This briefing gives an overview of health board
finances. It covers the information found in the 14 health boards'
six monthly financial reports. Rising inflation and changes
to the budget distribution formula mean that health board budgets
are under a great deal of pressure this year. Health Boards
also have to make efficiency savings of 2%. The boards must
have balanced budgets and so any overspends have to be met by
cuts in other areas
Health Boards Six Month Financial Reports
Ayrshire and Arran
Currently their budget is under spent by £1.51 million. There
is though an overspend of £529k in integrated and emergency
services made up from the cost of locums to cover vacancies,
orthopaedic nursing staff and theatre supplies overspends.
Under spends in other areas are covering this just now in
particular vacancies in women and children's services and
mental health services mainly in drug and alcohol. The public
health under spend comes from ring fenced allocations. It
is expected that this money will be spent once plans are in
place leaving a high risk of shortfall at the year-end. Other
risks highlighted are that no provision has been made for
equal pay. They also expect extra costs to arise from Modernising
Medical Careers (MMC).
The report indicates a "tight financial outlook". Currently
they are over-spent by £425k. This is due to £611k in efficiency
targets not "being fully covered" and a £186k under-spend
on operational budgets. Nursing costs also continue to be
overspent. The report indicates the need for "robust measures"
and the achievements of recurring efficiency savings through
the Strategic Change Programme. The efficiency target is £3
million per year. "Robust measures "usually means cuts.
Dumfries and Galloway
The board has an efficiency savings target of £4.6 million.
Currently the over-spend is £373k and they are forecasting
£2.4m by year-end. The report predicts that the target for
nursing pay will not be met and will overspend of £240k. The
overspend in patient admin is so far £149k. The water borehole
project is delayed due to technical problems and expected
savings are now at risk. They still believe the efficiency
target is achievable but highlight some key risks: half of
staff are now assimilated to Agenda for Change but the full
costs are not yet clear. Maintaining 24-hour medical cover
and reducing working-time below 48 hours without a serious
risk to service: "potential solutions involving substantial
extra investment". Achieving the waiting times target will
"need a high level of additional funding: £7.88m" which is
£1.9m more than budgeted. There is a clear risk of cuts if
these risks are realised
At six months there is an under spend of £1.234 million and
they are predicting an under-spend of £1.876m by year-end.
The board is currently predicting a revenue surplus of £3.5m.
This assumes that savings of £14.5m are made. The cash savings
plan is still in development, the target is £7m per year.
The plan includes achieving a sickness absence rate of 4%
and reducing older peoples' admissions. This though faces
a serious challenge because of the increasing numbers of elderly
people. The plan assumes Agenda for Change costs will be as
budgeted, other boards are finding this not to be so. Savings
programme: "real cash release savings are at a level that
it is unlikely that traditional approaches to efficiency will
fully deliver. Every opportunity therefore must be taken as
part of the strategic change resulting from the Healthcare
Strategy to improve efficiency and more importantly release
cash savings to meet the shortfall envisaged".
This area already has an overspend of £1.6m for the first
6 months of year. There is real concern that even the current
under-spends are due to phasing and will catch up while over-spends
are real. "virtually all of the organisations financial reserves
are now committed". The report states that it is "difficult
at present to see any change in the pattern of overspend".
Pay budgets were reduced to reflect savings targets but are
now overspent by £1.3m. The report states "Sectors and departments
that are operating at a level above their net funded establishment
must take steps to bring their staffing levels and costs back
into line as a matter of priority" There are also risks that
the situation will worsen: need to meet efficiency target
£26.2m in savings and under spends "some areas are facing
significant difficulty in achieving these targets". Energy
costs: new electricity contract 59% increase on current costs.
£1.2m this year and £2.4m on a full year basis until 2009/10."
Agenda for Change: staff are assimilating at higher grades
than predicted so additional savings will be needed to compensate
for the extra costs. There is a clear risk of cuts to jobs
and services in order to balance the budget.
Greater Glasgow and Clyde
Glasgow is reporting spending levels running closely in line
with budget. The board has cut services to meet costs savings
targets of £22.2m against a year-to-date target of £24.2m.
Overall Glasgow and Clyde had a savings target of £42.2 million,
increased costs on energy, capital charges and drugs have
added another £8 million taking the new target to £50.7 million.
The plan included the creation of a £11.4 million surplus
for the two new hospitals planned next year but because of
the additional costs, this money will be spent this year.
This has implications for the 2009-10 budget: the new cost
savings target will now be in the region of £56-£66 million.
A further £5-10 million is to be included for Modernising
Medical Careers costs, extra pay costs or new initiatives.
This results in a "overall net funding challenge of £61-£76"
for next year.
The finance report emphasises the importance of "adjustments"
in order to break even. Increased energy costs have led to
an overspend of £762k. They are also budgeting for a £600k
loss of income now that car parking charges have been abolished.
Potentially £7.3m in recurring savings have been identified
and included in budget plans. Plans for 2009/10 though include
a 1% reduction across all health board budgets. It is hoped
the savings are to be achieved through increased productivity
There is no detail on where the "savings" will be made or
on how they will affect service delivery.
After six months the board has an under spend of £7.467m.
They expect a cumulative surplus of £14.835m by year-end.
The board has overspent by £1.5m for first 6 months of year.
£1.2m in unmet efficiency targets and £0.3m in overspending.
The report indicates that the savings target of approximately
£20 million will be achieved by year-end and they expect to
break even. There is though no detail on how this will happen.
Orkney has a revenue deficit of £421k. Overspends in local
services total £103k: £113k overspend on locums, overspends
of £38k on out-of-hours services and £32k on nursing offset
by under spends in community nursing. An action plan is being
prepared supported by external consultant. It was expected
by end November and will be reported at the next meeting.
Cuts of £555k are already in place.
The savings target was £911K. There are additional pressures
from over-spends on locums and outpatient drugs and theatre
supplies partially offset by under-spends in community dentistry
and prescribing. Spending now being closely monitored because
of the risk of going over budget. There is a large overspend
in estates the finance team are investigating: £208,236. Estates
must stay in budget for rest of year. Shetland are forecasting
breaking even but this assumes an arrangement relating to
the abatement of the Revenue Resource Transfer will be agreed.
Tayside have overspent by £1 million, last year overspend
was £0.5 million at same stage. While some areas have under-spent
there are also large overspends: The delivery unit overspend
is £2.3 million due to FHS prescribing and energy and a savings
target shortfall. Anticipated under-spend of £6 million on
capital charges is covering this. Only £16.2 million of the
deferred expenditure target of £24m has been identified. They
also plan a saving of £2m from expenditure carried forward
from 2007/08 and they expect an under-spend of £2 million
on board earmarks. Additional cost pressure mean the savings
target changed from £11.4m to £16.1m to break even, gap of
£1.3m so far and expect a full year shortfall of £3.8 million.
The board hopes to break even if additional costs savings
met. There is a high risk of not meeting savings targets and
a high risk of Agenda for Change cost being above budget.
The number of successful reviews is higher than anticipated.
The board identified the need for more cuts though there are
no details yet.
The Western Isles has an overall overspend of £4000 and believe
there is high risk of not covering this by the end of the
financial year While this may seem small there have been considerable
overspends and a significant proportion of reserves have been
used to cover these. The papers state "so early in the year
is a source of concern as it severely curtails any year-end
flexibility." And "it is unacceptable that so far the organisation
has not identified any further recurrent or non-recurrent
savings. It is clear that decisions will have to be taken
ahead of concluding the work on the clinical strategy if we
are to break-even this year and in 2009/10". Key areas of
high expenditure are: overspend on medical staff including
locums and junior doctors now forecasting a final overspend
of £334k. The unexpected purchase of new cleaning system 45K
(was officially rejected but somehow bought anyway). Forecast
of overspend of £287k on patents being treated by NHS Highland.
Facilities overspend forecast at £284k: cost of fuel oil,
and increased costs of food and other consumables. The board
is now making plans to cut spending including a freeze on
The briefing lacks detail because the financial reports that
it is based on also lack detail. What is clear though is that
there are significant challenges to delivering current services
within budget and achieving the efficiency target set by government.
The picture may also worsen through the winter. Health spending
is particularly difficult to predict as demand depends on
so many things including the weather. UNISON believes that
some boards will have to cut jobs and services in order to
balance their budgets. (See further information
section for link to parliamentary debate on health budgets)