Budget Monitoring – 4 Months to 31 July 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 – 4 Months to 31 July 2025 Presented by: James Gow, Head of Finance The Integration Joint Board is recommended to: • Note that the HSCP is reporting that it has overspent its budget by £1.5m as at M4. • Note an overspend of £1.5m is forecast and that management are working to bring spend back in line with budget. • Note recovery restrictions remain in place. • Note savings of £4.9m have been delivered, 56% of target. 1. EXECUTIVE SUMMARY 1.1 This report provides an early indication of financial performance for the first four months of the 2025/26 financial year. It summarises the financial position and forecast to the year end. It should be noted that it is very early in the year and forecasting is difficult in this context, particularly with high reliance on agency staffing which creates uncertainty and a lack of stability in costs. Additionally there are risks around service demand, particularly over the winter period. There are some areas of initial concern and these are being discussed with service management. The delivery of savings is critical to financial performance. Continued engagement with both partners is also critical as the financial risk to them is higher than it has been in recent years due to the depletion of reserves. 1.2 Steps to identify and deliver further savings to manage within budget and make progress in addressing the underlying budget gap are a priority. 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, local and national approaches are required to address this. 2. Recommendations 2.1 • Note that the HSCP is reporting that it has overspent its budget by £1.5m as at M4.
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2 • Note an overspend of £1.5m is forecast and that management are working to bring spend back in line with budget. • Note recovery restrictions remain in place. • Note savings of £4.9m have been delivered, 56% of target. 3. DETAIL OF REPORT 3.1 4 Months to 31 July 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 28,716 27,548 (1,168) (4.2%) HEALTH SERVICES TOTAL 93,588 93,263 (325) (0.3%) GRAND TOTAL 122,304 120,811 (1,493) (1.2%) 3.1.1 The main focus has been on analysis relating to the forecast, particularly for social care services where accounting is not on an accrual basis. Concerns are summarised in the forecast section. 3.2 3.2.1 Forecast Outturn At this early stage in the year the HSCP is forecasting an overspend as there are areas of concern and the delivery of the recovery plan 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. Forecast spend is summarised below with further detail in appendix 2. Service Annual Budget £000 Forecast Outturn £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 96,858 97,546 (688) (0.7%) HEALTH SERVICES TOTAL 301,416 302,230 (814) (0.3%) GRAND TOTAL 398,274 399,776 (1,502) (0.4)% 3.2.2 Within Social Work the immediate areas of concern are: Children’s and families – Forecast overspend £1.1m The overspend is driven by a further increase in costs and numbers of Children in out of area residential placements, currently at 19. The service does expect to reduce this in the coming weeks which in turn will have a favourable impact on the forecast, which assumes current placements will continue to the year end.
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3 Other budgets are forecast close to budget, however there is further work required to assess future agency spend as this is currently forecast in line with commitments which may be lower than actual spend through to the year end. The forecast also assumes that the savings plans will be delivered. 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, 1% extra on pay totals circa £370k. This is yet to be confirmed by Argyll & Bute Council. 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 any underspending can be used to slightly mitigate the actions required in 2026/27. Adult Services Budget Forecast Spend Variance External Residential Placements – demand led @ national contract rate £13.0m £13.1m (£0.1m) Care @ Home Service £20.3m £20.6m (£0.3m) Internal Care Home Placements £7.9m £ 8.1m (£0.2m) Older Adults - Other £9.8m £ 9.6m £0.2m Total £51.0m £51.4m (£0.4m) These budgets have been increased by £2.9m or 6% to reflect last years spend and inflation, even 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 but significant 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 driven by a forecast 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 would be preferred that these reserves were carried into 2026/27 to mitigate the step increase in the budget gap in that year and not used to fund further overspending in the current year. 3.2.3 NHS services are forecasting an overspend of £0.8m:
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4 - Agency staff – the reliance on agency, locum and bank staffing continues, particularly in Lorn & Isles Hospital. The gross spend across all services is £3.6m. LIH is currently the highest spending service area, reporting £1.4m of the total spend. - Out of Area Patient Placements – 24/25 saw a significant increase in the number of patients being placed out of area for inpatient treatment. These placements have continued into 25/26 and are having an adverse impact on the budget of £310k. The pressure has eased slightly as one patient has now been discharged from a long-term high cost placement. However, there are discussions on-going in respect of potential new placements. - Unachieved savings – the shortfall against service savings targets in the reported position is £1.5m. The forecast assumes - SG will fully fund the cost of the AfC Reform, SLA and pay increases. - No additional unbudgeted costs will emerge from any SLAs, in particular the patient activity SLA with NHSGG&C. There is sufficient scope for management to address the forecast year-end overspend and deliver a break-even outturn position, particularly if focussed action is taken to address the high cost of agency usage and delivery of the savings plan and financial recovery plan. 3.2.4 Processes to reduce spend continue: • Continuing 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. 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 The HSCP has a substantial savings programme. The target, which includes the recovery plan, is £8.7m. Additionally NHS Highland are looking for the HSCP to deliver a further £2.2m of savings, plans for this are in development however these are unlikely to be delivered on a recurring basis. Managing the programme is increasingly challenging. In the first 4 months £4.9m or 56% has been declared. The service improvement team, finance teams and management continue to progress, monitor and report on savings projects.
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5 3.3.2 3.3.3 3.4 3.4.1 3.4.2 4 4.1 5 5.1 6 6.1 2025/26 Savings Year to 31 July 2025 Target Achievement Balance % £' 000 £' 000 £' 000 Fully Achieved 4,332 4,332 0 Partially Complete 4,382 559 3,823 Total 8,714 4,891 3,823 56% Appendix 3a lists the fully delivered savings and 3b summarises the remaining savings, risk rated as below. The additional recovery plan savings are highlighted in the appendix: Savings regarded as low risk £429k Savings that may not be achieved in full in 2025/26 £2,303k Savings unlikely to be deliverable in full 2025/26 £1,091k Efforts are continuing to deliver the programme. Many of the savings are challenging and progress will continue to be reported monthly. 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 some concern, this does however mean that there remains an underlying budget gap. 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 £5.2m 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. The detail of this is being worked through at present. 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. 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. It is too early in the year to draw firm conclusion but delivery of the savings
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6 6.2 6.3 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 8. 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 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. • Pressure on support services relating to HR, administrative and finance processes. • Delivery of the balance of the savings programme. The HSCP is not in a sustainable financial position as 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.
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7 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. 12. CONCLUSIONS 12.1 12.2 This report provides a summary of the financial position as at the end of month 4 and an early estimate of the 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 challenge 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 expected to be required to manage financial performance through the remainder of 2025/26.
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8 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 M4 4/9/2025 Additional text added re Professional advisory Finance & Policy Budget Monitoring M4 16/9/2025 TBC 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