Health and Social Care Partnership – Financial Position
Argyll and Bute Council · 8 May 2025
Back to Policy and Resources Committee — 8 May 2025 and its agenda
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 8 MAY 2025 HEALTH AND SOCIAL CARE PARTNERSHIP – FINANCIAL POSITION 1. EXECUTIVE SUMMARY 1.1 This report brings to the attention of Members, the current financial position of the Health and Social Care Partnership (HSCP) and the request for a recovery plan to be developed. 1.2 The Integrated Joint Board approved the HSCP budget for 2025-26 at their meeting on 26 March 2025. Social Work had a balance of £0.500m of savings still to be identified and Health had a gap of £4.2m as the HSCP were not able to identify the required 3% in NHS savings. 1.3 The gap in 2025-26 and opening gap in 2026-27 need to be addressed urgently and it is the intention of the HSCP that there is some overlap between short term recovery actions and the slightly longer-term requirement to reduce costs substantially. 1.4 The IJB Chief Officer and Chief Financial Officer are currently preparing a recovery plan which will be presented to the IJB at the end of May. Once the recovery plan has been approved by the IJB, it will then be submitted to the Council. 1.5 Should the recovery plan not be successful the Council may be faced with having to make interim funds available which would most likely have to come from the Council’s General Fund. 1.6 The HSCP position will be closely monitored during the year and updates provided to the Policy and Resources Committee via the regular budget monitoring pack. 1.7 It is recommended that the Policy and Resources Committee: a) Consider the content of this report. b) Note that a recovery plan is currently being prepared and will be presented to Council once it has been approved by the IJB. c) Note that a risk remains that the HSCP may revert to the Council for interim funds.
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 8 MAY 2025 HEALTH AND SOCIAL CARE PARTNERSHIP – FINANCIAL POSITION 2. INTRODUCTION 2.1 This report brings to the attention of Members, the current financial position of the Health and Social Care Partnership (HSCP) and the request for a recovery plan to be developed. 3. RECOMMENDATIONS 3.1 It is recommended that the Policy and Resources Committee: a) Consider the content of this report. b) Note that a recovery plan is currently being prepared and will be presented to Council once it has been approved by the IJB. c) Note that a risk remains that the HSCP may revert to the Council for interim funds. 4. DETAIL 4.1 The Health and Social Care sector across Scotland is in a difficult position at present due to the financial challenges they are facing. Most HSCPs have significant forecast deficits and depleted reserves. Audit Scotland have repeatedly reported that the sector is not operating on a financially sustainable basis. As reserves are reduced, service reduction is now required. The drivers of the financial challenges are: • Real terms reductions in funding over several years. • Increasing demand for services due to the ageing demographic. • On-going shortages of staff resulting in increased dependency upon agency staffing. 4.2 The Integrated Joint Board approved the HSCP budget for 2025-26 at their meeting on 26 March 2025. Social Work had a balance of £0.500m of savings still to be identified and Health had a gap of £4.2m as the HSCP were not able to identify the required 3% in NHS savings. 4.3 The £0.500m of unidentified savings in Social Work is in addition to £1.547m of identified savings planned for 2025-26. There remains a risk that the gap could increase if the agreed savings are not delivered or if costs and demand increases. One key risk relates to the increase in the employer National Insurance rate from 1 April 2025. Scottish Government provided 60% of the funding for employees directly employed by the Council, with the Council providing the remaining 40% of funding. The risk is in respect of commissioned
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providers and the HSCP estimate this could be in the region of £1.3m-£1.4m and strong representation has been made to the Scottish Government. 4.4 There is a larger funding gap from 2026-27 onwards due to almost £3m of non- recurring funding being used towards the 2025-26 budget. At the time of writing this report, the outturn for 2024-25 has not been finalised. 4.5 The gap in 2025-26 and opening gap in 2026-27 needs to be addressed urgently and it is the intention of the HSCP that there is some overlap between short term recovery actions and the slightly longer-term requirement to reduce costs substantially. 4.6 I am bringing the HSCP financial position to the attention of this Committee as the Scheme of Integration states “Any potential deviation from the planned outturn should be reported to the IJB, the Council and NHS Highland at the earliest opportunity”. The Scheme also states “Where it is forecast that an overspend will arise, then the Chief Officer and Chief Financial Officer of the IJB will identify the cause of the forecast overspend and prepare a recovery plan setting out how they propose to address the forecast overspend and return to a breakeven position. The Chief Officer and Chief Financial Officer of the IJB should consult the Section 95 Officer of the Council and the Director of Finance of NHS Highland in preparing the recovery plan. The recovery plan should be approved by the IJB. The report setting out the explanation of the forecast overspend and the recovery plan should also be submitted to the Council and NHS Highland.” 4.7 I have been liaising with the IJB Chief Officer and Chief Financial Officer and they are currently preparing a recovery plan which will be presented to the IJB at the end of May. Once the recovery plan has been approved by the IJB, it will be submitted to the Council. 4.8 Further savings cannot be delivered without reduction in service and capacity within the HSCP. Almost all social care services are provided to individuals with protected characteristics (children, older people, people with disability) and it is therefore not possible to reduce services without having a disproportionate adverse impact on these groups. The draft recovery plan includes increases to income, vacancy savings, review of services, application of a care ceiling and agency staff savings. These have still to be discussed and approved by the IJB. 4.9 The IJB Finance and Policy Committee have requested that the HSCP management team outline potential actions that could be expected to reduce spend at a pace and magnitude to address the future budget gap. Options are currently being explored, and it is welcomed that the Council has set aside £0.500m to assist with transformation and it is likely that this will be used to bring in external consultancy to provide challenge and identify opportunities for cost savings. Information will be provided to the Council as and when required. 4.10 As noted above, there remains a risk that the HSCP cannot bring its 2025-26
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expenditure within budget. The Scheme of Integration states “Where recovery plans are unsuccessful and an overspend occurs at the financial year end, and there are insufficient reserves to meet the overspend, the Parties will consider making interim funds available. An analysis will be undertaken to determine the extent to which the overspends relate to either budgets delegated back to or activities managed by the Council or NHS Highland with the allocation of the interim funds being based on the outcome of this analysis. Any interim funds provided by the Council or NHS Highland will be repaid in future years based on a revised recovery plan agreed by both parent bodies, as required by either of the Parties. The NHS and Council will require to be satisfied that the recovery plan provides reasonable assurance that financial balance will be achieved.” 4.11 The risk to the Council is in respect of any Social Work overspend within the HSCP. The Council may be faced within having to make interim funds available which would most likely have to come from the Council’s General Fund. As reported to the Council in February, the unallocated General Fund balance is estimated to be less then £1m, although is subject to change as we finalise the 2024-25 year-end position. 4.12 The HSCP position will be closely monitored during the year and updates provided to the Policy and Resources Committee via the regular budget monitoring pack. 5. CONCLUSION 5.1 The HSCP is facing an extremely challenging financial position. The Integrated Joint Board approved the HSCP budget for 2025-26 at their meeting on 26 March 2025. Social Work had a balance of £0.500m of savings still to be identified and Health had a gap of £4.2m as the HSCP were not able to identify the required 3% in NHS savings. 5.2 The IJB Chief Officer and Chief Financial Officer are currently preparing a recovery plan which will be presented to the IJB at the end of May. Once the recovery plan has been approved by the IJB, it will then be submitted to the Council. Should the recovery plan not be successful the Council may be faced with having to make interim funds available which would most likely have to come from the Council’s General Fund. 5.3 The HSCP position will be closely monitored during the year and updates provided to the Policy and Resources Committee via the regular budget monitoring pack. 6. IMPLICATIONS 6.1 Policy - The Scheme of Integration sets out the financial arrangements for the IJB and partner bodies. 6.2 Financial - The HSCP are working on preparing a recovery plan for 2025-26 as there is £0.500m of unidentified savings in Social Work and a gap on £4.2m within Health.
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6.3 Legal - None directly from this report, when thee recovery plan is prepared it may have Legal issues to consider. 6.4 HR - None directly from this report, when the recovery plan is prepared it may have HR issues to consider. 6.5 Fairer Scotland Duty - 6.5.1 Equalities None directly from this report, when the recovery plan is prepared, it will require to consider equality issues. 6.5.2 Socio Economic Duty None directly from this report, when the recovery plan is prepared, it will require to consider equality issues. 6.5.3 Islands Duty None directly from this report, when the recovery plan is prepared, it will require to consider equality issues. 6.6 Climate Change The Council and HSCP is committed to addressing climate change and reviews how Services are delivering this on an ongoing basis, within the available budget resources. 6.7 Risk - There is a risk that the HSCP will revert to the Council for an interim fund payment if there is an overspend at the year end. 6.8 6.9 Customer Service – The Rights of the Child (UNCRC) - None directly from this report, when the recovery plan is prepared, it will require to consider customer service. None Kirsty Flanagan Executive Director/Section 95 Officer 16 April 2025 Councillor Ross Moreland, Policy Lead for Finance and Commercial Services Councillor Dougie McFadzean, Policy Lead for Care Services