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Health Spending Briefing 195 Jan 2009
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Health Spending Briefing - Health Board Budgets

Briefing number 195 January 2009

Introduction

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


Cost challenges

Health inflation is usually higher than general inflation so the recent inflation rises have been greater for health boards than other areas. The increases have also coincided with changes in the formula for the allocation of funds to health boards and a new government with new priorities. Health boards also face additional pressures for funding caused by: 48-hour working week limit under Modernising Medical Careers, Agenda for Change successful grading appeals being more numerous than budgeted, waiting-time targets and general cost pressure such as increased fuel costs. The expected value of land sales wil be affected by falling property prices. On top of this, boards have to make efficiency savings of 2%.


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).

Borders

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

Fife

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.

Forth Valley

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".

Grampian

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.

Highland

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.

Lanarkshire

After six months the board has an under spend of 7.467m. They expect a cumulative surplus of 14.835m by year-end.

Lothian

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

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.

Shetland

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

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.

Western Isles

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 vacancies.

Conclusion

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)


Action for branches

Branches should monitor the spending locally. UNISON is concerned that the savings are not through improved efficiency and new processes but are cuts in jobs and services. Please look closely at plans for your departments and send any information/concerns to Kay Sillars at k.sillars@unison.co.uk


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Further information

Budget papers
www.scotland.gov.uk/Resource/Doc/238287/0065416.pdf

P and I briefing 171 on 2007-08 Budget
www.unison-scotland.org.uk/briefings/spendingreview2007.html

P and I briefing 135 Efficient Government
www.unison-scotland.org.uk/briefings/efficientgov135.html

Parliamentary Report of motion on Health funding www.scottish.parliament.uk/business/
officialReports/meetingsParliament/or-08/
sor1113-02.htm#Col12336

Contacts list:

Kay Sillars
k.sillars@unison.co.uk

Dave Watson
d.watson@unison.co.uk

@P&I Team
14 West Campbell Street
GLASGOW
G2 6RX

Tel 0845 355 0845
Fax 0141 331 1203
Textphone 0141 248 3981

 

Scottish Government | Scottish Parliament | Briefings Home

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Further Information

Budget papers
www.scotland.gov.uk/Resource/Doc/
238287/0065416.pdf

P and I briefing 171 on 2007-08 Budget
www.unison-scotland.org.uk/briefings/spendingreview2007.html

P and I briefing 135 Efficient Government
www.unison-scotland.org.uk/briefings/efficientgov135.html

Parliamentary Report of motion on Health funding www.scottish.parliament.uk/business/
officialReports/meetingsParliament/or-08/
sor1113-02.htm#Col12336

 

Contacts:

Kay Sillars
k.sillars@unison.co.uk

Dave Watson
d.watson@unison.co.uk

P&I Team
14 West Campbell Street
Glasgow G2 6RX
Tel: 0845 355 0845
Fax: 0141 221 8953