Scottish medium term view and a ‘new deal’ for health boards


by Dr Ellie Roy, CIPFA's Health and Social Care Manager

The Scottish Government has published a medium term financial framework for health and social care, bringing together a number of policy initiatives designed to reform care delivery in Scotland. While it presents a challenging picture, the medium-term view and intention to monitor the sustainability of plans going forward is welcomed. In launching the framework the Cabinet Secretary for Health and Sport also announced a ‘new deal’ for health boards in Scotland.

In the current climate public financial management is more important than ever. Resources are becoming scarcer, which coupled with increasing pressures and demands on services, makes it more challenging to ensure that resources are effectively targeted. There is perhaps no sector where this is currently more obvious than in health and social care.  Medium-term financial planning has not been particularly well developed in the public sector, primarily due to ongoing uncertainties about political, economic and resourcing factors. Thus, the publication of a Medium Term Health and Social Care Financial Framework by the Scottish Government is particularly welcome, not least as it incorporates both health and social care – reflecting the move towards greater integration of these services. It also signals an intention to consider the financial sustainability and resilience of the sector in Scotland. By balancing the financial implications of policy objectives against constraints in resources, it should provide a basis for decision making, at both national and local levels. 

The Scottish Government's framework aims to paint a picture of the future revenue requirements across health and social care. It suggests that by 2023/24 assumed Barnett consequentials for health and social care will be £4.1bn higher than in 2016/17. However, given a 'no change' scenario the actual spend required in 2023/24 will be £5.9bn higher. Taking into account existing policies for reform and the associated investment and savings, it forecasts a 'gap' of £159m remaining in 2023/24. While some of the reform programmes are already underway, particularly in the area of integrating health and social care, the framework recognises that more progress is required to drive forward reform and deliver the residual balance. While the current framework does not incorporate capital requirements, it is understood that there are plans to produce a complementary capital strategy at a later date.

Due to the constantly changing nature of the financial environment in which it was constructed, it is perhaps unsurprising that there are elements which remain to be incorporated – most notably the recent changes to public sector pay settlements. However, the intention is to regularly update the framework to account for these elements, including assessments of local and regional delivery plans on achieving ambitions. Any medium-term plan should be a 'living' document, and updates can be as important as the strategy itself. CIPFA looks forward to working closely with the Scottish Government on the evolution of the framework going forward.

In recognition of the effort it will take for health boards to deliver the reforms outlined in the framework, and perhaps in response to the Auditor General’s report of ‘significant financial challenges’ being faced in two health boards earlier in the week, the Cabinet Secretary also announced a ‘new deal’ for health boards going forward. Rather than having to deliver a break even position at the end of each financial year, from 2019/20 Boards will have a three-year financial cycle over which to break even. If they are able to achieve this then they will be given 1% flexibility on their resource budget each year, allowing them to over or underspend. This will provide a similar degree of flexibility as already enjoyed by Integrated Health Boards (which are part of the local government accounting system). 

The Cabinet Secretary also announced that in order to allow boards to move forward on the three-year planning cycle, they would be given a ‘clean sheet’ from 2019/20, with all existing ‘brokerage’ loans written off, amounting to some £150m over the past five years (including the current financial year).   

Some have criticised this as rewarding financial mismanagement. However, the Cabinet Secretary stated the intention is to allow boards to be able to ‘focus their attention on delivering the measures set out in the health and social care delivery plan and this financial framework’ and to ‘maintain a strong focus on patient care and the delivery of services to patients that is safe, effective, person-centred and timely’. 

Whether the ‘new deal’ amounts to rewarding financial mismanagement or not could be debated. However, it provides a much needed flexibility for health boards to plan and manage their finances in the face of emerging pressures not always within their control, and should stand them in better stead to meet the challenges set out in the framework. Given the historical reticence in the public sector to undertake medium term financial planning, it is encouraging to see such an approach such as this being taken, and we would encourage other areas of the UK to consider the principles underpinning this initiative in order to inform the wider debate and consider their own financial resilience and sustainability for the future.

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