Management Accounts - 11 Months to 28 February 2025
Argyll and Bute Council · 26 March 2025
Back to Argyll and Bute HSCP Integration Joint Board (IJB) — 26 March 2025 and its agenda
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1 Classification: OFFICIAL Integration Joint Board Date of Meeting: 26 March 2025 Title of Report: Budget Monitoring – 11 months to 28 February 2025 Presented by: James Gow, Head of Finance The IJB is recommended to: • Note that the HSCP has overspent its budget by £2.2m. • Note an overspend of £2.3m is forecast. • Note Argyll & Bute Council have confirmed the HSCP can access £3.05m in pension saving resource they hold on behalf of the IJB. • Note reserves will be utilised to cover the remaining deficit and new projects funded from this source are on hold. • Note savings of £5.1m have been delivered, 77% of target. 1. EXECUTIVE SUMMARY 1.1 This report provides a summary of the financial position as at the end of month 11 and forecast to the year end. The Social Work forecast remains of concern as costs (predominantly social care) are well in excess of the approved budget. Actions are required to manage this through reducing spend, increased use of reserves and by accessing non-recurring pension fund savings. Specific cost pressures relate to on-going high levels of agency and locum spend, increasing high-cost placements within Children’s and Families service and high demand and agency staff costs within Older Adult Services. The NHS position is now forecast in line with budget but there are still some risks. This report has been considered by the Finance & Policy Committee on 18th March. 1.2 The forecast is an overspend against budget estimated at £2.2m. Overall the position has improved, largely due to some additional resourcing, vacancy savings and slippage on project spend within the NHS budget. The approach to managing the continuing financial challenge into next year is: • Increase scrutiny of spend and vacancy management. • Progress the savings programme. • Develop additional controls to reduce spend within social care, particularly in respect of care at home. • Utilise additional resourcing from the pension fund savings and allocate remaining reserves. The Health, Social Work and Social Care sector continues to be in a very difficult and unsustainable financial position, this has been highlighted by Audit
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2 Classification: OFFICIAL Scotland in various reports. It is also case that many IJBs are in deficit, and many are now taking action to reduce access to care or increase charges to help fund shortfalls. The situation has changed rapidly from one where reserves were increasing and underspending to reduced real terms funding, increasing demand and overspending. This has not been planned nationally (real terms increases were promised in the Spending Review) and has created significant challenge throughout the sector. Resource levels are not sufficient to fund current service demands and delivery models. 2. Recommendations • Note that the HSCP has overspent its budget by £2.2m. • Note an overspend of £2.3m is forecast. • Note Argyll & Bute Council have confirmed the HSCP can access £3.05m in pension saving resource they hold on behalf of the IJB. • Note reserves will be utilised to cover the remaining deficit and any projects not fully committed have been paused. • Note savings of £5.1m have been delivered, 77% of target. 3. DETAIL OF REPORT 3.1 11 Months to 28 February 2025 The table below provides the year to date figures, Social Work/Care services report on a cash basis whereas Health report on an accruals basis. Appendix 1 provides further analysis: Service Actual £000 Budget £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 82,368 80,317 (2,051) (2.6%) HEALTH SERVICES TOTAL 251,780 251,590 (189) (0.1%) GRAND TOTAL 334,148 331,907 (2,240) (0.7%) 3.1.1 For social care budgets the concerns remain: • Number of external placements for children. • Demand for older adult care, increasing costs of care packages and management of delayed discharges, increasing demand for care home placements. • Spend on agency staff remains too high, the planned reduction is not being achieved. Agency staff numbers have been reduced slightly but too late in the year to have a significant impact on the financial position. Absence cover is problematic as services are often paying staff plus an enhanced rate for agency cover which generally amounts to 150% of the cost of the underlying staffing gap,1 FTE of resource can cost the equivalent of 2.5 FTE in these circumstances. 3.1.2 The NHS budget is still slightly overspent, the position has improved as slippage and reserves have been allocated. Overspending has continued at
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3 Classification: OFFICIAL Lorn and Islands Hospital, with locum medical costs remaining high. Increasing cost per case activity in Glasgow is also contributing to the overspend position. Spend on agency staffing has reduced, agency staff are generally only employed to cover for essential posts which are either vacant or there is an absence. The planned reduction has been achieved / exceeded for nursing and AHP groups, this has been supported by national initiatives to cut back spend. 3.2 3.2.1 Forecast Outturn The forecast outturn has improved as the position with NHS services is now in line with budget. This improvement is due to the allocation of earmarked reserves and recognition of slippage with some projects along with some funding allocations being confirmed. The Social Work forecast continues to present a significant challenge and a large overspend is expected. In addition to the implications in the current year, the budget is reliant upon reserves which are reducing and largely committed. Forecast spend is summarised below with further detail in appendix 2. Members will recall that the budget already relies upon the use of reserves and an allocation from the non-recurring pension fund saving, the overspend is in addition. Service Annual Budget £000 Forecast Outturn £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 92,235 94,681 (2,446) (2.7%) HEALTH SERVICES TOTAL 281,142 281,017 125 (0.0%) GRAND TOTAL 373,377 375,698 (2,321) (0.6)% 3.2.2 Within Social Work, Children’s and Families and Older Adult budgets are overspending, a £2.4m adverse variance is forecast. The overspend in Children’s Services relates to the increased number of children in out of area placements (£0.7m) and the regrading of staff (£0.3m) These are now being offset by underspending elsewhere within Children, Families and Justice. Spend on older adults remains above budget. The budgets summarised below were increased from £35.6m to £38.6m (8%) to allow for increasing demand and inflation. Social Care agency spend is at £3.9m for 10 months with around 50 members of staff currently employed on this basis. This has increased on £3.2m spend for all of last year and £0.8m in 2021/22. The cost of accommodation is adding to the problem. Alternative arrangements on Islay and Tiree will be available in the coming weeks to reduce this. Agency within nursing homes is reducing with recruitment but care at home agency is meeting service demand with limited scope for immediate improvement. Adult Services Budget Forecast Spend Variance External Residential Placements – demand led @ national contract rate £11.4m £12.4m (£1.0m) Care @ Home Service £19.6m £20.9m (£1.3m) Internal Care Home Placements £7.6m £ 7.9m (£0.3m) Total £38.6m £41.2m (£2.6m)
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4 Classification: OFFICIAL 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 from week to week, there are typically around 170 older people in out of area placements of the 490 or so that are in privately owned care homes. This is due to both lack of local capacity and the choice of the individual / family concerned. The new Care at Home contract has been implemented in and is reducing costs per hour of care in areas where there are providers available. The national focus on reducing delayed discharges from acute services continues and is adding to pressure to ensure people are placed in residential care or provided with care at home packages as quickly as possible. Services continue to be provided beyond sustainable staffing levels and available budget, to meet increasing demand. Recovery actions reported to the February meeting of the Finance & Policy Committee are now being implemented. This is now including action to stop any further increase in the number of hours of homecare commissioned in each area and action to reduce the number of agency staff employed. 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 £m Budgeted Reliance on Pension Fund Savings 1.3 Forecast revenue budget variance 2.4 Total budget gap 3.7 The HSCP have formally written to Council to request the full £3.05m available from the pension fund saving, this request has been approved. The remaining £0.7m (plus any further deterioration) will require to be funded from reserves. General reserves carried forward for social work totalled £2.6m, these are largely committed to projects (such as key worker housing, the shared service approach to catering and the care homes and housing project), and the completion of the Tigh a Rudha refurbishment and remodelling. Other projects not legally committed have been paused as Social Work General Reserves will be largely exhausted by the year end. 3.2.3 NHS services are forecasting breakeven now as funding has been confirmed for 2c practices and slippage on projects has been recognised in the position: - Agency staff – agency, locum and bank staff costs continue to be the single largest cost pressure. The gross spend on agency, locum and bank staffing across all services is £11.3m. LIH is the highest spending service area, reporting a gross cost of £4.8m. Whist recruitment within LIH nursing services has reduced the monthly agency costs being incurred, there are still long term vacancies for consultant physicians covered by agency staff. £3.2m spend relates to medical staffing vacancy cover. There is no indication that the challenges in recruiting consultant physicians will improve in the near future. - 2c practices – There is a pressure of £556k due to agency staffing.
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5 Classification: OFFICIAL - High cost out of area private sector referrals – Cost pressure £732k. 1 patient remains a delayed discharge at an unbudgeted cost of £3,500 per week. - Unachieved savings are further adding to cost pressures. Excess costs continue to be partly offset by vacancies and slippage on projects. While the forecast has improved, the Health budget is dependent upon the use of reserves (£4.3m). The intention is to deliver a balanced NHS position at the year-end however there are still some risks: - Delays in receiving data on cost per case charges from NHS GG&C. - Ongoing issues with PSD prescribing reporting. - Lack of clarity on the full cost of the implementation of Agenda for Change Non Pay Reform and funding. - Year end SLA increases due to activity adjustments. - Further unfunded private sector high cost admissions, including a significantly high cost complex care package. The national context within the NSH is that Boards are still collectively projecting an overspend in the current year and for 2025/26 budget planning. 3.2.4 Processes to reduce spend continue but the impact on Social Care budgets has so far been limited: • Continuing vacancy management. • Increased controls and reporting of agency and locum spend. • New approval process for agency staffing. The Social Work overspending has been reported within the Council, and further mitigations are being implemented, these overlap with actions associated with the work on the budget as the impact on the current year will is limited at this stage: • The remainder of the pension fund saving held by the Council has been formally allocated to the HSCP to fund the overspend. • 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). A reduction of 5 agency staff has been achieved in February and March. • Plans to use interim beds to assist with delayed discharges as been halted. • Recovery of direct payment balances where these are not being fully spent (non-recurring) is underway. • The operation of the care at home service is underway as reported in February. • The project to expand capacity at Thomson Court has been paused (£500k of HSCP resource had been allocated to this). These measures may result in some reduction in service and increase in unmet need or further waiting times for care packages. The HSCP will not be able to
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6 Classification: OFFICIAL recover its Social Work / Social Care financial position by year end. The care at home efficiency work, reduction in care at home contract costs (reported separately) and the projects outlined in the budget paper are the main additional pieces of work that are underway to improve the situation next year. This is consistent with the national position in the sector with many IJBs taking action to address deficits. Concerns about financial sustainability was highlighted again this year by Audit Scotland (for both IJBs and the NHS) but there has not been a government response which addresses the issue. The impact of NI increases in April is a heightened risk for 3rd sector and commissioned service providers. At present there is no identified solution or funding. 3.3 Savings Delivery 3.3.1 3.3.2 3.3.3 3.4 3.4.1 The service improvement team, finance teams and management continue to progress, monitor and report on savings projects. As at Month 11 the total savings declared increased slightly to £5.1m (77%) of the £6.6m target, although £0.4m is on a non-recurring basis: 2024/25 Savings Year to 28 February 2025 Target Achievement Balance % £' 000 £' 000 £' 000 Fully Achieved 4,421 4,421 0 Partially Complete 2,192 302 1,890 Non Recurring - 370 (370) Total 6,613 5,093 1,520 77% Appendix 3a lists the fully delivered savings and 3b summarises the remaining savings, risk rated: Savings regarded as low risk £52k Savings unlikely to be achieved in full in 2024/25 £1,100k Savings unlikely to be deliverable in 2024/25 £738k Efforts to deliver as much of the balance as possible will continue into 2025/26 and the balances will be carried forward as approved savings. There are a number of projects where change processes are required and are taking time. The new medical staffing model in Cowal is now being implemented and it is hoped that the savings relating to FME contracts can progress soon. The amber and red rated projects represent a financial risk already incorporated in the forecast. Reserves Earmarked reserves of £19.9m were carried into 2024/25 including £4.7m for sustainability and value, this has been passed back to NHS Highland and replaced with a recurring allocation. To date £11.6m has been committed, including £4.3m to fund the NHS revenue budget gap and the £4.7m described above. The reserves position is summarised in Appendix 4. Remaining
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7 Classification: OFFICIAL 3.4.2 4 4.1 5 5.1 6 6.1 6.2 6.3 reserves are reduced to £8.2m, many of these are earmarked for specific purposes. It is likely that at least £0.7m of general reserves will be required to cover the overspend in Social Care which has required project work to be put on hold. The Scottish government have indicated that there is some scope for reallocating reserves to fund cost pressures. Much of the remaining reserves balance has been allocated: • £600k for the Prevention / Wellbeing project. • Estimated £529k for remodelling the Campbeltown Hospital to better locate new radiography equipment (now underway); • £366k for NHS houses on Coll (net of £100k from the Strategic Housing Fund); and • £940k for the Tigh a Rudha renovation and remodelling (Reserves are match for Council capital, Strategic Housing Fund and Island Programme Funding). Strategic development work has been paused due to capital funding constraints, the Care Homes and Housing project is continuing. The use of reserves to fund revenue spend is not sustainable. 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. The Council are holding a pension fund saving which will be accessed. The HSCP expects to be reliant upon reserves to fund its overspend and expects general reserves to be largely exhausted by the end of the year. 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. 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 directly.
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8 Classification: OFFICIAL 9. 9.1 10. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE None. RISK ASSESSMENT 10.1 There are a number of financial risks: • Continuing impact of high service demand. • Inability to reduce supplementary staffing. • Pressure on support services relating to HR, administrative and finance processes. • Cancellation of projects and use of remaining reserves to fund overspending; and • Delivery of the remaining savings programme. The HSCP is not in a sustainable financial position as spend and service demand exceed resourcing. Financial recovery and development of the savings programme for 2025/26 remain priorities. 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 11. The Social Work forecast remains of serious concern and a large overspend is forecast due to on-going demand for services and reliance upon agency staffing. Funding the structural deficit with non-recurring resourcing is an urgent problem for future planning. The HSCP will utilise the non-recurring savings relating to pension costs from Argyll and Bute Council to part fund the overspend. This will restrict flexibility in future years and further adds to the longer-term gap between spend patterns and resources. This also reduces funding for development and transformation as the balance shifts further towards managing immediate pressures rather than longer term change. A further action is to put a hold on projects which were to be funded from reserves where spend is not committed. Argyll and Bute Council are aware of the situation.
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9 Classification: OFFICIAL 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 & Policy Committee Budget Monitoring 11 Months to 28 February 2025 18/03/2025 TBC Senior Leadership Team Budget Monitoring 11 Months to 28 February 2025 19/03/2025 TBC APPENDICES: Appendix 1 – Year to Date Position Appendix 2 – Forecast Outturn for 2024-25 Appendix 3a and 3b – Savings Programme Appendix 4 – Reserves AUTHOR NAME: James Gow, Head of Finance EMAIL: james.gow@argyll-bute.gov.uk