Budget Monitoring - 6 months to 30 September 2025
Argyll and Bute Council · 19 November 2025
Back to Argyll and Bute HSCP Integration Joint Board (IJB) — 19 November 2025 and its agenda
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1 Integration Joint Board Date of Meeting: 19 November 2025 Title of Report: BUDGET MONITORING – 6 MONTHS TO 30 SEPTEMBER 2025 Presented by: James Gow, Head of Finance The Integration Joint Board is recommended to: • Note that the HSCP has overspent its budget by £1.4m as at M6. • Note an overspend of £1.4m is forecast and that management are working to bring spend back in line with budget. • Note recovery restrictions remain in place. • Note savings of £5.9m have been delivered, 67% of target. • Note that the HSCP is proposing to re-allocate a number of earmarked reserves to manage its financial situation. 1. EXECUTIVE SUMMARY 1.1 This report provides a summary of financial performance for the first 6 months of the financial year. It provides the financial position and forecast to the year end. There are uncertainties and risk associated with the forecast, particularly with high reliance on agency staffing which creates uncertainty and a lack of stability in costs. Additionally there are risks relating to service demand, particularly over winter. There are specific areas of concern and overspending highlighted in this report. The delivery of savings remains critical to financial performance. Continued engagement with both partners is on-going as the financial risk to them is higher than it has been in recent years due to the depletion of reserves. At present the forecast overspend can be funded through the use of reserves, however, any further deterioration is likely to result in a financial risk to partners. 1.2 Steps to identify and deliver further savings to manage within budget and make progress in addressing the future budget gap are priorities. Existing controls and restrictions will remain in place. The Health, Social Work / Social Care sector across Scotland continues to be in a difficult and unsustainable financial position. Locally, actions taken to date are already causing concern in relation to system flow and there is a risk this will deteriorate further as more financial savings are made. Resource levels are not sufficient to fund current service demands and delivery models. This report has been considered by the Finance & Policy at its meeting on 27 October. 2. Recommendations
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2 • Note that the HSCP has overspent its budget by £1.4m as at M6. • Note an overspend of £1.4m is forecast and that management are working to bring spend back in line with budget. • Note recovery restrictions remain in place. • Note savings of £5.9m have been delivered, 67% of target. • Note that the HSCP is proposing to re-allocate a number of earmarked reserves to manage its financial situation. 3. DETAIL OF REPORT 3.1 6 Months to 30 September 2025 The table below provides the year to date figures, Social Work/Care services report on a cash basis, Health report on an accruals basis. Appendix 1 provides further analysis: Service Actual £000 Budget £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 44,318 43,180 (1,138) (2.6%) HEALTH SERVICES TOTAL 142,712 142,477 (235) (0.2%) GRAND TOTAL 187,030 185,657 (1,373) (0.7%) 3.1.1 The focus is on analysis relating to the forecast, particularly for social care services where accounting is not on an accrual basis. 3.2 3.2.1 Forecast Outturn An overspend is forecast as there are areas of concern and the delivery of the recovery plan still has a degree of uncertainty attached to it. The Social Work / Social care budget is reliant upon the use of £0.5m of reserves and £2.5m of non-recurring pension fund savings. The forecast is summarised below with detail in appendix 2. Service Annual Budget £000 Forecast Outturn £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 96,935 97,673 (738) (0.8%) HEALTH SERVICES TOTAL 305,308 305,980 (672) (0.2%) GRAND TOTAL 402,243 406,653 (1,410) (0.3)% 3.2.2 Within Social Work / Social Care the areas overspending are: Children’s and families – Forecast overspend £1.08m The overspend is driven by an increase in costs and numbers of Children in out of area residential placements, currently at 15. The forecast spend has reduced slightly as an improved cost forecasting process has been established which takes into account anticipated end dates for placements.
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3 Other budgets are forecast reasonably close to budget, however there is further work required to assess future agency spend as the forecast is in line with commitments which may be lower than actual spend through to the year end. The forecast also assumes further savings will be delivered including those associated with the Threshold of Care and care package reviews. The pay increase has been settled at 4% or 1% greater than budgeted. It is expected that there will be funding to cover this cost pressure (still to be confirmed), 1% extra on pay totals circa £370k which adds to recurring cost pressures. Management of Social Care and Social Work budgets are a priority, due to the scale of the budget gap, next year the HSCP must prioritise operating within budget on these services at present as improvement now will reduce the action that has to be taken in the new year. Adult Services Budget Forecast Spend Variance External Residential Placements – demand led @ national contract rate £13.0m £13.5m (£0.5m) Care @ Home Service £20.6m £20.8m (£0.2)m Internal Care Home Placements £7.8m £ 7.5m £0.3m Older Adults - Other £9.8m £ 9.6m £0.2m Total £51.2m £51.4m (£0.2m) These budgets have been increased by £3m or 6% to reflect last years spend and inflation, after the removal of £0.7m of savings already delivered. Managing agency staff and delivery of remaining savings is critical, at present there is a small forecast overspend and savings still require to be delivered. External residential placement spend includes provision within Argyll and Bute and in other local authority areas. These placements are generally at the nationally negotiated care home rates and include out of area placements which are due to both lack of local capacity and the choice of the individual / family concerned. The Social Work / Social Care budget is funded by: Social Work £m Budgeted Reliance on Pension Fund Savings 2.5 Use of General Reserve 0.5 Underlying budget gap 3.0 If the HSCP is able to operate Social Work / Social Care services within budget it will still have spent £3m that it does not have in 2026/27, this is the driver for managing spend down as quickly as possible. The current forecast overspend is largely due to the variance on Children’s placements, it is expected that this will reduce as alternative arrangements are made for some children. The forecast overspend at present is approximately equivalent to the value of remaining general reserves relating to Social Work services. It is preferred that these reserves are carried into 2026/27 to mitigate the step increase in the budget gap in that year, and not used to fund overspending. 3.2.3 NHS services are forecasting an overspend of £0.7m, a slight improvement on the previous month forecast:
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4 - Centrally held savings – the savings which remain in development as part of the financial recovery plan are currently held centrally until defined plans are in place, the work to finalise and implement these plans needs to progress quickly. The resulting overspend is £989k. - Agency staff – the reliance on agency, locum and bank staff continues, particularly in Lorn & Isles Hospital. The gross spend on agency, locum and bank staffing across all services is £5.7m. LIH is currently the highest spending service area, reporting a gross cost of £2.2m. Savings are being delivered and improvement is being achieved, a more detailed report on progress will be provided at a future meeting. - Out of Area Patient Placements – 24/25 saw a significant increase in the number of patients being placed out of area for inpatient treatment due to a lack of an agreed NHS pathway and this trend is continuing in 25/26. These are having an adverse impact on the budget of £510k. - High cost secondary care prescribing – two patients are now receiving a new drug treatment costing £218k per patient per annum via NHS GG&C clinics. - Unachieved savings – the shortfall against service savings targets in the reported position is £0.7m. This is in addition to the shortfall on the centrally held savings target. In addition to budget overspends, there are offsetting underspends largely arising from vacancies. At the midpoint in the financial year, the forecast position retains a degree of uncertainty due to the reliability of prescribing data from PSD/PHS and the delay in cost per case cost reporting from GGC. The forecast takes account of anticipated shortfalls against savings targets and assumes: - SG will fully fund the cost of the AfC Reform, SLA increases and pay awards. - No additional unbudgeted costs will emerge from any SLAs, in particular the patient activity SLA with NHSGG&C. - Prescribing reporting from PSD is robust and costs have stabilised. - There will be no adverse financial impacts on the health budgets from decisions made in regard to the provision of social care services. There is sufficient time for management to address the forecast year-end overspend and deliver a break-even outturn position. This will require focussed action to address high cost agency usage, out of area placements and to accelerate the delivery of savings. The situation with the SLA is a substantial strategic risk, it is expected that Greater Glasgow and Clyde will be highlighting that the cost of treatments provided by them to Argyll and Bute Residents significantly exceeds the current SLA value. NHS Highland are aware and it is accepted by all parties that this cannot be manged by the HSCP, it is also anticipated to be an issue for the 2026/27 financial year rather than the present one. Analytical work on the data provided is now underway, further spend on acute services will in turn reduce
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5 resourcing for community services if budgets are not adjusted to compensate. This would be contrary to current policy direction. 3.2.4 Processes aimed at reducing spend continue: • Vacancy management. • Increased controls and reporting of agency and locum spend. • New approval process for agency staffing. • A moratorium is in place on any new agency social care staff and all renewals are short term and subject to an exit strategy (in reality this may mean a cut in service where in house staff cannot be recruited or a rise in unmet need). • Care at Home efficiency processes continue. • Implementation and monitoring of the threshold of care policy. These measures may result in some reduction in service and increase in unmet need or further waiting times for care packages. Un-committed spend of reserves remains on hold as these may be required to fund overspending. 3.3 Savings Delivery 3.3.1 3.3.2 3.3.3 The HSCP has a substantial savings programme. The target, which includes the recovery plan, is £8.9m. Additionally NHS Highland are looking for the HSCP to deliver a further £2.0m of savings, plans for this are in development and earmarked reserves have been identified to part cover the shortfall on a non-recurring basis. Managing the programme is increasingly challenging. In the first 6 months £5.9m or 67% has been declared. The service improvement team, finance teams and management continue to progress, monitor and report on savings projects. 2025/26 Savings Year to 30 September Target Achievement Balance % £' 000 £' 000 £' 000 Fully achieved 4,797 4,797 0 Remaining programme 4,117 1,133 2,984 Total 8,914 5,930 2,984 67% Appendix 3a lists the fully delivered savings and 3b summarises the remaining savings, risk rated as below. The recovery plan savings are highlighted in the appendix: Savings regarded as low risk £174k Savings that may not be achieved in full in 2025/26 £1,799k Savings unlikely to be deliverable in full 2025/26 £1,011k Many of the savings are challenging and progress will continue to be monitored and discussed on a monthly basis. Additionally, the HSCP has to balance this with identifying ways in which it can address its budget shortfall in 2026/27 and beyond. There are a number of projects where change processes are required and are taking time. The amber and red savings represent a financial risk. The level of non-recurring savings is of concern, this does however mean that there remains an underlying budget gap.
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6 3.4 3.4.1 3.4.2 4 4.1 5 5.1 6 6.1 6.2 6.3 Reserves Earmarked reserves of £20.7m were carried into 2025/26 including £4.7m for sustainability and value and 7.2m for agenda for change costs. To date £5.3m has been allocated to cover spend (balance reduced to £15.5m). The reserves position is summarised in Appendix 4. The recovery planning work includes a review of reserves which have not been spent over several years with a view to closing the budget gap (NHS) on a non-recurring basis. A provisional allocation of £1.2m of previously earmarked reserves is being held for this purpose. It would clearly be preferable that this funding was used for its original purpose, however, there is, at present, no obvious alternative way of addressing the gap in the current year. The final use of these reserves will be determined nearer to the end of the financial year. The remaining general reserves balance is reduced to £2.0m and is mostly committed to projects and to covering remaining budget gaps. The HSCP is not progressing new projects funded from reserves. The general reserve is currently significantly below the 2% of expenditure policy target level (£8m). A revised reserves policy was approved by the Finance and Policy Committee in September 2025, this recognises that the 2% target is aspirational at present. 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 forecast outturn position is a projected overspend. Delivery of the savings programme, measures to reduce costs and implement the recovery plan are critical to financial performance. Staff Governance – None directly from this report but there is a strong link between HR management and delivering a balanced financial position. Clinical Governance – None directly, however if cost savings are required there are likely to be implications for care volumes or quality. 7. 7.1 7.2 PROFESSIONAL ADVISORY Professional Leads have been consulted with 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. Efficiency improvement measures taken in recent months 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
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7 8. 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. Work is underway with management teams to understand the impact and mitigate risks, but the current situation report is that over 50% of bed occupancy is related to people waiting for care in the community, including increasing delays in Greater Glasgow & Clyde. Further action to reduce social care activity levels / costs will exacerbate these issues. EQUALITY AND DIVERSITY IMPLICATIONS 8.1 None directly from this report. 9. 9.1 10. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE None. RISK ASSESSMENT 10.1 There are a number of financial risks: • Impact of high service demand and winter pressures. • Inability to reduce supplementary and agency staffing quickly enough. • Pressure on support services relating to HR, administrative and finance processes. • Delivery of the balance of the savings programme. • SLA Costs charged by Greater Glasgow & Clyde. The HSCP is not operating in a financially sustainable way, spend and service demand is exceeding resourcing. Financial recovery and development of the savings programme for 2026/27 are priorities. Additionally the independent care sector are continuing to raise their concerns about sustainability throughout the sector. A further service closure within the Learning Disability Service is being managed by the HSCP at present, as an indicator that this is a real risk. 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 this report is publicly available.
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8 12. CONCLUSIONS 12.1 12.2 This report provides a summary of the financial position as at the end of month 6 and a forecast outturn. Management of finance and spend in the current year is critical as the HSCP has very limited financial flexibility remaining and even more severe challenges in 2026/27 that require to be addressed. At present the HSCP has identified several areas of overspending in the current year. Both partners are aware of the current position and it is noted that there are some general reserves remaining that may be required to balance any adverse budget variance. The HSCP remains in a difficult situation from a finance perspective, as is most of the sector. Further actions are required to manage financial performance through the remainder of 2025/26, the implementation of the threshold of care and development of more sustainable staffing models are critical. The contents of this report should also be considered alongside the budget outlook which presents an increasingly difficult financial challenge. 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 – M6 15/10/25 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