Budget Monitoring - 7 months to 31 October 2024
Argyll and Bute Council · 27 November 2024
Back to Argyll and Bute HSCP Integration Joint Board (IJB) — 27 November 2024 and its agenda
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1 Integration Joint Board Date of Meeting: 27 November 2024 Title of Report: Budget Monitoring – 7 months to 31 October 2024 Presented by: James Gow, Head of Finance The Integration Joint Board is recommended to: • Note that the HSCP has overspent its budget by £1.6m. • Note that an overspend of £2.9m is forecast. • Note actions are required to reduce spend and additional funding is required from Argyll & Bute Council who hold pension saving resource on behalf of the IJB; • Note that savings of £4.7m have been delivered, 72% of target. 1. EXECUTIVE SUMMARY 1.1 This report provides a summary of the financial position as at the end of month 7 and a forecast for the year. The forecast has deteriorated further and remains of concern as costs within social work services in particular are in excess of the approved budget. Steps are required to manage this through reduced spend and / or increased use of reserves and 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 costs within Older Adult Services. 1.2 The forecast is currently an overspend against budget estimated at £2.9m. The approach to managing this will be to: • Increase scrutiny of spend and vacancy management. • Progress the savings programme. • Implement additional controls to reduce spend within Social Care. • Request Argyll & Bute Council make available additional resourcing from the pension fund savings. It is the case that the Health and Social Care sector continues to be in a very difficult and unsustainable financial position. 2. Recommendations 2.1 • Note that the HSCP has overspent its budget by £1.6m. • Note that an overspend of £2.9m is forecast.
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2 • Note actions are required to reduce spend and additional funding is required from Argyll & Bute Council who hold pension saving resource on behalf of the IJB; • Note that savings of £4.7m have been delivered, 72% of target. 3. DETAIL OF REPORT 3.1 7 Months to 31 October 2024 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 an analysis of the variances: Service Actual £000 Budget £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 49,138 48,052 (1,086) (2.3%) HEALTH SERVICES TOTAL 152,482 151,887 (595) (0.4%) GRAND TOTAL 201,620 199,939 (1,681) (0.8%) 3.1.1 For social care budgets there are several areas of concern: • Number of external placements for children; • Demand for older adult care and management of delayed discharges; • Spend on agency staff remains too high, the 10% planned reduction is not being achieved. Absence is particularly problematic as services are often paying staff plus an enhanced rate for agency cover which can amount 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 also overspent, the main drivers continue to be the use of agency staffing and medical locums along with an increase in high-cost external mental health placements. It is recognised that agency staff are only employed to cover for essential posts which are either vacant or there is an absence. 3.2 3.2.1 Forecast Outturn The forecast is of concern, particularly for social work services where there are several services overspending. In addition to the implications in the current year, the budget is already reliant upon reserves which are reducing and largely committed. Forecast spend is summarised below with detail in appendix 2. Members will recall that the budget relies upon the use of reserves and an allocation from the non-recurring pension fund saving.
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3 Service Annual Budget £000 Forecast Outturn £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 91,795 93,845 (2,050) (2.2%) HEALTH SERVICES TOTAL 277,477 278,288 (811) (0.3%) GRAND TOTAL 369,272 372,133 (2,861) (0.8)% 3.2.2 Within Social Work, children’s and families, mental health and older adult budgets are all overspending and a £2.0m adverse variance forecast. The main driver relating to Children’s Services is the increased number of children in out of area placements. These are considered to have been unavoidable and each one is carefully reviewed and considered before being contracted. This cost pressure was not foreseen at the time the budget was prepared. The forecast overspend on this heading is £0.6m on a budget of £6.7m. A detailed report on this aspect of the underspend was provided to the Finance & Policy Committee in September. Spend on older adults is also above budget with agency staffing a particular issue. The budgets summarised below were increased from £35.6m to £38.5m (8%) to allow for increasing demand and inflation. Social Care agency spend is currently at £2.1m for 7 months. The cost of accommodation for agency staff on islands is adding to costs. Alternative arrangements on Isla will be available in the coming weeks to reduce this. Adult Services Budget Forecast Spend Variance External Residential Placements – demand led @ national contract rate £11.4m £12.3m (£0.9m) Care @ Home Service £19.6m £20.5m (£0.9m) Internal Care Home Placements £7.5m £ 7.2m £0.3m Total £38.5m £40.0m (£1.5m) The new Care at Home contract has been implemented in and will reduce costs in the last half of the year, the savings have been built into the forecast. 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 the staffing levels and available budget, in order to meet demand. Recovery actions are now required for the HSCP and care at home activity is an area of focus. To date no action has been taken to restrict provision of care for financial reasons. A recovery plan is under development for the current and future years as the outlook remains difficult. The Social Work budget assumed that £1.3m of the pension fund saving (£3.5m is held by the Council) would be allocated to revenue costs in 2024/25. The HSCP has informed Council officers that it expects to require additional support from this funding, now close to the full £3.5m available. This has also been highlighted as a risk to the HSCP leadership group. The table below summarises the extent of forecast reliance upon non-recurring savings:
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4 Social Work £m Budgeted Reliance on Pension Fund Savings 1.3 Forecast revenue budget variance (M4) 2.0 Underlying budget gap 3.3 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 with Hub North), and the completion of the Tigh a Rudha remodelling. 3.2.3 NHS services are likewise reporting an increasing overspend of £0.8m. The main concerns are: - 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 £7.1m. LIH is currently the highest spending service area, reporting a gross cost of £3.12m most of which relates to medical staffing. - 2c GP practices (directly operated) – the HSCP has taken over the running of 2 further practices. This is creating additional locum cost pressures and is driving a £0.5m overspend. There is a lack of certainty about the funding impact of the GMS uplift on 2c practice funding. - High cost out of area referrals – the 8 admitted patients have created a cost pressure of £454k at the end of October. - GP prescribing – costs are expected to be £350k or around 1.4% higher than budgeted at present. Some excess costs will continue to be offset by vacancies. However, the Health budget is already dependent upon the use of reserves and there is little scope to increase reliance on reserves. The plan was to utilise £4.3m of reserves to fund the revenue spend. A tightening of spend controls is now being implemented to bring NHS spend back in line with budget, progress on agency/locum staffing is critical to achieving this. NHS Highland are aware of this overspend and the HSCP is continuing to work towards bringing the budget into line. A further issue which has added to the forecast overspend has been that SG have cut Multi Disciplinary Teams funding in-year by £14% (£5.7m for the sector and £106k for the HSCP). The SG health finance team have confirmed, in writing, that the UK budget announcement does not make any additional funding available for the NHS in the current financial year. The national context within the NSH is that Boards are collectively projecting a £464m overspend this year. 3.2.4 Overall the HSCP is operating in excess of its approved budget. Steps are in place to try and mitigate this including: • Continuing vacancy management processes. • Increased controls and reporting of agency and locum spend.
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5 • New approval process for agency staffing. The Social Work overspending has been reported within the Council and it is anticipated that further mitigations are required, these overlap with actions associated with the work on the budget: • A request for more of the pension fund saving held by council to balance the revenue budget; • A moratorium 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); • Recovery of direct payment balances where these are not being fully spent (non recurring); • Prioritising of care to priority 1 to reduce care at home hours to be managed within each area; • Reconsideration of assessment thresholds and; • Assessments to ensure other care provision (eg family in receipt of carers allowance) are taken into account in assessments. These measures are likely to result in some reduction in service and increase in unmet need or waiting times for care packages. It is not possible to bring spend back into line with budget without impact on service. The position is consistent with the national situation in the Health and Social Care sector with many IJBs taking similar action. Concerns about financial sustainability was highlighted again this year by Audit Scotland but there has not been a Government response to address the issue. There are a number of risks including: • The Council pay award has been implemented but not yet agreed by all unions; • In year budget cuts have been announced by the Scottish Government to fund the pay increases, including a reduction in the Health and Social Care Budget; • The impact of NI increases next year may be viewed as a risk for 3rd sector and commissioned service providers in the short term while funding is uncertain; • There are staff re-grading exercises underway which could result in increased pay costs; and • Demand for services, impact of winter pressures and the priority given to managing delayed discharges remain risks in the current year. 3.3 Savings Delivery 3.3.1 The service improvement team, finance teams and management continue to progress, monitor and report on savings projects. As at Month 5, £4.7m (72%) of the £6.6m target has been declared:
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6 3.3.2 3.3.3 3.4 3.4.1 3.4.2 2024/25 Savings Year to 31 October 2024 Target Achievement Balance % £' 000 £' 000 £' 000 Fully Achieved 4,091 4,091 0 Partially Complete 2,522 228 2,294 Non Recurring - 425 (425) Total 6,613 4,744 1,869 72% Appendix 3a lists the fully delivered savings and 3b summarises the remaining savings, risk rated: Savings regarded as low risk £456k Savings unlikely to be achieved in full in 2024/25 £1,100k Savings unlikely to be deliverable in 2024/25 £738k Work is on-going to deliver as much of the balance as possible. There are a number of projects where change processes are required and are taking time to progress. The new medical staffing model in Cowal is now starting to be implemented and it is hoped that the savings relating to FME contracts can be progressed soon. The amber and red rated savings projects represent a financial risk already incorporated in forecasts. 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 £10.7m 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 reserves are reduced to £9.2m, many of these are earmarked for specific purposes. The Scottish government have suggested that there is some scope for reallocating reserves to help fund cost pressures. The IJB is in the process of allocating reserves to projects. To some extent these are compensating for insufficient investment in infrastructure by partners: • £600k for the Prevention / Wellbeing project; • Estimated £529k for remodelling the Campbeltown Hospital to better locate new radiography equipment; • £366k for NHS houses on Coll (net of £100k from the Strategic Housing Fund); and • £800k for the Tigh a Rudha renovation and remodelling (Reserves are match for Council capital and Island Programme Funding). Much of the strategic development work has been paused due to capital funding constraints, the Care Homes and Housing project is continuing. The use of reserves to balance the revenue position is not sustainable and a proper solution to the mis-match between recurring funding and spend requires to be identified as reserves reduce and the pension fund saving will not be available beyond 2025/26.
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7 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 forecast outturn position is a projected overspend. The Council are holding a pension fund saving which could be accessed if the HSCP continues to overspend, the HSCP is required to progress its recovery planning. 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 costs 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 from this report. 9. 9.1 10. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE None. RISK ASSESSMENT 10.1 There are a number of financial risks and these are reported to the Finance & Policy Committee: • Continuing impact of high service demand and winter pressures; • Inability to reduce supplementary staffing; • Pressure on support services relating to HR, administrative and finance processes; and • Delivery of the balance of the savings programme. The HSCP is not in a sustainable financial position as spend and service demand exceed available funding. Financial recovery and development of the savings programme for 2025/26 are priorities. It does not expect to return to a position where it requires additional funding that it will need to repay as a result of its overspending in 2024/25.
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8 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 7. The forecast is of concern and the management team are seeking to manage spend down during the remainder of the year. The reliance upon non-recurring resourcing is an increasing problem for 2025/26 and future years. The HSCP will require to seek additional support from the non-recurring savings relating to pension costs from Argyll and Bute Council to fund the overspend. This will restrict flexibility in future years, adds to the longer-term gap between spend patterns and available resources. This will also limit funding for development and transformation as the balance shifts further towards managing immediate pressures rather than longer term change. 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 M7 20/09/24 TBC SLT Budget Monitoring M7 22/09/24 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