manage spend. However, services were being provided significantly beyond sustainable staffing levels and available budget, to meet increasing demand. That situation could not continue. Learning Disability / Physical Disability / Mental Health These services operated above budget with increased spend becoming apparent in the later part of the year as care package and external placement costs increased. The budget was £25.3m and spend was £378k higher.
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5 Social Work / Social Care Funding / Budget The Social Work / Social Care funding allocations were: Social Work £m A & B Council Allocation 82.7 Bon-recurring Pension Fund Saving 2.5 Funds flow from NHS Budget 15.3 Total Budget 100.5 The remaining £0.5m of the pension fund saving has been held for transformation by Argyll & Bute Council. Spend from this has been approved but not drawn down during the year. Spend in total was therefore still higher than the resources that would normally have been available to the HSCP. the net £57k underspend was added to the general reserve held by Argyll and Bute Council on behalf of the IJB. 3.1.2 NHS Budget The HSCP reported an underspend of £2.8m in respect of its NHS services. The position improved markedly in the final months of the year. The main factors which resulted in the improvement were: - Reduced costs of national services confirmed in February and March. - Increased national drug rebates confirmed at year end. - Reduced cost per case activity with other Scottish Boards than anticipated. - Reduced prescribing costs due to national price reductions (£1m saving). The underspend has been transferred to the IJB General Reserves giving a final year end position of breakeven. Whilst the outturn is favourable, the IJB approved a health budget for 2026/27 which requires the use of the reserves. The HSCP plans to rely on the reserves to fund the impact of existing cost pressures and the likely impact of the ongoing geo-political crisis. It is necessary that this underspend is carried forward to fund the 2026/27 budget deficit as outlined in the budget paper. Analysis has been undertaken to ensure that favourable variances, where they are likely to be recurring, are used to reduce the underlying budget gap. However, many of them are considered fortuitous and would have been hard to predict earlier in the year. The year end position along with the on-going issue with the Greater Glasgow and Clyde SLA does indicate the importance of increasing capacity to better manage the patient flows to other Boards. The reduction in prescribing costs, £1m of the underspend, is one area where consideration will be given to increasing the operational savings target with a view to reducing the underlying recurring cost pressures and deficit.
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6 In-Year Cost Pressures There are overspends which have had to be managed during 2025/26. The top 10 are listed below: Service Budget £ Actual £ Variance £ Comment LIH General Medical Staff 2,773,100 3,856,546 1,083,446 Agency cover for vacancies HSCP Underlying Deficit 968,000 0 968,000 Budget Gap savings not delivered External MH Placements 0 716,068 716,068 Long term care costs 2C Practice - Kilcreggan 471,221 818,145 346,924 Agency cover for GP vacancies Other Board Patient Treatments 4,931,200 5,209,860 278,660 Increased charges from Forth Valley and the Golden Jubilee LIH Surgical Staffing 1,360,700 1,639,263 278,563 Agency cover for vacancies Campbeltown Hospital staffing 2,421,900 2,679,131 257,231 Agency cover for dialysis unit and ward vacancies External NHS Board Mental Health Treatment 103,400 354,175 250,775 increased costs for secure unit and dementia patients External Women's & Children treatment 25,800 259,367 233,567 Elective maternity referrals to Forth Valley Patient Travel - Islay 463,600 682,118 218,518 Increase in patient flights to Glasgow Total 11,582,921 16,214,673 4,631,752 There are three key drivers from the table above which will continue to impact the HSCP’s financial position in 26/27: • Workforce pressures – workforce planning & recruitment strategies require to be reviewed for services which are consistently overspending due to a lack of a stable staffing model. LIH General Medical and General Surgery Medical Staffing have been reliant on locum / agency staffing every year since the pandemic ended. • External Patient Treatments – activity assumptions and pathways need to be considered for those services which the HSCP has no formal pathway to allow robust forecasting and financial planning at a patient level to minimise the time spent in high cost complex care settings. • Structural deficit/unachieved savings. Greater Glasgow and Clyde (GG&C) SLA No account has been made in the year position for the additional costs of the NHS GG&C rebased SLA. This has not impacted on the figures for 2025/26 but remains an area of contention and cost pressure for 2026/27 and beyond. There is going to be a requirement to make some additional payment to NHS GGC in 26/27. The longer term approach to funding this also needs to be clarified. Appendix 1 provides further analysis of variances against the budget. 3.2 Unaudited Accounts The unaudited accounts are due to be completed in June, these will be considered by the Audit and Risk Committee prior to publication. It is still
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7 possible, but unlikely, that there will be changes to the figures in this report as the accounts are finalised. 3.3 Savings Delivery 3.4 3.4.1 3.4.2 Savings declared totalled £8.0m (90%) of the £8.9m target, although £2.7m of the health savings still have to be converted into recurring rather than in-year savings. Savings performance against the approved plan has therefore been very positive and has been supplemented by favourable variances and strong performance in delivering the financial recovery plan. Governance of the savings plan has continued to be managed through the Savings Review Group, chaired by the Chief Finance Officer and attended by Heads of Service on a rotational basis. 2025/26 Savings Year to 31 March Target Achievement Balance % £' 000 £' 000 £' 000 Fully Achieved 7,980 7,980 0 Carried Forward 944 45 899 Total 8,924 8,025 899 90% Appendix 2 lists the savings, the fully complete ones will not be reported upon further, the non-recurring ones and those that were not achieved will be carried forward into 2026/27. The Children & Families £100k recovery plan saving will be offset against the service growth budget as it cannot be delivered. Reserves Earmarked reserves of £20.7m were carried into 2025/26. Of this, £5.6m was spent during the year. This included spend on a number of key projects listed in appendix 4. Some of the main areas of reserves spend included: • 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 • Final phase of the Tiree Care Home remodelling £209k £2.9m of the funding carried forward for the agenda for change costs were also spent during the year. This largely related to re-grading of nursing staff and funding the financial impact of the reduced working week. Spend of reserves carried forward was less than expected as the Sustainability and Value funding (£4.7m) has been carried forward for another year and reserves were not required to the extent planned to support the revenue budget. A number of new funding allocations were also received in 2025/26 and not spent prior to the year end. Therefore reserves have increased overall. The total of the new allocations to reserves is £15.5m. Some of the main ones are: • Agenda for Change liabilities and costs £8.5m
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8 4 4.1 5 5.1 6 6.1 • Hospital @ Home expansion £1.3m • Long Covid project £0.3m • System Flow and Improvement £1.1m • Primary Care & GP Walk In Service £0.6m • NHS revenue underspend £2.8m Appendix 3 provides a full analysis of opening reserves, spend and new reserves received and carried forward. Better than planned financial performance during 2025/26 has again provided some degree of resilience, however there remains significant structural problems with the financial sustainability of NHS services within Argyll & Bute in particular and the issue regarding the SLA has still not been adequately resolved. General Reserves Opening £000 Spend £000 New Reserves £000 Closing Balance £000 A & B Council 1,585 209 57 1,433 NHSH 992 534 2,857 3,315 Total General Reserve 2,577 743 2,914 4,748 Total Reserves – Council 2,247 209 202 2,239 Total Reserves - NHS 18,500 5,434 15,321 28,387 General reserves (those reserves that are not earmarked for a specific purpose) are £4.7m. The IJB reserves policy is that it should aim to hold a minimum contingency reserve of 1% of annual spend (£4m) and should hold 2% (£8m) as an aspirational target. At the year end, general reserves were slightly above the 1% level. Given the scale of the underlying budget deficit it is not intended that significant spend from the general reserve is progressed at present. The earmarked reserves are not held entirely at the discretion of the IJB, these are held for specific purposes and mostly relate to NHS funding streams and are generally required to cover the costs of commitments already made, particularly in relation to staffing costs. RELEVANT DATA AND INDICATORS Information is derived from the financial 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 – the outturn position is favourable in comparison to budget and the HSCP therefore has been able to increase its general
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9 6.2 6.3 reserves slightly and has not had to rely on unplanned financial support. The improved performance indicates that financial governance was effective during 2025/26. Staff Governance – None directly from this report, there is a strong link between HR management and delivering a balanced financial position. Clinical Governance – None directly. 7. 7.1 8. PROFESSIONAL ADVISORY Professional Leads have been consulted with on the implications of the budget and savings programme. EQUALITY AND DIVERSITY IMPLICATIONS 8.1 None. 9. 9.1 10. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE None. RISK ASSESSMENT 10.1 There are financial risks included in the Strategic Risk Register, the year end position does not change these or the risk ratings. The increase in general reserve will be of assistance in ensuring that the HSCP is perceived as a going concern and has a route to fund its budget deficit (NHS) in 2026/27. 11. PUBLIC AND USER INVOLVEMENT AND ENGAGEMENT 11.1 None directly from this report, engagement on activities relating to savings and transformation forms part of the project plans where appropriate. The HSCP is transparent in respect of its finances and it conducted an extensive budget engagement exercise in the December 2025 to March 2026 period. 12. CONCLUSIONS 12.1 12.2 This report provides a summary of the financial position as at the end of the 2025/26 financial year and confirms that the HSCP has taken effective steps to manage within budget for the year. This means that it again has a small level of financial resilience and has reserve funding in place to fund its budget gap for 2026/27 (NHS services). The delivery of savings and the social work financial recovery plan has been effective and has contributed to the improved position. The outturn was better than had been forecast during the year. This is in part due to the financial impacts of the recovery plan actions becoming evident in the later part of the year. There were also late funding allocations and savings confirmed relating to the NHS service underspend. The future challenge is however significant and the need for service re-design and transformation is increasingly important.
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10 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) Finance & Polic Committee Budget Monitoring – 12 months to 31 March 2026 19/5/2026 TBC SLT Budget Monitoring – 12 months to 31 March 2026 25/5/2026 TBC APPENDICES: Appendix 1 – M12 Outturn Appendix 2a and 2b – Savings Programme Appendix 3 – Reserves AUTHOR NAME: James Gow, Head of Finance EMAIL: james.gow@argyll-bute.gov.uk