REPORT ON NHS BOARDS’ SURVEY ON BUDGET PLANS 2012-13

The Royal College of Nursing (RCN) Scotland has been monitoring the fourteen NHS territorial boards’ financial plans and performance for the last three years, beginning with the data presented in Taking the Pulse of NHS Scotland in 1 December 2010 . Financial pressures are clearly impacting on patient services and staff locally. As both a professional body and trade union, the RCN has committed to monitoring NHS territorial board budgets to help us engage with employers, the Scottish Government, MSPs and our members in an informed, constructive and timely manner. This briefing sets out some of the issues emerging from our ongoing analysis that may be useful for the Health and Sport Committee’s meeting on 1 May. Comparability and variation Similar to the experience of the Health Committee when surveying health boards, we have found it difficult to source reliable and comparable data to help us understand local pressures and the impact of variations in approach and performance between boards. Whilst the annual Audit Scotland 2 performance review of the NHS is an important source of audited finance data, it is published – inevitably – nine months after year-end. We are also interested in understanding and comparing performance against plans at a time when we can work to negotiate positive change for patients and our members. Our regular review of financial plans and activity across the territorial boards is based on the financial annex to the Local Delivery Plan and the financial Monthly Monitoring Returns supplied by boards to Scottish Government. We obtain these documents by regular Freedom of Information requests to boards. Whilst, if taken in isolation, these cannot provide us with answers to all our questions, they do provide the only top line comparable finance information on key areas of in-year expenditure and savings delivery that we have been able to source. Efficiency Savings As highlighted repeatedly by the RCN and others, there is still no means for us to verify that the totality of “savings” planned and made are indeed true cash efficiencies (providing the same or
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greater service for less money), rather than straightforward service cuts. Our comments below are made in this context. Pay We would urge a particular note of caution on the possible interpretation of the statement on page 16 of the report on the health board surveys that: “it is notable that pay pressures are not a factor that boards place in the top three [risks to the financial plan for 2012-13]”. Clearly whilst the public sector pay freeze is in place and workforce numbers continue to drop (with nursing numbers now lower than at any time since 2006) pay may not be highlighted as a particular budgetary pressure. However, in responding to the Committee’s survey, twelve of the fourteen territorial boards list concerns about meeting their efficiency plans during 2012-13 in their top three financial risks. Pay remains the largest single outlay of any 3 board and it is our understanding that boards are still intending to reduce their pay bill in order to make the efficiencies required for financial 4 balance . As such, many of the savings boards are planning – and which nearly all say are a significant risk to meeting their financial plan – are likely to affect the workforce and pay costs. Increased pay costs (including Agenda for Change incremental increases) may not be a significant pressure in the way that prescribing costs are, but the drive to instigate reductions to the pay bill to break even through savings, is a very real pressure on boards, on staff and on the quality of services. Even in formal returns made to the Scottish Government, the impact of savings plans on the workforce is not always clear. We believe that the Scottish Government’s categorisation of efficiency saving schemes is interpreted variously across the territorial boards, particularly with regard to savings under the “workforce” and “clinical productivity” headings. The Scottish Government Local Delivery Plans and financial monitoring returns now require boards to report savings plans and performance against broad headings alone, and not on individual savings plans. However, in previous detailed iterations, it was clear that many “clinical productivity” saving schemes included significant reductions to workforce costs by, for example, changing skill mix to deliver services.

Pharmacy The significant pharmacy cost pressures highlighted in the report to the Committee corresponds with the data we have analysed for the past three years. By December 2011, nine of the 14 territorial boards had overspent on their 2011-12 GP pharmacy budget to the tune of £13.4m (including overspends in Dumfries & Galloway, Greater Glasgow & Clyde and Lanarkshire). This is despite an average uplift assumption to the GP pharmacy budget of 5.2% in 2011-12. Further, the same 2011-12 plans show a combined savings figure for prescribing last year of £34.8m. It is not possible to monitor hospital drug spend from the data we have, but this primary care prescribing pattern is reflective of previous years’ positions. Our concern is not just the spiralling costs to boards to meet prescribing bills, but the impact of this ongoing pressure on other budgets. Where prescribing budgets are overspent and/or prescribing savings are not made, the money will have to be found elsewhere to meet the boards overall financial plan as agreed with Scottish Government. It is often not possible to track where any budgetary adjustments are made during the financial year to compensate for these drug cost pressures. It would be interesting to know what additional measures boards have had to take in the past, or contingencies they are planning, to attempt to stay in financial balance in the light of these very real pharmacy pressures. Identification and delivery of savings Of the territorial boards’ £226.8m declared cash savings for 2012-13, only £153.2m (67.6%) is detailed in the response to the specific question asked by the Committee to list the top three savings plans. Though we cannot assume this is the case for 2012-13 from this report, we have seen that in previous years many boards have continued well into a financial year with significant amounts of savings remaining unidentified. Where this is the case, even those identified plans declared may become inconsequential, as additional cash savings must be found from existing activity. From the boards giving evidence, it may be worth understanding what percentage of their planned 2012-13 savings remains unidentified at this point. In their 2010-11 LDPs, the four boards giving evidence declared £27.2m of unidentified savings still to be found at the start of 2011-12: 29.4% of their combined planned savings for that year. This was not an unusual position among the territorial boards.

In addition, even categorised savings plans are only as good as their eventual delivery. Using the latest monitoring data available to us for 2011-12, it is clear that half of the 14 territorial boards were some way short of achieving 75% of their planned efficiencies by the threequarters point of the year (December 2011). Achievement rates in seven boards ranged from just 50% to 65% of planned savings. Where achieved savings are falling this short of plans by the ninth month of the financial year, it is highly likely that boards will implement emergency measures to source non-recurring (one-off) savings to meet the shortfall. Historically, this has included potentially damaging activities such as vacancy freezes, bans on the use of bank staff to fill rotas and cuts to training budgets. Of the boards giving evidence, Dumfries & Galloway and Lanarkshire were on, or ahead of target, but Greater Glasgow & Clyde and Western Isles were behind target at December 2011. The information supplied to the Committee in this survey does not always make clear the balance between planned recurring and nonrecurring savings in boards’ plans. To ensure sustainable financial balance we would expect to see the vast majority of savings planned and delivered on a recurring basis – this may be an issue worth exploring further. Shifting the balance of care Notwithstanding the different interpretations of what should have been included under the headings provided at question 2, if taken at face value, boards are increasing their combined community budgets by around £10m more than they are increasing their combined acute budgets. However, this difference represents just 0.13% of the total core revenue resources 5 given to boards in 2012-13 and acute budgets do continue to increase in all but four boards (these four include Dumfries & Galloway and 6 Western Isles). Recent cost book data did show a slight shift in funding from acute to community, with a small drop (-0.9%) in acute operating costs between 2010 and 2011. However, given the long term policy drive to shift the balance of care, a wider discussion on the barriers boards are facing in making the financial shift of resource would be helpful, particularly given cross-party support for additional investment in preventative spend.

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Transparency of pooled and transferred resources The Committee’s report highlights significant, unexplained variation in local authority investment in the change fund, as well as highlighting £325m of NHS monies (4.2% of core revenue resources) invested in local authorities through formal resource transfer arrangements. Previous Health Committees have noted the difficulty in monitoring the use of resource transfer monies. Furthermore, NHS Highland, in its return, indicated some of the additional issues now facing MSPs in monitoring NHS finances in the light of their new arrangements to transfer total community budgets between the NHS and Highland Council under their lead agency agreement. We understand that an additional £8m of NHS funding has been transferred to Highland Council to fund the delivery of delegated child health functions in 2012-13. We are not yet clear how this will be accounted for within existing national monitoring arrangements and think it worth highlighting that the partnership agreement between parties in Highland only details financial monitoring arrangements for the first year of a five year agreement. If we are to ensure that limited public sector investment in health and care services delivers against agreed outcomes efficiently it will be important to ensure, as the integration agenda progresses, that arrangements are clearly in place to monitor and evaluate the use of monies that are transferred or pooled between agencies. Financial balance in the long term Finally, while the Committee’s work is focused specifically on NHS Board plans for 2012-13, it may be worth considering the underlying recurring position (both planned at year-start and delivered at year-end) in future iterations of the survey. This would further help to indicate whether core funding is sufficient to cover core services and provide a vital overview of the ongoing financial sustainability of each NHS board. For more information, please contact Elinor Jayne, Parliamentary and Media Officer on 0131 662 6172 or elinor.jayne@rcn.org.uk

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http://www.rcn.org.uk/__data/assets/pdf_file /0004/352741/Taking_the_Pulse_of_NHS_ Scotland.pdf 2 http://www.audit- scotland.gov.uk/docs/health/ 2011/nr_111215_nhs_overview.pdf 3 Break-downs of planned expenditure in 2011-12 LDPs show clinical and non-clinical pay accounting for between 40.4% and 51% of boards’ total planned gross expenditure. For the boards giving evidence the percentage of planned gross expenditure on pay was: NHS Western Isles’ (40.5%): NHS Lanarkshire (43.1%); Dumfries & Galloway (46.4%), and NHS Greater Glasgow & Clyde (49.7%). The Monthly Monitoring Returns do not, on their own, explain this variation. 4 We expect workforce projections for the current financial year to be submitted by boards to Scottish Government by June 2012. 5 The Scottish Government announced £7761.3m of core funding to territorial boards for 2012-13 on 10 February 2012. 6 See: http://isdscotland.org/HealthTopics/Finance/Costs/

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