Budget Monitoring - 12 Months to 31 March 2025
Argyll and Bute Council · 17 September 2025
Back to Argyll and Bute HSCP Integration Joint Board (IJB) — 17 September 2025 and its agenda
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1 Integration Joint Board Date of Meeting: 17 September 2025 Title of Report: Budget Monitoring – 12 months to 31 March 2025 Presented by: James Gow, Head of Finance The IJB is recommended to: • Note that the HSCP overspent its budget by £1.8m. • Note that the overspend related to Older Adult social care budgets. • Note the HSCP utilised all of the available £3.05m in pension fund savings to fund its overspending. • Note that general reserves reduced from £7.8m to £2.6m with total reserves increasing by £0.9m to £20.7m. • Note savings of £5.1m have been delivered, 77% of target. 1. EXECUTIVE SUMMARY 1.1 This report provides a summary of financial performance for the 2024/25 year. Financial performance is mixed. The HSCP has operated within the resources available to it and still has a small balance of general reserves at the year end. However, it overspent its Adult Social Care budget by £2.1m and has largely funded this using non-recurring savings from the Strathclyde Pension Fund. Additionally, NHS spend in the year was supported by the use of £4.2m of general reserves, as planned in the budget. 1.2 1.3 Given the context facing the sector it is welcomed that the HSCP has not had to rely on emergency additional support from either partner. However, it is not operating on a financially sustainable basis and there are severe financial challenges ahead. General reserves are depleted and the non-recurring pension fund saving is not available from 1 April 2026. Progressing the approach to managing budget shortfalls in future years through savings plans is now urgent. This report outlines performance in 2024/25 against budget, delivery of the savings plan and use of reserves. The Health, Social Work and Social Care sector continues to be in an unsustainable financial position, this has been highlighted by Audit Scotland in various reports. It is also case that many IJBs and Health Boards are in deficit, and many are now taking action to reduce access to care or increase charges to fund shortfalls. Resource levels are not sufficient to fund increasing service demands and the increasing cost of current delivery models. There are new pressures also associated with additional legislative requirements in terms of the Safe Staffing and Care Reform legislation.
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2 2. Recommendations • Note that the HSCP overspent its budget by £1.8m. • Note that the overspend related to Older Adult social care budgets. • Note the HSCP utilised all of the available £3.05m in pension fund savings to fund its overspending. • Note that general reserves reduced from £7.8m to £2.6m with total reserves increasing by £0.9m to £20.7m. • Note savings of £5.1m have been delivered, 77% of target. 3. DETAIL OF REPORT 3.1 12 Months to 31 March 2025 The table below provides the year-end figures comparing spend against budget in the usual format, there will be some 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 95,855 93,859 (1,996) (2.1%) HEALTH SERVICES TOTAL 281,252 281,497 245 0.1% GRAND TOTAL 377,107 375,356 (1,751) (0.5%) Additional Allocation of Pension Fund Savings 1,751 Year End Balance 377,107 377,107 0 0% 3.1.1 To balance the HSCP budget, an extra £1,751k in non-recurring pension fund savings was allocated. Additionally the £245k underspend on the Health budget was used to support excess Social Care spend. Therefore the overall HSCP position was balanced. There was no additional use of reserves to fund revenue spend (other than planned) and the HSCP was not in receipt of funding that it is required to repay. Social Work / Social Care The overspend was in line with forecasts provided throughout the year, the areas of overspending are summarised below along with detail on agency staffing spend: Children and Families The Looked After Children budget was highlighted as an area of overspend all year. This was due to a higher number of children in external placements and the overspend was £987k on a £6.7m budget. The service budget overspent by £395k against its £15.7m total as savings were made on other headings (appendix 1 provides analysis). Older Adults The Service overspent by £2.1m, pressures have been highlighted all year:
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3 Adult Services Budget Spend Variance External Residential Placements – demand led @ national contract rate £11.4m £11.4m - Care @ Home Service £19.8m £21.4m (£1.6m) Internal Care Home Placements £7.5m £ 8.0m (£0.5m) Total £38.7m £40.8m (£2.1m) The budgets were increased by 8% to allow for cost and demand pressures, despite this they have overspent. One of the main issues has been continued reliance upon agency staff, analysed further below. This has been driven by absence and recruitment issues, the commitment to continuing to staff services has resulted in spend in excess of budget. The position slightly improved at the year-end in comparison to the forecast due to some additional income from client contributions and some actions taken towards the end of year had an impact. External residential placements includes provision within Argyll and Bute and in other local authority areas. These are generally at the nationally negotiated care home rates. While the figures fluctuate, there are typically around 170 older people in out of area placements of the 490 or so that are in independent sector care homes. This is due to both lack of local capacity and the choice of the individual / family concerned. Spend on agency across all Social Work / Social Care services was £4.9m, including £370k in accommodation costs (Oban and islands): Agency Staffing Cost Analysis £’000 £’000 Care Homes Kintyre Care Centre 613 Gortonvogie 441 Tigh a Rudha 158 Care Homes – other internal 34 Care Homes Total 1,246 Care @ Home Islay & Jura 528 Mull & Iona 373 Tiree & Coll 257 Kintyre 344 Lorn 1,249 Mid Argyll 161 Other 67 Care @ Home Total 2,979 Children & Families 270 Social Work - Adults 208 Social Work – MH / LD 271 Total 4,974 There were signs of improvement towards the end of the year with reductions in Oban, Gortonvogie and Tigh a Rudha. The empty homes project also created residential capacity which will reduce accommodation costs in the new
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4 year. For comparison, spend in the prior year 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 better. • experienced reduced absence relating to sickness and other HR issues. • had been able to commission contractors to deliver more care @ home within the contract. These factors, and our response to them, (along with increasing demand) have driven poorer than budgeted financial performance. There are also smaller levels of further 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. Services were provided beyond sustainable staffing levels and available budget, to meet increasing demand. Recovery actions were implemented towards the end of the year and a significant reduction in contract provision achieved for the new year. However, the care at home service remains a substantial financial risk in 2025/26. Action has been taken to stop any further increase in the number of hours of homecare commissioned in each area and to reduce the number of agency staff employed. Learning Disability / Physical Disability / Mental Health These services operated within budget during the year (£27.8m) and there were no significant agency staffing requirements. Funding The Social Work budget assumed £1.3m of the pension fund saving (£3.05m is held by the Council) would be allocated to revenue costs in 2024/25. Social Work £’000 Budgeted Reliance on Pension Fund Savings 1,300 Overspend 1,996 Contribution from NHS Budget (245) Actual allocation of pension fund saving (3,051) Net Position 0 Therefore during 2024/25 Social Work services spend was £3.3m higher than the resources that would normally have been available to the HSCP. No general reserves were used to fund the overspending. The pension fund saving is available in 2025/26 but not thereafter. Service provision at the current level is not sustainable. Finally, in respect of Social Work, the total estimated spend on sickness absence was £1.9m gross or £1.3m net of statutory sick pay recovery. There is some correlation between agency staff spend and sickness absence. A detailed analysis has been considered by the Finance & Policy Committee, this is an additional area of focus for service management at present.
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5 3.1.2 NHS Budget The NHS budget was slightly underspent at the year end and the £245k saving was allocated to Social Care. The reported position had been improving towards the end of the year and some additional slippage in projects enabled the service to balance its budget. Whilst the year end position is favourable, the HSCP does have significant cost pressures which will continue into 25/26. These pressures are: GGC Cost per Case Activity – £1.3m – increasing activity is coming through cost per case charges for new treatments. In addition, newer, more expensive drug treatments are being used as first & second line therapies. Further analysis is required to better understand the trends and operation of the SLA post pandemic. LIH General Medicine Medical Staffing - £0.9m – continued use of agency staff to cover long term vacancies is the sole cause of this overspend. The gross spend on agency staffing was £2.6m. The table below shows that this is a continuing trend despite investment in the new medical model in 22/23. LIH had agency usage in General Surgery Medical Staffing and nursing agency across all inpatient services. It should be noted that LIH reported a £2m overspend across all services for 24/25. This is in line with the previous year outturn for the hospital. Out of Area Patient Treatment Elective Referrals - £1.2m – 24/25 saw significant growth in out of area referrals for elective mental health and brain injury patients. There were 14 referrals with a total cost of £1.8m. After the application of funding within the financial plan, the current forecast cost pressure for 25/26 arising from currently agreed placements is £841k. Approximately 25% of this overspend relates to the 2 delayed patients. The favourable position was achieved due to offsetting underspends largely arising as a result of ongoing vacancies and slippage relating to projects. Other concerns in respect of the NSH budget are: • £4.3m of reserves was allocated in the budget to support revenue spend. This is not available in 2025/26 and therefore there is a budget gap of a similar magnitude in the current year. • Several important savings schemes were not delivered during the year and these targets are therefore carried forward. • Earmarked reserves are substantial and some have not been used for a number of years. General Medicine Agency Medical Staff Annual Budget YTD Spend Variance Variance as % of budget Gross Agency Spend Year £'000 £'000 £'000 % £'000 22/23 1,919 2,551 (632) -33% 1,946 23/24 2,263 2,972 (709) -31% 2,338 24/25 2,570 3,421 (851) -33% 2,618
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6 Provisional figures suggest that NHS Scotland overall overspent significantly with additional funding being allocated to support most Boards. The HSCP has been able to fund its revenue spend last year as planned and has not required/received additional support outwith formula allocations. 3.2 Unaudited Accounts The unaudited accounts are provided separately, there are some differences in the reported figures due to the different ways both partners prepare budget monitoring reports, the table below reconciles this report to the accounts: Argyll & Bute Council £'000 Spend per M12 Management Accounts 95,855 Less additional resource transfer - NHS underspend -245 Add project expenditure funded from reserves 1,270 less Funding allocated to reserves -128 Roudings 2 Net spend per accounts 96,754 NHS Highland Spend per M12 Management Accounts 281,252 Cost of services hosted by the Health Board 3,277 Net spend per accounts 284,529 Total Management Accounts 377,107 Adjustments 4,176 Annual Accounts net Spend 381,283 3.3 Savings Delivery Savings delivery is summarised in appendix 2, the remaining balances will be carried forward into 2025/26. The service improvement team, finance teams and management continue to progress, monitor and report on savings projects. As at Month 12 the total savings declared totalled £5.1m (77%) of the £6.6m target, although £0.4m is declared on a non-recurring basis: 2024/25 Savings Year to 31 March Target Achievement Balance % £' 000 £' 000 £' 000 Fully Achieved 4,271 4,271 0 Partially Complete 2,342 423 1,919 Non Recurring - 370 (370) Total 6,613 5,064 1,549 77% Appendix 2 lists the savings, the fully complete ones will not be reported upon further, the remainder will feature in the savings reports in 2025/26.
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7 3.4 3.4.1 3.4.2 Reserves Earmarked reserves of £19.9m were carried into 2024/25. The expectation was that these would reduce during the year, however NHS reserves have increased as additional funding for staff pay liabilities associated with agenda for change pay awards have been allocated and the £4.7m for sustainability and value has been carried forward for a further year (it had been expected that this would be utilised during 2024/25). Appendix 3 provides a full analysis of opening reserves, reserves spend and new reserves received and carried forward. The most important issue is the decline in general reserves, these had provided the HSCP with some financial resilience, this is now limited. General Reserves Opening £000 Spend £000 New Reserves £000 Closing Balance £000 A & B Council 2,598 1,013 - 1,585 NHSH 5,217 4,226 - 991 Total General Reserve 7,815 5,239 - 2,576 Total Reserves – Council 3,389 1,270 128 2,247 Total Reserves - NHS 16,490 6,649 8,659 18,500 The £4.2m NHS spend was allocated to fund the revenue spend per the approved budget. Council spend was to support key projects including the Tigh a Rudha refurbishment, the Care Homes Stage 1 strategic work, the Empty Homes project with Shelter and the catering shared service. In respect of the closing balance, £500k of the council balance is committed to the revenue budget in 2025/26, and circa £400k is also committed to complete existing projects. The NHS reserves are held for infrastructure projects and circa £400k is committed to the Cambeltown Hospital reconfiguration / new radiography installation. Other reserves are earmarked for specific purposes. The Scottish Government indicated that there may be some scope to review those reserves that have not been spent for a number of years to contribute to the financial gap on a one- off basis. The HSCP is no longer in a position to contribute substantially to capital or infrastructure projects, it has done this in recent years to provide match funding to facilitate projects. Capital and infrastructure spend is the responsibility of both partners, not the HSCP.
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8 4 4.1 5 5.1 6 6.1 6.2 6.3 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 a significant overspend on social care and this has been funded by use of non-recurring pension fund savings. General reserves were used to fund the budget gap and invest in projects, these have reduced to £2.6m and are largely committed. 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. 7. 7.1 8. PROFESSIONAL ADVISORY Professional Leads have been consulted with on the implications of the budget and savings programme. Consistent messaging within teams and with the community is highlighted as areas for improvement in respect of the financial situation and HSPC/IJB response to it. EQUALITY AND DIVERSITY IMPLICATIONS 8.1 None directly. 9. 9.1 10. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE None. RISK ASSESSMENT 10.1 There are a number of financial risks included in the Strategic Risk Register, the year end position does not change these or risk ratings. The HSCP is not operating on a financially sustainable basis as planned spend and service demand exceeds recurring resourcing. Financial recovery and development of the savings programme for 2026/27 remain priorities. The reduction in reserves indicates that the financial resilience of the HSCP is now much reduced along with its ability to part fund projects. 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 the annual report is publicly available.
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9 12. CONCLUSIONS 12.1 12.2 This report provides a summary of the financial position as at the end of the 2024/25 financial year. It reflects the figures in the un-audited accounts but in a different format. It provides detail on the variance with the budget and confirms the final position in respect of savings and reserves. It also provides a detailed analysis of social care spend on agency staff and accommodation as one of the key drivers of the overspending. The outturn was slightly better than forecast. The £1.8m of overspending has been funded from reserves as planned and by the non-recurring saving relating to staff pension contributions. Although reserves are depleted, the HSCP has not required additional funding from either partner that it is required to repay. The future challenge is however significant and the HSCP cannot afford to overspend in the new year. Controls on spend, vacancies and new agency staffing remain in place and the HSCP is in the process of progressing its financial recovery plan. 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) Senior Leadership Team Month 12 Budget Monitoring 11/6/25 Amendments made to report Finance & Policy Committee Month 12 Budget Monitoring 24/6/25 N/A Audit & Risk Committee Month 12 Budget Monitoring 20/6/25 N/A 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