Budget Outlook and Medium Term Financial Plan 2026/27-2028/29
Argyll and Bute Council · 17 September 2025
Back to Argyll and Bute HSCP Integration Joint Board (IJB) — 17 September 2025 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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1 Integration Joint Board Date of Meeting: 17 September 2025 Title of Report: Budget Outlook and Medium-Term Financial Planning: 2026/27 to 2028/29 Presented by: James Gow, Head of Finance The Integration Joint Board is asked to: • Consider the budget outlook for 2026/27 to 2028/29 and note the risk and uncertainty in respect of funding settlements. • Note the forecast budget gap of £18.2m for 2026/27. • Note that work on the savings plan is continuing in partnership with the Council and NHS Highland. • Consider the scale of service reduction that is likely to be required to achieve financial balance. • Note that oversight of the budget process will continue to be undertaken by the Finance & Policy Committee. • Note expenditure control measures and financial recovery actions continue to be implemented. 1. EXECUTIVE SUMMARY 1.1 1.2 This report provides an updated budget outlook for the 2026/27 financial year and the following two years. It takes into account recent Government policy documents and nationally utilised assumptions in respect of inflation uplifts. It is anticipated that the Scottish Government will publish new multi-year financial plans along with its budget in either December 2025 or January 2026. 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 the event that the situation aligns reasonably closely with the figures in this report. 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. The situation in 2026/27 is particularly difficult, as £3m of non-recurring pension fund savings are no longer available; the HSCP has been relying on these to fund Social Work / Social Care spend in 2024/25 and 2025/26. The financial plan and savings programme will continue to evolve, as funding allocations are confirmed by Government and partners.
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2 1.3 The outlook aims to provide a framework for the development of the 2026/27 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 confirmed and there is no clear commitment to fund increasing demand and costs within the social care system, in particular. 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 actual inflation and increasing demand is taken into account. 1.3 1.4 The HSCP has been able to fund its activity in 2024/25 but has a remaining budget gap in 2025/26 which still requires in-year action to address. General reserves are depleted and there is no expectation, at present, that there will be reserve funding available to address the budget gaps in future years. The situation across the Health and Social Care remains unsustainable with many IJBs and Health Boards reporting deficits. Overall, the financial context is deteriorating, and further efficiency and cost savings are required across the system. Few opportunities remain for housekeeping or operational savings, and most further savings require service change along with proportionate impact assessments and consultation. Financial planning is based upon a mid-range scenario, which estimates the budget gap at £18.2m or 4.5% of spend. 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 will also be required. 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 a financial strategy needs to align with service change aimed at reducing cost and service provision. 2. INTRODUCTION 2.1 The purpose of this report is to update the medium-term financial outlook / plan. 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 is required to align with the new Joint Strategic Plan, which is under development at the current time. It 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 UK Government has published its spending review, which allocates limited additional revenue and capital resource to the Scottish Government.
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3 • The Scottish Government has recently published a number of strategic and policy documents: - Health and Social Care Service Renewal Framework - Scotland’s Population Health Framework - Scotland’s Fiscal Outlook: Medium Term Financial Strategy The National Care Service proposals are no longer progressing in the way that was previously intended. • The health and social care sector continues to be under severe pressure, as reported by Audit Scotland. The pressure is deriving from: - Demographic change and service demand. - Staffing recruitment and retention. - Financial pressures, reduced reserves and increasing budget gaps. - NHS Boards are overspending and anticipated 3% annual efficiency saving is expected to be required, arrangements relating to brokerage / treatment of overspending is still to be confirmed. • Inflation is increasing - CPI is at 3.8%, with RPI at 4.4%. The impact of inflation, to the extent that it is not funded, is a driver of the increasing budget gap. There are risks associated with inflation assumptions particularly in respect of pay where national assumptions have been used, NHS and Local Authority staff have agreed 2-year pay increases through 2026/27. The minimum pay rate for externally employed care staff has not been set. At present, the HSCP is basing its budget modelling upon available planning assumptions. The Fiscal Strategy in particular outlines a significant challenge for the public finance in Scotland through to 2030. It highlights: - Increasing demand and costs for health and social care services due to demographic change. - Increasing net funding required in Scotland to fund the more favourable benefits system. - Limited / low economic growth forecasts. - Public services are not sustainable and reduction in the public sector workforce is required alongside with public sector reform. The fiscal framework does not make expenditure commitments for Health & Social Care; this is expected in the forthcoming spending review and budget for 2026/27. Further, the NHS NRAC formula will again be updated; this improved for the 2025/26 budget, following the census publication, a reduction is possible as there are indications that the population of Scotland has increased to a greater extent than in Argyll and Bute. The HSCP cannot wait for the budget in December / January as there will be insufficient time for governance and consultation processes to take place between then and March 2026. There are also new legislative requirements and duties, the Care Reform Act, and the Health and Care Staffing Act, being two examples. These will result in further increased cost pressures, as there is little evidence of sufficient additional funding to support these new rights for people and obligations for the HSCP.
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4 Finally, the HSCP is in the process of renewing its Joint Strategic Plan; this will provide the strategic framework covering the period of this outlook, and beyond. 3.2 Current Financial Position The HSCP is in a challenging situation at the time of preparing this outlook. This is common across the sector, and the most recent comparative data indicates that the Argyll & Bute HSCP ended the 2023/24 year in a relatively favourable position. However, 2024/25 was a difficult year, as it overspent its Social Care budget by £2m, and the HSCP spent £3m more than its core budget on Social Care; this was funded by temporary pension cost savings. The above table summarises the year-end position. The NHS budget was supported by £4m of reserves, which along with the £3m referred to above, means spend was £7m above baseline recurring resourcing. This is not sustainable and resulted in a reduction in general reserves. The budget for 2025/26 is likewise challenging. The HSCP was not able to balance its budget and is therefore working on a financial recovery basis. It is also the case that the budget is dependent upon use of remaining reserves. If the HSCP is able to operate within its budget and deliver the recovery plan, it could expect to have no more than £500k in reserves available, at the start of 2026/27. The temporary pension fund saving of £3m will not be available from 1 April 2026.
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5 The main recovery actions currently in place include: - Care at home efficiencies – no further net increases in care at home hours are available for commissioning - Weekly vacancy monitoring reviews - Moratorium on new agency staff - Direct leasing of key worker accommodation - Reductions in agency staffing, where possible - Contract reviews - No new commitments from Reserves - Recovery of unused funds held by clients - Appointment of Reviewing Team to review care packages; reviews to commence in August 2025 Additionally, the HSCP is in the consultation process in respect of its threshold of care / fair access to care proposal. 3.3 Revenue Budget 2026/27 to 2028/29 3.3.1 3.3.2 Services provided by the HSCP are largely funded by allocations made by the Scottish Government to Local Authorities and NHS Boards. They then 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, and it is re-iterated that prior to the publication of the Scottish Budget there will remain considerable uncertainty, however it does appear unlikely that the current underlying budget gap will be substantially addressed through additional funding. Social Work The figures below outline estimated incremental pressures on Social Work / Social Care budgets. Modelling is on-going, as spend patterns relating to these budgets are shifting, at present, particularly in relation to Older Adult services and Looked After Children’s services. There is an allowance for unknown cost and demand pressures which will be allocated to the most appropriate services as the budget cycle proceeds.
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6 3.3.3 Social Work Cost and Demand Pressures 2026-27 £000 2027-28 £000 2028-29 £000 Pay inflation @ 3.5% for 2026/27 and 3% and then 2% 1,437 2,706 4,014 Incremental pay increases 198 396 594 Non-Pay Inflation 771 1,570 2,126 Children and Families demand pressure – looked after children 168 237 307 Mental Health Services Demand Pressure 76 154 234 Older People Demand Growth (1%) 461 930 1,406 Allowance for unknown cost and demand pressures 700 900 1,100 Minimum Pay Rate / Free Personal Care Uplift (TBC) 3,000 6,000 9,000 Total Social Work Cost and Demand Pressures 6,811 12,893 18,781 Offset by additional funding: Inflation on NHS Resource Transfer 446 905 1,378 Minimum pay rate uplift (TBC) 3,000 6,000 9,000 Pay increase funding – assumes 0.5% funded 205 205 205 Total Additional Funding (3,651) (7,110) (10,583) Removal of Pension Fund Saving / use of reserves 3,050 3,050 3,050 Net New Pressures / Budget Gap 6,210 8,833 11,248 The above table outlines significant expected funding gap, and it makes limited allowance for demand increases. It is therefore the case that the IJB is only likely to be able to propose a balanced budget if it very quickly reduces services and spend. Actions are likely to have adverse whole system implications and are likely to be contrary to the policy framework referred to in 3.1. Health Budget Likewise, the NHS incremental budget summary is provided below based upon currently available assumptions. The core assumption is a 3% increase in baseline funding. The approach being taken with NHS budgets has changed and brokerage is no longer available to boards who are required to submit their financial plans and planned deficits to the Scottish Government for approval. Key assumptions are: • 3% uplift in baseline funding (assumed for 3 years). • pay increases, the superannuation increase (20.9% to 22.5% of pay) and costs associated with agenda for change (safe staffing and reduced working week) will be fully funded. • no change to NRAC formula assumed for 2026/27. • plan for the delivery of 3% annual efficiency savings. The approach is to assume that internal (NHS) SLA cost increases will be fully funded as part of the pay funding, this assumption is a risk as Greater Glasgow and Clyde Health Board are reviewing their SLA costing / charging model, and it is possible they will be seeking a greater level of uplift. This is a matter that is agreed at Health Board and Scottish Government level, any unfunded excess would result in further pressure on health service delivery within Argyll & Bute and would be contrary to community-based delivery models. The budget planning, summarised below, reflects these assumptions. Growth and inflation increases
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7 are kept to an absolute minimum as these add to the budget gap / savings requirement. NHS Cost and Demand Pressures 2026-27 £000 2027-28 £000 2028-29 £000 Pay Inflation Uplift – assume fully funded 3,037 6,165 9,387 Pay Increments 100 200 300 New prescribing & Hospital Drugs Inflation – 8% 1,982 4,118 6,421 Inflation on GCC SLA – assume fully funded 3% 2,588 5,150 7,790 Inflation - Commissioned Services & SLAs 465 944 1,437 Resource Transfer Inflation (3% PA) 446 905 1,378 Inflation on PFI Contract (RPI assumption) 92 188 287 Energy, Estates & Utilities Inflation (8%) 376 562 758 Fleet cost pressures 100 100 100 Allowance for new drug approvals (oncology) 200 400 600 Care Packages and other commissioning inflation 2% 142 287 437 New weight loss medicines - estimated 100 200 300 NSD Topslice – cost pressures 400 800 1,200 MS 365 Licenses 50 100 150 Renal Transport 200 200 200 IES property and transport 100 100 100 Labs and Radiology – new contracts (reporting) 100 100 100 Allowance for unknown cost and demand pressures 450 1,450 2,450 Depreciation 197 397 600 Total Health Cost and Demand Pressures 11,125 22,366 33,995 Less baseline uplift @ 3% (7,946) (16,130) (24,560) Add underlying / recurring deficit 5,816 5,816 5,816 Current Savings Shortfall* 3,005 1,000 - Estimated Budget Gap 12,000 13,052 15,251 Indicative 3% saving on baseline 7,946 16,130 24,560 *assumed all current savings delivered by end 2027/28 The NHS gap at £12m for 2026/27 includes the current shortfall in savings delivery, which sits at £3m; some of these are dependent upon organisational change processes and have been delayed due to cancellation of capital projects. The HSCP considers the review of the Glasgow SLA charging methodology a material risk, which could adversely impact. Even the 3% target for new savings is a significant challenge. The HSCP will continue to liaise with NSH Highland on expectations regarding the potential actions associated with identifying savings on this scale. It is not anticipated that there will be any reserve funding available by the end of 2025/26 to part fund the budget gap. The table above provides an estimated budget gap that will need to be funded through: • recurring or one-off resourcing levels being in excess of those assumed above. • removal or funding for some cost pressures which exceed 3%.
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8 3.3.4 • efficiencies, service re-design, and service reductions. Summary Budget Gap and Savings Target This report seeks to provide an indicative budget gap for planning purposes. Between now and 2026/27 budget approval in March 2026, management will be working on plans to address the gap, as far as possible, and will keep both partners informed of progress. The Finance and Policy Committee will continue to review progress in developing savings plans. It is clear that the scale of the gap is such that the HSCP faces a significant challenge to implement sufficient change by 2026/27, 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 HSCP financial position represents a risk to both partners at present. Revenue Budget Summary 2026-27 £m 2027-28 £m 2028-29 £m Opening Recurring deficit 8.9 8.9 8.9 NHS Cost & Demand Pressures 11.1 22.4 34.0 Social Work Cost & Demand Pressures 6.8 12.9 18.8 Allowance for unachieved savings 3.0 1.0 0 Estimated funding uplifts (11.6) (23.2) (35.1) Budget Gap 18.2 22.0 26.6 New Savings Target as % of spend 4.5% 5.2% 6.1% Based on a mid-range scenario, the budget gap is estimated at £18.2m. There is significant uncertainty. The gap will require to be reduced in consultation with both partners. 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. It is also likely that a different approach will be required in respect of NHS and Social Work / Care budgets. It is likely that the HSCP will not be in a position to balance its NHS budget. There is an expectation that: - addressing waiting times and whole system re-design will remain a priority. - community engagement and consultation process are to be adhered to. - organisational change processes also remain in place. The Social Work position is a more serious issue in the short term. The actions that the HSCP would be required to take to deliver a balanced budget are likely
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9 to have a significant adverse impact on the system and communities. Some actions to address the situation are under way, particularly regarding the Threshold of Care proposal and care at home efficiencies. Based on the above modelling, there is a requirement to identify additional substantial actions to reduce spend. There is a risk that our approach to moving towards financial balance will result in permanent damage to the social care system and increased costs in Health and Social Care, in the medium term. Progress with the development of savings plans will be reported to the Finance & Policy Committee. The main pieces of work that require to be progressed are: Threshold of Care Policy Decision September 2025 Budget Consultation / Engagement Autumn / Winter 2025 Development of savings proposals Autumn 2025 In order to further highlight the scale of the challenge, 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 illustrated below: 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
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10 Additionally, it is well understood that health and social care demand and spend is heavily 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 funding models allocate resources to areas based on demographics, the total budget is not being uplifted to account for this. The HSCP is being pushed to reduce services and capacity (internally and for partners) at a time when demand is known to be increasing. Despite this context, the financial plan is to set a balanced budget in agreement with both partners. This will require service change and reductions and / or additional financial support. The financial plan will therefore have to align with a process of service change aimed at reducing costs, savings targets at this scale will require changes to service delivery and reductions in the scope of the services the HSCP can provide going forward. 3.4 Transformation and Investment Argyll & Bute Council is holding £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 any scope to progress infrastructure projects other than those funded by partners. 370 380 390 400 410 420 430 440 450 460 26/27 27/28 28/29 Spend v Resourcing £m Spend £m Resourcing £m
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11 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 remaining to assist with the budget gap in 2026/27, this is subject to financial performance being in line with budget in the current year. The HSCP is unlikely to be in a position to build up reserves during the period of this budget outlook, this should be a priority when financial stability is achieved. It is possible that it may again build up debt if it cannot achieve balance. 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 2026/27 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 2025/26, no particular reason why there should be an adverse impact in 2026/27, but this will be reviewed. 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. 5 4 20 On-going partnership working and consultation. Increased risk reflects scale of challenge NHS Highland are facing. Cost and Demand pressures increase further or are not funded to the extent assumed in the model. 4 5 20 Engagement in sector networks, modelling based 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. 3 3 9 Unlikely to be an issue for 2026/27 but could be for later years depending on inflation and compliance with the public pay policy per the national negotiations.
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12 3.6.2 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 and additional funding to improve terms and conditions. Funding reduced due to reserves held by HSCP and/or across sector. 4 4 16 Opportunity reduced as sector reserves are reducing. Progress key projects as quickly as possible. 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 spend plans align with Strategic Plan. 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. 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 much 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 within the communities we serve. 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: 2026-27 £m 2027-28 £m 2028-29 £m Mid-Range Budget Gap 18.2 22.0 35.1 Health Worst Case Additional 3.0 6.0 9.0 Social Work Worst Case Additional 2.0 4.4 7.0 Worst Case Budget Gap 23.2 32.4 51.1 In the event that the outlook improves or if the Scottish Budget allocates additional resource the HSCP would scale back its savings target or less reliant on additional funding.
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13 3.6.3 Workforce Workforce risks are considered in detail in the Workforce Plan. Labour shortages are likely to continue constrain the ability of the HSCP to deliver services and improvement. The financial plan no longer assumes a net growth 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. The shift from growth in recent years to retraction has been swift. 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 (currently being refreshed) 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. 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 used 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 Strategic Plan 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. 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – There is expected to be 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.
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14 7. 7.1 7.2 8. PROFESSIONAL ADVISORY There are no recommendations in this report which require to be consulted on with Professional Advisory Leads. The development of the savings plan is being progressed in consultation with Professional Advisory Leads and the full Leadership Team. Professional advice is that the HSCP should aim to significantly 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 care levels 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 10.2 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 as a consequence of the budget outlook for 2026/27, and beyond. Management of finance by the HSCP is expected to be an increasing priority and risk, in the coming period. The consequential impact on service delivery, industrial relations and infrastructure is amongst other strategic risks that are perceived to be increasing at present. The ability of the IJB to meet its statutory responsibilities are at risk if it cannot balance its budget or cannot meet its statutory service obligations within the resources available. 11. PUBLIC AND USER INVOLVEMENT AND ENGAGEMENT 11.1 Public engagement and consultation relating to the HSCP’s financial planning is being progressed using existing frameworks such as public consultation on specific proposals. A process for a public budget consultation has still to be identified, it is recognised that significant service change is likely to be required,
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15 it is important that stakeholders are able to engage with and contribute to the future provision of services. 12. CONCLUSIONS This document provides an updated budget outlook for 2026/27 to 2028/29. 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 which has been building in recent years as reserves have been depleted, and inflation has eroded the real terms value of budgets. 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 require to be updated throughout the coming months. At present, it is clear that the HSCP continues to face a stark financial challenge; its funding and cost assumptions are such that there is a risk to both partners in respect of finance and a risk to communities and services as actions require to be taken to address these. 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 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) Strategic Leadership Team Budget Outlook 4 September 2025 Updates made and professional advisory added Finance & Policy Committee Budget Outlook 16 September 2025 TBC