NES NES/15/24
Item 8b (Enclosure)
March 2015
NHS Education for Scotland
BoardPaper Summary
1.Title of Paper
Draft NES budget for 2015/16 and beyond
2.Author(s) of Paper
Audrey McColl, Acting Director of Finance
- Purpose of Paper
To present to the Board the draft Budget for 2015/16 and our 3 year financial plan.
We were required to submit our draft LDP and Financial Plan to SGHSCD on 13/2/15. The figures contained within this paper have been used to develop that submission. The draft budgetwas then discussed by the Executive Team on 24th February and by the Finance and Performance Management Committee on 26th February. Any proposed amendments from these reviews have been incorporated within this paper for presentation to the Board on 10th March. Our final LDP submission is then required to be submitted to SGHSCD by 13th March 2015.
4.Key Issues
NES has had an uplift in funding of 1% confirmed for 2015/16, but has had its baseline reduced by ‘efficiency savings’ of £1.5million. This means that we were not permitted to retain the efficiency savings for reinvestment as they were removed from our core funding and retained by Scottish Government. The net result was a total uplift of £2.5m or 0.33%.
Against this uplift we have had to plan for pay pressures on our own payroll and on the budget for our training grade establishment of 2.4% with a total price tag of £6.1m. This equates to 1.5% of our baseline which has had to be managed against a total uplift of just 0.33%
We have adopted a number of measures to enable us to cover the gap of £3.6m between our uplift and pay pressures. These have included additional efficiency savings, deletion of agreed vacant posts, and a reduction to the ACT budgets of 1%.
We have also sought to identify funding for a small number of required investments, and to cover other unavoidable cost pressures.
We are able to present a balanced budget overall for 2015/16 but this is achieved through using non recurrent resources to manage a modest recurrent deficit of approximately £328k.
The position for 2016/17 is likely to be extremely challenging, primarily as a result of the anticipated withdrawal of the rebate on employers national insurance contributions in 2016.We will require an uplift of 2.6% to be able to manage pay pressures alone.
5.Educational Implications
This budget underpins the activities set out in the Local Delivery Plan which is included on this agenda for consideration.
6.Financial Implications
This paper indicates how the resources available to us will be deployed in 2015/16 to deliver the objectives set out in our LDP and Corporate Plan.
7.Which NES Strategic Objective(s) does this align to?
The budget underpins all our strategic objectives.
8.Impact on the Quality Ambitions
The education and training that NES provides/commissions, and which is supported by this budget, will have an impact on all the Quality Ambitions.
9.Key Risks and Proposals to Mitigate the Risks
The key risks associated with the proposed budget are as follows:
Risk / Proposal to MitigateNES has a history of generating underspend, particularly as a result of vacancies in our Training Grade establishments; and increasingly through the impact of vacancies and lead time to fill vacant posts in our own establishment. / The budget includes some estimates of underspend as a result of training grade vacancies. This amount is considerably reduced on previous years reflecting changes in how we manage these establishments.
We have not anticipated any slippage on our own staff establishment but plan to make arrangements to review the position with a view to being able to provide additional non recurrent investment at an early stage in the new financial year.
Risk that Training Grades do not underspend by the amounts assumed in this budget / Estimates are prudent and take into account anticipated increases in funded posts from August 2015 There may be some movement between different TG types but we consider that we will be in a position to manage the overall position.
There is an underlying recurrent deficit on the budget / Given the significant financial pressures being managed in year it is inevitable that there is pressure on the recurrent position. We believe that this position can be managed.
The position beyond 2015/16 is likely to be very difficult to manage as a result of the increases in NICs / Our LDP submission to SG will indicate the level of uplift required to manage pay pressures in 2016/17.
10.Equality and Diversity Impact Assessment
An assessment has taken place of all the areas where savings are proposed and this has not identified any reduction to our services.
11.Recommendation(s) for Decision
The Board is requested to review, and subject to any agreed changes, to approve the draft budget and financial plan.
A McColl
4/3/15
DRAFT NES BUDGET FOR 2015/16 AND BEYOND
1Introduction
The purpose of this paper is to:
- Set out the background & context to the NES budget for 2015/16
- Describe the process by which the draft budget for NES for 2015/16 and beyond has been developed.
- To identify areas of cost pressures and risk where provisions have been made
- To highlight areas where new elements of expenditure is proposed on a recurrent or non recurrent basis.
- To seek approval from the Board for the budget.
2Key budget parameters for 2015/16
2.1Anticipated NES income.
The draft Scottish Budget was published on 9th October 2014.
The draft budget included uplifts for Territorial Health Boards of 2.7% for 2015/16 and differential uplifts and savings targets for Special Health Boards with an expectation that once again 4 of the Special Health Boards: NES, NSS, Health and HIS will deliver cash releasing savings in the form of budget reductions to support spending on health priorities elsewhere. Details of the allocations and % changes in RRL for Special Health Boards are shown in the table below.
Special Boards / 2013/14 / 2014/15 / 2015/16 / % change 2013/14 - 2014/15 / % change 2014/15 - 2015/16NHS Waiting Times Centre / 44.7 / 45.2 / 46.0 / 1.12% / 1.77%
NHS Scottish Ambulance Service / 207.6 / 209.7 / 212.1 / 1.01% / 1.14%
NHSStateHospital / 33.6 / 33.9 / 34.2 / 0.89% / 0.88%
NHS 24 / 61.5 / 62.1 / 62.7 / 0.98% / 0.97%
NHS National Services Scotland / 281.7 / 280.5 / 283.3 / -0.43% / 0.99%
Healthcare Improvement Scotland / 15.9 / 15.2 / 15.2 / -4.40% / 0.00%
NHS Health Scotland / 18.5 / 17.7 / 18.0 / -4.32% / 1.69%
NHS Education for Scotland / 390.4 / 391.3 / 392.6 / 0.23% / 0.33%
It should be noted that the detailed allocation for NES indicates an uplift of 1% in 2015/16, with savings of £1.5m to be returned to SGHSCD, £0.5m on a non recurrent basis. The savings to be returned are top sliced from our baseline funding and can not be retained for reinvestment. The amount of £1.5m brings the total savings we have delivered over the last few years to £23.5m or 5.8% or our anticipated baseline for 2015/16 (14% of baseline excluding training grade salaries).
2.2Anticipated Cost Pressures
In approaching budget planning for 2015/16 all Boards were advised to plan on the basis of a 1% uplift on pay costs arising from an anticipated cost of living award; and a 2% increase in employer’s superannuation costs arising from the actuarial valuation of the NHS Superannuation Scheme. In early December we were advised that the actual increase in employer’s superannuation costs would be 1.4%.
The Board will be aware of the significant amount of the NES budget (61%) which is committed to paying the salaries of doctors, dentists, pharmacists, clinical psychologists and others while they are in training. As a result the increases in pay and employers costs create a cost pressure of £6.1m on the NES budget, which we have had manage against a total increase in income of £2.5million, as set out in the table below.
Total Expenditure£’000s / Cost pressure included
£’000s
Trainee related pay expenditure / 257,800 / 5,400
NES staff payroll / 34,100 / 700
TOTAL NES PAY PRESSURES / 291,900 / 6,100
Total
£’000s / Uplift *
£’000s
NES Total SGHSCD income / 420,300 / 2,500
Savings required to balance pay pressures alone / 3,600
Note: * uplift is stated taking account of the £1.5m reduction in our baseline to cover efficiency savings.
3Budget Preparation for 2015/16
We released indicative budgets to Directorates in October 2014, to enable them to start planning and allocating resources, including staffing, to key deliverables for 2015/16. In preparing these operational budgets, we recognised that we would need to adopt a careful approach to identifying savings which would not disadvantage those Directorates with predominately staffing costs and very low non pay budgets. We therefore took the following approach:
- The full anticipated cost of pay and superannuation increases were allocated to Directorates to ensure that Directorates with little resourcing flexibility were not disadvantaged by having to identify efficiencies to meet these costs. In the draft budget detail attached at Appendix 1 the Directorate allocations still include the full anticipated 2% cost increase which we originally planned for. The subsequent 0.6% reduction, amounting to £1.4m has been included as a lump sum adjustment before arriving at the figure for Funds Available and will be adjusted against individual Directorates before the approved budget is allocated.
We then sought to balance the cost of providing funding for the increased pay costs by:
- Adjusting indicative pay budgets for each Directorate; to remove the pay costs associated with long term vacancies, and non recurrent posts with no funding commitment beyond March 2015.
- Adjusting indicative budgets for each Directorate by the balance of the savings identified for each as a result of the procurement transformation.
- Issuing indicative non pay budgets for all Directorates based on 2014/15 budgets, with adjustments being made against budgets that had consistently underspent.
Further measures to achieve a balanced budget at the corporate level have included:
- Negotiating a reduction in the recurrent savings target required by SGHSCD, to £1m with the balance of £500k to be achieved non-recurrently.
- Identifying additional recurrent savings of £341k through the voluntary severance scheme.
- Agreeing an increase of £500k in our non-recurrent carry forward into 2015/16.
We have also assumed a 1% reduction in the sums we make available to territorial boards for the Additional Costs of Teaching (ACT). This is funding which is made available towards the direct teaching cost of undergraduates withinthe NHS. NES has managed this funding on behalf of the Government since 2004/05. In 2014/15 our total budget for Medical and Dental ACT stood at £89.4m. In identifying measures to meet the budget pressure identified at 2.2 it has been necessary for us to consider all lines of our budget. Our priority has been to protect the basic salary budgets associated with Training Grades (including making provision for full pay pressures). We have therefore taken the view that there is scope for us to contribute towards the total cost pressures of £6.1million through a contribution from the Medical and Dental ACT budgets. This is based on the following points:
- Over the last few years these budgets have been uplifted in line with any uplift received by NES, despite NES having to deliver savings of £22m.
- NES has also provided considerable sums in non recurrent Medical and Dental ACT funding to NHS Boards over the last few years.
- We have evidence that a number of Boards struggle to identify how they are going to commit their ACT allocations to educational support.
- We have proposed to the Medical ACT working group that in view of the requirement to manage pay pressures (largely driven by trainee salaries) of 1.5% against an uplift of 0.33% we should apply a small (1%) reduction in Medical ACT – equivalent to an overall budget saving of 0.18%. This has been received without significant levels of concern. What is causing more concern is the likely changes in allocations due to the move to amethodology based on Measurement of Teaching (see below).
- 2015/16 will see us moving the Medical ACT allocation model to one based on Measurement of Teaching. Funding to NHS Boards is currently allocated using a model based on university student weeks. The student week total equated to the numbers of students multiplied by the number of academic weeks in each year of a school’s curriculum.It is a two stage model, stage one allocates funding to medical schools on the basis of funded student places while stage two distributes the funding to NHS Boards within the medical schoolarea based on their share of student week activity.
NES has been working on a Measurement of Teaching (MOT)project for a few years in order to better identify the actual teaching taking place in NHS settings and by whom. From 2015-16, this data will now be used at stage two of the allocation model instead of the student week data.We propose to accompany the reduction of 1% in the total allocation with the provision of some non-recurrent funding, linked to key criteria, to smooth this transition.
- The above points largely apply to Medical ACT, we do not foresee any particular issues in applying the same approach to Dental ACT. Boards have benefitted from substantial amounts of non-recurrent Dental ACT funding over the recent past and a reduction in Dental ACT is deemed to be manageable. The prospect of a 1% reduction has already been discussed with the Glasgow and Dundee Dental schools.
Finally, as in previous years, we have sought to estimate, and build into our budgetary considerations, an amount to cover variances between training grade budgets and actual expenditure. We have anticipated £1m underspend on Dental Training Grades, but have noted that a move to national recruitment from 2016 is likely to reduce this amount for 2016/17. We have also anticipated an underspend of approximately £1m on Medical Training Grades. This amount is significantly lower than in previous years, and reflects the fact that we are seeking to manage our training establishment on a WTE basis, in line with Scottish Government policy, which will involve anticipating less than full time vacancies and seeking to recruit to additional posts where appropriate. This change will impact on our budgets from August 2015 and the budget reflects this.
4NES Financial Position for 2015/16
4.1The overall position
The outline draft budget position for NES for 2015/16 is attached at Appendix 1. Appendix 2 contains a summary of what activity is supported in each Directorate (it should be noted that all key targets are included in the Local Delivery Plan). The key elements of the draft budget are outlined below.
4.2Total anticipated allocations
This budget includes all confirmed income allocations for 2015/16. It does not include allocations expected but not yet confirmed.
The budget includes anticipated carry forward of £1.0 million from 2014/15 into 2015/16.
4.3 Expenditure
The expenditure detailed against each Directorate is based on indicative budgets and has not yet been adjusted for savings resulting from the Voluntary Severance Scheme, or for the reduced increase in superannuation costs.
4.4 Provisions
The provisions line in the budget is used to set aside amounts of money which it is considered will be required to fund aspects of NES business, sometimes in advance of detailed plans or firm estimates being available. The amounts included in our provisions for 2015/16 are set out in the table below:-
Provisions Summary / Recurrent£’000s / Non Recurrent
£’000s / Total
£’000s
Funding for anticipated costs of the redeployment register and a further round of voluntary severance / 133 / 400 / 533
Funding for transitional period of Digital Programme / 208 / 182 / 390
2nd year of funding for Scottish Improvement Science Collaborative / 150 / 150
Implementation of Scottish Wide Area Network (SWAN) / 87 / 87
Pharmacy Educational Supervisors (pending confirmation of funding from SGHSCD) / 120 / 120
Provision to cover costs of new point of care resources for e-library (currently in tender process) / 97 / 97
Health and Social Care Integration provision / 43 / 43
Funding to support SG initiative to increase employment of disabled staff (part year impact – full year of £18k for 2016/17) / 18 / (9) / 9
Anticipated Top slice of income from Dental Portal / (58) / (58)
576 / 795 / 1,371
4.5Voluntary Severance
Total recurrent savings from Voluntary Severance, net of any approved transitional backfill arrangements, amount to £341k. This amount will be removed from individual Directorate budgets in order to support corporate priorities.
4.6Funds Available
This line in the budget shows, after the inclusion of all items above, funds available of £493k. This breaks down into a split into a recurrent deficit of £871k and a non recurrent surplus of£1,346.
4.7ACT Funds
This line shows the funds released from the proposed 1% reduction in Medical and Dental ACT funding.
5Planned Additional Expenditure
The resources identified at 4.6 and 4.7 above have been allocated to support a small number of priority investments as follows:-
Recurrent £’000s / Non Recurrent £’000s / Total£’000s
Funds required to respond to regulator and government priorities:
Additional quality manager post in dental to respond to increased regulator requirements / 52 / 52
Specialist lead DCP post to manage post-qualification for dental nurses / 31 / 31
Additional quality management posts in medicine to respond to increased regulator requirements / 75 / 75
Additional Medical Education Lead sessions (2WTE) to prepare for the GMC 2017 visit.(76 triggered visits and 119 scheduled visits) / 250 / 250
Consolidation of contingent staff posts currently supporting education for quality improvement / 95 / 95
Support for the QI Hub / 31 / 31
Funding to support administration of Tier 2 Visas / 22 / 22
244 / 312 / 556
Funds to support continued organisational development and improvement
Fees and other costs to collect full occupation data in remaining NES properties; and to implement our property strategy in Aberdeen / 105 / 105
Funds to cover advice and support in updating Business Continuity Plans / 36 / 36
Funds to purchase and maintain Business Continuity Software. / 10 / 20 / 30
Extension of 2 fixed term posts in support of organisational performance improvement and recognition of some non pay pressures / 4 / 49 / 53
Funding for Organisational development priorities / 14 / 14
Extension to the fixed term post supporting the harmonisation of job descriptions project / 13 / 13
Sub Total / 14 / 237 / 251
Funds required to support cost pressures not otherwise accommodated
Recognition of non pay pressures arising from the dissolution of EDD / 27 / 27
Recognition of budgets to support NES sponsorship of awards / 18 / 18
Funds to cover anticipated additional service charges at 2CQ / 48 / 48
Sub Total / 93 / 0 / 93
GRAND TOTAL / 351 / 549 / 900
6Budget Summary
Taking into account the investments outlined above the draft budget indicates £487k uncommitted. We are currently involved in an exercise to consider how we can usefully use this funding to offset some of the transitionary issues in moving to the MoT method of allocating ACT (see section 3 above). This will include consideration of the requirements that we will make of boards receiving this additional funding.