Wednesday 26 March 2014
The following statement, providing an update on the Health & Social Services Department's Financial Position, was delivered by the Health & Social Services Minister, Deputy Mark Dorey, to the States of Deliberation on Wednesday 26 March 2014.
Mr Bailiff
I am grateful for the opportunity to make this statement on the Health and Social Services Department's 2013 and 2014 financial position.
HSSD's final outturn position for 2013 was £112.1 million - an overspend of £300,000 against an authorised budget of £111.8 million. However, HSSD started this year with a budget of £108.1 million. I need, first of all, to outline the various changes to the Department's budget that were authorised by T&R in the course of 2013; and, second, to explain the size of the genuine overspend, which we believe to be around £1.6 million. I will also speak about the Department's position in regard to the financial transformation programme.
As I have said, the authorised budget for HSSD was £111.8 million at the year end, up from the original budget of £108.1 million. One third of this increase, or £1.3 million, was due to pay awards, which are centrally funded and added to budgets. Another £800,000 was due to the costs of severance, both general and strategic.
The remaining difference of £1.6 million between the original budget and the authorised budget is explained as follows: HSSD's budget was reduced by around £500,000 in respect of two centralisation projects - telephony and recruitment. This was offset by additional funding of around £800,000 from the budget reserve; which included funding a special situation concerning looked after children and for a small number of individual cases requiring significant levels of long-term specialist care which was reported in the October Budget Report. Most people requiring such care tend to be known to HSSD for some time, and budgets can be set accordingly; but there are also cases where people come suddenly into the care of the Department, for various reasons. Such unplanned placements can have a significant impact on HSSD's budget. But rather than build in a generous contingency, HSSD is working with T&R on the basis that, where it is not possible to fund this additional unplanned care from within budget, HSSD will apply to the budget reserve.
This leaves a difference of £1.3 million between the original budget and the authorised budget. From mid 2013, HSSD had been consistently forecasting an overspend against budget. Although the Department made significant efforts to contain costs and identify efficiency savings, particularly during the second half of the year, the projected overspend never dropped below £1.3 million. As such, at the end of 2013, HSSD wrote to T&R asking them to approve an overspend of £1.3 million, and this was done within their delegated authority. As all the year-end processes have now been worked through, we are now able to confirm that the final overspend figure was in fact £1.6 million, and I understand that there will be a proposition in the States Accounts for the additional £300,000.
HSSD has made considerable efforts to strengthen financial management and improve the consistency and quality of financial reporting, and the effects of that have already been felt. We have shared information regularly with T&R throughout the year, as well as updating States Members on the Department's financial position at the October Budget Debate.
HSSD has also made genuine progress with the Financial Transformation Programme in 2013. At the start of the year, the Department had to achieve a target of £3.29 million; of which, £0.9 million was carried forward from 2012. By the end of the year, HSSD had banked £3.26 million - only £30,000 less than the target - in recurring, full-year savings.
These savings were banked at various points during the year, so their in-year cash effect was less than their full-year value. HSSD saved £1.75 million cash during the course of 2013. This was £1.5 million short of the full-year savings. So if HSSD had been in a position to bank all of its savings at the very beginning of 2013, this would have brought the Department's overspend figure right down, from the £1.6 million I have reported today, to less than £100,000.
HSSD has an even greater challenge in terms of its FTP target for 2014. The Department is trying to achieve £4.7 million in savings, to deliver an overall budget of £104.2 million. HSSD is making progress, and has banked £0.8 million in the first two months of the year. We have identified further savings opportunities worth about £1.1 million that will be realised during the year; and are actively working to close the gap. However, as with 2013, savings will be gradually banked throughout the course of the year - which means that these will have a positive effect in terms of reducing HSSD's overall expenditure, but will not have a full year effect in the Department's financial outturn for 2014.
It is too early in the year to forecast what the Department's financial position will be at the end of 2014, and we know the year ahead will be a serious challenge. But HSSD will continue to strengthen its own financial management, to work closely with the Treasury and Resources Department, and to share information openly with States Members as the year progresses.
