NHS FIFE

Report to the Finance and Resources Committee on 25 March 2014

FINANCIAL FRAMEWORK 2014/15 AND LOCAL DELIVERY PLAN

1.INTRODUCTION

The Financial Framework and Local Delivery Plan (LDP) (Financial Annex) for 2014/15 requires to be approved by the Board, based on recommendations from the Finance and Resources Committee, to allow for opening budgets to be issued to managers and for the LDP to be submitted to the Scottish Government for their approval.

A draft financial plan was considered by the Committee at its meeting on 26 November 2013. This paper updates the information contained within the previous paper and highlights the financial challenge relating to the achievement of a breakeven position in the financial year 2014/15. The paper considered by the Committee in November is attached with revised appendices 2 and 3 provided, reflecting the updated position. Figures which have changed are highlighted in the original paper.

2. PROGRESS

Since the previous report, the Board has received its Initial Revenue Allocation for 2014/15.

Since the previous report, considerable work has been undertaken to ensure that all known and identifiable changes in expenditure have been considered for inclusion within the framework. Staff within the finance directorate have reviewed the existing budgets and estimates for Pay Awards and cost inflation.

3.REVENUE RESOURCE ALLOCATION (RRL)

The Board has received an initial RRL of £557.296m. This represents an increase of £17.823m over the recurring baseline for 2013/14. This allocation is made up as follows:

£m

Recurring Baseline 2013/14539.473

Uplift at 2.69% 14.495

NRAC 4.028

Change Fund (0.700)

£557.296m

Based on the updated NRAC projections, NHS Fife is still £4.1m below its NRAC target allocation. The distance NHS Fife is away from overall Parity had reduced based on a 2014/15 model, as a result of the incorporation of 2011 census data.

The Board’s estimated total income of £687.749m also includes £64.823m of additional allocations to be received in year, £32.870m of Family Health Service Non-Discretionary income, £29.741m of Miscellaneous income and £3.091m of Dental charges.

Draft financial plans were submitted as part of the draft LDP to SGHSCD.

  1. BUDGETS FOR 2014/15

The financial plan for 2014/15 makes appropriate allowances for Pay and Price movements and incorporates a range of other adjustments.

The following assumptions have been included in arriving at the estimated budgets for the year:

  • Pay Awards – in line withPublic Sector pay recommendations, a 1% uplift in Pay Scales has been assumed, along with a £300 uplift to full time staff earning less than £21k and pro-rata for part time staff on the same pay scale range.
  • Direct Medical Supplies – an uplift of 4% has been provided to cover basic price inflation.
  • Hospital Drugs – a 4% uplift has been applied. This is expected to meet growth estimates in volume and price of existing drugs. A further £2m has been identified to meet the cost of new drugs identified by the Scottish Medicine Consortium.
  • GP Prescribing – an uplift of 4% on existing budgets has been provided for Prescribing.
  • Energy – based on current information on contracts from National Procurement a 10% uplift has been included.
  • Rates – a 2.7% increase to reflect a number of changes including the reduction in discount percentage for unoccupied premises.
  • General Supplies – a 1% uplift has been included.
  • Other NHS Service Level Agreements – as per previous years where nationally an uplift has been agreed based on the minimum RRL uplift, a 2.7% increase has been included.
  • Voluntary Organisations – a 1% uplift has been included.
  • Resource Transfer – a 2% uplift has been included based on a national agreement.
  • Other Non-NHS Agreements – this is largely payments to Fife Council which has been uplifted by 2%.
  • Reserves and Developments – no uplifts have been included for items under this heading.
  • The finance agreement in respect of the GH&MS new build and the St AndrewsCommunityHospital has been uplifted by 3.0% in line with the estimated rate of RPI for February.

The Plan includes additional full year funding for costs initially incurred and funded in 2013/14. These include:

  • Scottish Medicines Consortium £2.0m
  • Treatment Time Guarantee£0.504m
  • Service Agreements with NHS Tayside and ForthValley£0.294m
  • Glenwood Health Centre – Revenue Consequences£0.150m
  • External Works£0.100m

Funding for the Adult Change Fund (£700k), Nursing Interns (£80k) and Tayview Learning Disabilities (£82k) have been removed based on the 2013/14 plan and the assumption is that the expenditure will cease.

Other additional costs which were previously identified either from Local, Regional or National initiatives are included. The major elements are shown below:

  • Unscheduled Care Plan (LUCAP)£2.704m
  • Service Agreements£0.800m
  • Consultant in Emergency Care£0.100m
  • Care of Veteran Amputees£0.140m
  • Wheelchairs£0.058m
  • Regional Endoscopy Unit (NHS Fife Contribution)£0.625m
  • Board Chief Executives approved National Schemes£0.361m
  • Police Custody Healthcare (part year)£0.167m
  • Salaried Dental Service£0.300m
  • GP Out of Hours National Insurance£0.250m
  • GP Support to Community Hospitals£0.250m (n/r)
  • Diabetic Waste£0.170m
  • Adult Healthy Weight£0.110m

New additional costs which have been identified since the previous paper to the Finance and Resources Committee include:

  • ScotSTAR£0.107m
  • Carbon Reduction Credits£0.108m
  • Family Health / Vulnerable in Pregnancy£0.075m
  • Medical Trainees (part year)£0.140m

5.PROPOSED BUDGETS

The overall initial budgets for the year are shown in the attached appendix 1 for the main service areas - £687.749m.

The budgets listed in Appendix 1 result in a breakeven position being shown for the year, subject to £6.006m of efficiency savings being achieved.

Efficiency savings will have to be identified against individual delivery units and service areas.

The attached appendices 1(a), 1(b), 1(c) and 1(d) provide a breakdown of some of the key figures within the budget.

Appendix 1(a) provides details of expenditure with other Health Boards within Scotland, as well as the total cost of activity with Health Authorities in England, Wales and Northern Ireland (OATS) or Unplanned Activity with either Health Boards or the Private Sector (UNPACS).

Appendix 1(b) provides details of ongoing expenditure commitments funded either through additional time-limited allocations from SGHSCD or from the Boards baseline funding.

Appendix 1(c) lists the new investments at either a local, national or regional level.

Appendix 1(d) lists the service areas where carry-forward of 2012/13 allocations are required to meet the specific requirements of the allocations.

6.EFFICIENCY SAVINGS

The previous papers provided to the Finance and Resources Committee in November identified that £5.165m of cash releasing savings required to be delivered in 2014/15 to achieve a breakeven outturn.

The updated level of savings required to achieve breakeven in 2014/15 is £6.006m, comprising a new in-year savings requirement of £5.053m and a carry forward savings requirement of £0.953m, arising as a result of non-recurring savings delivered in 2013/14. The overall increase compared to the first draft of the plan relates to the identification of additional developments in 2014/15 which were not identified for funding in the first iteration. A high level summary of how these savings will be achieved is shown below.

£’000
1% savings within Clinical Delivery Units / 3,002
3% savings achieved corporately
1% savings from Estates and Facilities
Prescribing Savings / 803
440
1761
Total / 6,006

NHS Fife has a robust process for the identification and achievement of efficiency savings, managed through the Programme Management Office. Work continues to identify these savings in full, although good progress has been made across delivery units and within the Prescribing budget to deliver against these savings targets in 2014/15. Howeveran element remains at risk for delivery and progress towards achievement for both cash and non-cash savings will be closely monitored and reported to both the Finance and Resources Committee and to the Board throughout the year.

In order to mitigate against the risk of a shortfall against the savings target, NHS Fife has commenced the process to identify additional recurring and non-recurring savings beyond the 3% corporate target which can be achieved in 2014/15 to support the overall achievement.

  1. LONG TERM FINANCIAL PLANS

The long term financial plans have been revised to take account of known changes at this time to the planning assumptions (revised plans appendix 3).

Assuming the level of savings required to be made in 2014/15 are made on a recurring basis, then additional savings of £8.8m and £10.9m would be required to be delivered in 2015/16 and 2016/17 respectively to ensure a breakeven position.

The increase in future years savings is due to changes to Employers Pension Contributions, National Insurance changes and the Board now being closer to NRAC Parity.

8. LOCAL DELIVERY PLAN – FINANCIAL ANNEX

The draft LDP Financial Annex is attached and is required to be submitted as part of the Boards LDP submission. The Annex is a summary of the information contained within the Financial Framework and is not routinely issued to Board Members as it does not reflect management reporting lines.

The Board is however required to approve the submission of the LDP to SGHSCD.

9. RECOMMENDATIONS

The Finance and Resources committee is asked to:

  • notethe update to the LDP and Financial Framework;
  • recommendto the Board the approval of the 2014/15 Financial Framework and LDP Financial Annex; and
  • recommendto the Board,Opening Budgets for 2014/15

CHRIS BOWRING

Director of Finance

25March 2014