Hampshire County Council
	Executive Member for Adult Social Care		Item 2
	19 January 2007
	Policy and Resources Policy Review Committee
	1 February 2007
	Revenue Budget 2007/08, 2008/09 and 2009/10
	Report of the County Treasurer and Director of Adult Services

Contact: Jon Pittam, (01962) 847400; [email protected]

Rea Mattocks (01962) 847200; [email protected]

Adrian Thorne, (01962) 847526; [email protected]

1. Summary

1.1 This report sets out the proposed Adult Services revenue budget for 2007/08, a provisional budget for 2008/09 and 2009/10 and recommends a revised budget for 2006/07. This report has been prepared in consultation with the Executive Member and will be reviewed by the Policy and Resources Scrutiny Committee. It will be reported to the Leader and Cabinet on 9 February 2007 to make final recommendations to County Council on 21 February 2007.

1.2 The budget proposals contained in this report are derived from the departmental business plan which has been developed to support the priorities of the Corporate Strategy.

1.3 The provisional budget set in February 2006 for 2007/08 was only 1.4% above the 2006/07 budget in cash terms. Consequently in September 2006 Cabinet agreed to an additional £6.0m being made available to reflect ongoing pressures. A similar approach has also been used for 2008/09 and 2009/10 taking the increase in each of the three years to 4.3% per annum.

1.4 The last financial year was an extremely challenging year for Adult Services because of additional care commitments which led to an overspend of £11.1m, which was funded centrally from balances and reserves at the end of the financial year. In the current financial year Adult Services have worked very hard to reduce the level of the overspend as well as moving forward on a modernisation programme which will also help financial recovery.

1.5 However the service is still faced with considerable ongoing pressures which impact on both the current year and in future financial years. These include unavoidable service pressures (for example demography and levels of care) and additional inflation. The target for the department is to recover financially by the end of 2007/08, but this will mean that the budget and the subsequent outturn for the 2006/07 will be in deficit. Provision has been made for the deficit from central balances.

1.6 The Adult Services' strategy is to modernise the service to improve outcomes for clients, enable adequate achievement against the Commission for Social Care Inspection (CSCI) performance framework and to achieve financial recovery. Consequently, to achieve medium and long term financial stability, it has been necessary to take an approach which fundamentally modernises and transforms the service, rather than taking short term measures, which although may make savings would impact on client safety and satisfaction.

1.7 It is the nature of these changes that they are more complex and require more detailed evaluation and planning. The savings identified are necessarily estimates at this stage and require further detailed analysis and firm action within plans agreed by the Executive Member before the start of the financial year. In addition there will also be regular reports to the Financial Recovery and Modernisation Group which is chaired by the Leader. The proposals will require robust project management to ensure implementation. To put the financial recovery savings into context the amount of savings required in 2007/08 is more than that originally included in the 2006/07 budget (£6.4m) and that proposed during 2006/07 for financial recovery (£4.5m, total savings £10.9m) and this will stretch the available resources (although as expected over the two year recovery period agreed with Cabinet).

1.8 In summary:

2006/07 Revised

· Within the current financial year steady progress has been made bringing the level of the overspend down from £19m which was the estimated overspend at the beginning of the financial year.

· The overspend target for the end of the financial year is predicted to be £10.9m.

· The saving targets set in the original budget and the additional financial recovery savings should broadly be met.

· Any unused contingency (targeted to be £1m) from 2006/07 be carried forward into 2007/08, but this depends on pressures between now and the end of the financial year.

2007/08

· Meaningful budgets have been set for the client groups at levels to meet current demand as well as demographic pressures

· Saving plans are ambitious but the service plans to closely monitor their progress during the financial year, report to Members on a regular basis and take remedial action where appropriate

· 2007/08 will be a year of significant modernisation of the service and will require significant project management

· The budget is constructed at the cash limit and allows for:

Category	£m
Pressures	19.9
Savings	(12.4)
Net Growth	7.5
4.3% Cash Increase	(6.0)
Use of Contingency	(1.5)
Balance	0

2. Comments of the Director of Adult Services

2.1 Background

2.1.1 The financial position relating to Adult Services is well documented, with substantial extra commitments and a resulting overspend in 2005/06 and the subsequent full year cost pressures of approximately £19m being brought forward into 2006/07. During the current financial year the overspend has been reduced by a combination of actions taken by management as well as the implementation of a financial recovery plan which has been agreed by and reported to Members on a regular basis.

2.1.2 Strong corporate support has been instrumental in developing and delivering a modernisation programme to reshape the way services are delivered. It is also acknowledged that financial support from other departments has been a factor in working towards financial recovery.

2.1.3 While the pressures of the financial year 2006/07 and their impact on the year 2007/08 and beyond are fundamental in this report, it is also important to acknowledge that there have also been substantial achievements in 2006/07 as well. These achievements have created significant capacity issues in programme management, which are being managed within the department.

(i) The Department was awarded 2 stars in the Commission for Social Care Inspection performance assessment, with progress noted on a number of fronts.

(ii) The target to reduce significantly the anticipated overspend predicted at the beginning of the financial year is moving in the right direction As highlighted in previous reports, the rate of savings from demand management is beginning to plateau as a core level of demand is reached. Continuing to reduce demand may lead to safety issues for clients, so further savings are now being targeted on unit costs, changing, improving and modernising services and enhancing independence.

(iii) 367 of the 500 new nursing home beds have been opened.

(iv) 2 further outdated homes have been closed and their residents accommodated in better provisions.

(v) Residents in the vicinity of HMS Daedalus were safely accommodated with assistance from 74 staff from the Department when the access to their homes was prohibited during bomb removal operations.

(vi) The Department is providing strong support to the Local Area Agreement in delivering the priority for reducing demand on nursing and residential care and NHS acute beds.

(vii) The Cabinet on 18th December agreed a modernisation programme to improve the options for older people to remain at home and to address the budget pressures which link to the financial recovery plan included in the budget for 2007/08 and the following financial years.

(viii) The new Departmental Management Team is now largely in place and will be in a better position to manage the recovery plan and actions required.

2.1.4 The financial picture for 2007/2008 and beyond remains extremely challenging. Delivery of the strategy for Adult Services will require considerable service reshaping and close and complex work with new and existing partners. Programme Management time and skills will need to be developed and some capacity and competency will need to be bought in.

2.2 The Strategic Direction

2.2.1 Cabinet agreed the three year strategic direction for the service in December which included the current context and the key drivers as well as the timetable for implementation. The key drivers and pressures are demography and the impact of an ageing population, the themes of recent policy, the need to maintain and improve performance, and the need to recover financially over a two year period.

2.2.2 The emerging vision for the service is to shift the balance from dependency to independence, and the focus from illness services to preventative services by promoting the well being agenda through healthy communities. Adult Services will focus targeted services and resources on those people meeting the eligibility criteria, but will work in partnership with other services to meet the wider agenda of improving well being. The key challenge for the service has been to bring the drivers together in a way which meets people's needs.

2.2.3 The budget contains proposals as part of the financial recovery plan to meet the challenges of the drivers and pressures set out above. The key elements of the proposals cover supporting people in their own homes and providing improved options for accommodation and care.

2.3 2006/07 Revised Budget

2.3.1 The service has worked very hard in the current financial year to reduce the level of the overspend from the beginning of the financial year. The reductions have been achieved through efficiency savings as well as the financial recovery plan outlined earlier in the year. The predicted outturn for the end of the year of a £10.9m overspend assumes some use of the contingency in the current year with an allowance for further pressures up until the end of March. In addition there is a request to carry forward the balance of the 2006/07 contingency to 2007/08 when pressures will mount for the service.

2.4 2007/08 - 2009/10 Budgets

2.4.1 Key priorities for Adult Services in 2007/08 will be:

(i) Enforcing financial accountability at budget holder level. Keys to this are setting budgets and allocating savings that are managed by accountable budget holders. An important element is to set budgets for the client groups set at current demand taking into account eligibility, and this is included within the 2007/08 Budget.

(ii) Implementing structural and service changes to improve efficiency. The capacity for expedient savings, such as vacancy management, are largely exhausted and some are unsustainable. It is imperative, therefore, that the longer term efficiency projects are progressed, recognising that these are more difficult to achieve and require specific and firm action plans.

(iii) Modernisation of services to achieve the aspirations of the green and white papers. This involves reworking how care is defined and delivered (moving from dependency to independence, illness to prevention), giving clients greater choice and control and fundamentally reviewing the "social care offer" (including how and by whom it is delivered). The challenge is to do this for the emerging social care population with its different expectations, whilst continuing to deliver to the current client group.

(iv) Specifically, modernisation will include the development of the Hants Direct and the subsequent remodelling of Care Management and the skills mix in the teams. One aspect of this approach is to ensure that people are introduced to universal local services (e.g those provided by Recreation and Heritage) rather than care managed into high dependency services. For those whose needs are more profound, short term re-ablement services will be offered to assist in regaining independence.

2.4.2 These priorities come with a number of key risks, including:

(i) Demographic pressures do not allow the Department to work from a constant baseline. Put simply, over the medium term, demographic pressures cannot be absorbed by service modernisation and efficiency alone. Managing demographic pressures in the absence of a substantial national response will be difficult, however it is recognised that cash limits in future years have been increased.

(ii) The savings required for 2007/08 are more than double those required for 2006/07.

(iii) Change often brings resistance with it. Individual service users have the right to challenge decisions that result in service change. Consultation on service changes bring about considerable concerns and significant levels of response. All of these consume staff time and therefore the pace is slower than might otherwise be desirable. Added to this is the statutory requirement for long periods of consultation prior to any change programme.

(iv) Capacity is required, both in terms of skills and time, to deliver the necessary changes. There is an urgent need to develop programme and project management capacity in Adult Services.

(v) Partnership working poses a number of risks. The need to deliver change in partnership can slow the pace of change. There are also risks relating to the ability and capacity of providers to be able to respond to the scale and pace of change. In addition, this places at further risk Adult Services' achievement of performance, given that some Commission for Social Care Inspection judgements are based on the performance of partners e.g. delayed discharges.

(vi) There are underlying pressures in the independent residential and nursing care sector arising from lower occupancy rates, higher standards and increased costs (including from increases in the national minimum wage at more than twice the rate of inflation for several years). Fee increases have been tightly managed (at or below inflation for a number of years), but there is a risk of loss of supply in the future either by closure, refusal to accept the Hampshire rate or inability to meet appropriate standards. The introduction of star ratings for homes will enhance the visibility of these standards. There are similar cost pressures in the domiciliary care market, but these are currently offset by a buoyant labour market. There are also pressures arising from Health's `agenda for change' where the costs of wage changes are at a much higher rate than inflation and are being passed on to Social Care.

(vii) The budget contains several significant risks for which no contingency is made:-

The full year effect of the 2006/07 increase in disputed cost for domiciliary care which results from NHS pay restructuring called "Agenda for Change" [£0.450k].

Potential costs pressures from moving to the Contact Centre, Hants Direct [£0.433k].

Impact of further savings required by Health on Social Care (no estimate at this stage).

2.5 Efficiency Improvements

2.5.1 Adult Services will generate efficiency improvements through its financial recovery and modernisation programme.

2.5.2 The key drivers for modernisation are national and local. At a national level, there are requirements derived from the Green & White Papers as well as the Local Government White paper. At a local level drivers include delivery of the well being agenda in Hampshire, introduction of the contact centre, Health modernisation and Primary Care Trusts restructuring and, critically, ensuring services are provided for the people of Hampshire within the cash limit. This will be achieved by developing structures that will allow services to be provided more effectively, in particular:

Ensuring services are customer and outcome focussed

Providing services through multi disciplinary teams, with single access points

Joint approaches with partners, particularly health, to well being and public health, commissioning, and efficient use of human, capital and financial resources.

Rationalisation of the use of accommodation, including co-location with health, to improve communication and to reduce costs.

Integrating back office functions

2.5.3 Where identified, efficiencies arising from these proposals have already been included in the budget proposals for 2007/08 and beyond in this report. However the majority of proposals have to be fully developed and the full level of efficiencies will be reported at a later date.

2.6 Contribution towards the Increased Cost of the New Pay Framework

2.6.1 The contribution to the Pay and Benefit Realisation from the service will come from management savings as a result of the restructure (£0.259m) and also (£0.491m) savings as a result of the Home Care modernisation.

2.7 Performance

2.7.1 While the rating of 2 stars is encouraging, there are concerns about the 2006/07 performance, which the Department is addressing. In order to just maintain the star rating, improved performance is required across a range of national indicators. Many of the indicators measure volume and are directly resource related. For example, C32 Help to live at Home measures the number of older people supported per 1,000 population. Other indicators measure the time taken to provide services. For example, D56 Services put in place within 4 weeks of an assessment of need. Tighter gate keeping including slowing down the delivery of care, can reduce performance in areas like this, making the 2006/07 performance, reported in 2007/08 more vulnerable.

2.8 Conclusion

2.8.1 These Director's comments have noted achievements and drawn attention to risks and pressures. 2007/08 will be an extremely difficult year. The financial recovery plan requires the delivery of unprecedented recovery savings of £9.343m and further efficiencies of £1.855m. The successful achievement of this programme is dependent on partners and other departments of the County Council as well as improving the project management skills and capacity of the Department.

2.8.2 While the National Settlement has yet to recognise the full extent of increasing cost pressures from demographic change and changes in the NHS, the additional £6m is a welcome assistance from the County Council. Nonetheless, this budget carries too many significant risks to provide members with absolute security for a balanced position by March 2008. These risks include the full delivery of all savings; the residual costs from moving to a contact centre; significant unresolved amounts claimed by an NHS trust; as well as pressures from demography and financial pressures in the NHS. Less quantifiable risks arise from the provisions of a service to vulnerable people whose needs vary with changing weather conditions and viruses and infections. The Department manages a moving picture which can blow financial recovery off course. It would, therefore, be prudent to manage the Department's cash flow across more than one year, in case any of these risks present a significant variance.

3 Budget strategy

3.1 A provisional budget for 2007/08 was agreed by the Cabinet in February 2006. This was based on the following principles:

· Increases for all services in accordance with the County Council's base budget rules.

· Additional increases for adults and children's social care to reflect the Government's spending plans for those services in 2007/08 in the Spending Review 2004.

· Redeployment within each service of any further cashable efficiency improvements identified in 2007/08 towards new priorities and pressures.

· No other provision for any new service developments unless funded by cashable efficiency savings.

· All proposals for additional spending, however financed, are accompanied by a summary business case containing clear financial and performance data setting out how performance will be improved and value for money achieved, and how it links to the priorities of the Corporate Strategy.

The inflation assumptions used to construct the provisional base budget for 2007/08 were:

· 2.5% for pay together with the planned increase in the employers' contribution to the Local Government Pension Scheme from 275% to 295% of employee's contributions.

· 2.5% for non-pay.

· Income to be maximised by reviewing charges in line with the average inflation on the related gross expenditure and introducing new income wherever possible, taking account of the powers to charge for discretionary services in the Local Government Act 2003.

3.2 Services are also required to identify annual efficiency improvements of at least 2.5% for the annual efficiency statement. These need to be integrated into budget planning and categorised into cashable and non-cashable. Cash savings in budget terms will be required to meet new pressures and service development proposals.

3.3 The principles and assumptions outlined in paragraphs 2.1 and 2.2 were reviewed by Cabinet in September 2006 and revised guidelines for the 2007/08 budget set to reflect changed circumstances, new priorities and additional information emerging since February. The revised guideline reflects:

· Pay inflation reduced to 2.25% in line with the Government's expectation of a downward movement in the level of public sector pay increases in 2007/08.

· Budget transfers in respect of the phased introduction of the contact centre Hants Direct.

· The need to make reductions in the workforce plan in order to contribute to the anticipated cost of the new pay framework.

· An additional £6m for Adult Services reflecting the continuing impact of demographic factors and inflation which brings the budget for Adult Services into line with the overall increase in the 2007/08 budget.

3.4 For this service, the revised guideline for the 2007/08 budget is £266.8m as shown in the table below:

	£m
Provisional budget for 2007/08	260.6
Base budget adjustments including inter-service transfers	1.8
Hants Direct	-0.9
Pay and Benefits benefit realisation	-0.7
Guideline redistribution	6.0
2007/08 Provisional guideline	266.8

3.5 Indicative budget guidelines for 2008/09 and 2009/10 have been set based on the following assumptions:

· Increases for all services in accordance with the County Council's base budget rules

· Additional increase of 4.3% for adult services and an increase for children's social care based upon 2007/08 passporting assumptions

· Redeployment within each service of any further cashable efficiency improvements identified in 2007/08 towards new priorities and pressures

· No other provision for any new service developments unless funded by cashable efficiency savings

· Pay inflation restricted to an average of 2% with no increase in the employers' contribution to the Local Government Pension Scheme

· 2.5% for non-pay

· Income to be maximised by reviewing charges in line with the average inflation on the related gross expenditure.

4. Budget guidelines

4.1 The budget guidelines for this service are:

For 2007/08	£266.8m
For 2008/09	£276.3m
For 2009/10	£288.2m

4.2 This report sets out the Adult Services Executive Member's responses to the guidelines. The report:

· Reviews the revised budget for 2006/07 (as set out in Appendices 1 and 2)

· Reviews the 2007/08 base budget which totals £258.9m (as set out in Appendix 3)

· Identifies £19.9m of growth, pressures and costs absorbed (as set out in Appendix 4)

· Proposes the redeployment of £12.4m of resources (as set out in Appendix 4)

· The increase of £6.0m allowed will be used to offset the difference of £7.5m leaving a balance of £1.5m which if agreed will be offset by a carry forward from the 2006/07 contingency, and future contingencies.

· Identifies efficiency savings of £6.5m, being 2.5% of the base budget (as set out in Appendix 5)

· Reviews the charges made by this service (as set out in Appendix 6)

· Proposes a detailed budget for 2007/08 (as set out in Appendices 7 and 8)

· Identifies the workforce implications of the budget proposals including plans for workforce reductions to contribute to the increased cost of the new pay framework (as set out in Appendix 9)

· Proposes a provisional budget for 2008/09 and 2009/10 (as set out in Appendix 10).

5. Revised budget

5.1 The cash limit for the revised budget 2006/07 is £258.3m. The calculation is shown in Appendix 1.

5.2 As a result of the overspend in 2005/06 and the subsequent full year effect of the overspend in the current financial year the department is presently implementing a two year financial recovery plan. Consequently the revised budget for 2006/07 will show a deficit. The planned deficit for the current year will be funded centrally and therefore will not be carried forward into the next financial year.

5.3 Since the beginning of this financial year the forecast overspend has been reducing. The projected overspend reported to the Executive Member as at 31 May 2006 predicted a £17.5m overspend and the latest position as at 31 October 2006 is £11.6m. There are signs however that the reduction in the forecast is slowing down and pressure is beginning to be seen on all the client groups. The majority of the planned financial recovery savings have been achieved and work continues to achieve all of the planned savings of £6.4m.

5.4 In addition further checks have identified an over ambitious estimate of numbers of clients leaving the service which means that the anticipated savings across the client groups are not as high as hoped. The net effect on the current year is estimated to be between £0.1m and £0.5m which will be a pressure during the rest of the financial year. This issue will be corrected for future budget monitoring.

5.5 Within the budget there is also a contingency of £3.0m being held to meet any unforeseen pressures as well as being held against any shortfalls in savings. To date in 2006/07 £0.4m has been committed as non recurring expenditure to maintain performance against the department's performance indicators. In addition some contingency will be used on further nonrecurring pressures during the financial year. This contingency will be included in the 2007/08 budget (subject to no recurring costs taking place in the rest of 2006/07 which would reduce the £3.0m being available in 2007/08).

5.6 Assuming the rate of reduction on the overspend has slowed down, and assuming some further draw on the contingency in the remainder of the financial year the deficit for the current year is estimated to be £10.9m, but this is subject to the impact of unforeseen winter pressures until the end of March. The balance of the contingency left at the end of the financial year could be carried forward as a one off to 2007/08 to meet the net cost of the pressures in that financial year. This would be a prudent approach given the uncertainty of the achieving all of the financial recovery plans in 2007/08. If this approach is agreed the Executive Member for Adult Social Care recommends to Cabinet that the balance of contingency at the end of the financial year be carried forward as a one off to 2007/08.

5.7 A summary comparing the revised budget with the cash limit is set out in Appendix 2. At the beginning of the financial year it was apparent that the overspend of £11.1m from 2005/06 would have a significant full year impact on 2006/07 estimated to be around £19.0m. The first budget monitoring at the end of May showed an overspend of £17.5m and since then the overspend has reduced to it's current level of £11.6m. The end of year prediction shows an overspend of £10.9m.

5.8 During the current year service users were reviewed against eligibility criteria as well as to see whether a more cost effective package could be put in place to meet their needs. All new referrals were closely screened to divert as many as possible to lower cost community services. Only those meeting the eligibility criteria were processed through the care management system. This process will see an increase in the average costs of packages of care as service users steadily increase in dependency levels.

5.9 The major variations are set out below:

Older People (£8.5m overspend)

5.10 The overspend on Older People relates to the significant pressures within the budget for purchased services for residential, nursing and domiciliary care. The service area with the most pressure is domiciliary care particularly for externally purchased care. However variances have reduced since April particularly in nursing, residential and domiciliary care.

5.11 In addition to robust review and screening of referrals the in-house home care service piloted a model of reablement for older people. All new service users have a short term six week intensive package with an end date and review. Results have shown over 40% require a lower level of service or no service at review. Those requiring long term care following the review are provided with care by a cost effective independent sector package.

People with Physical Disabilities (£1.9m overspend)

5.12 The overspend on People with Physical Disabilities relates to pressures within the budget for domiciliary care as well as pressure from the demand brought forward for 2005/06, changes in continuing care criteria and changes in physical care needs which can no longer be met by a community care package for residential and nursing.

5.13 From April 2007 the service will be integrated with Older People to ensure a consistent approach to the provision of service for vulnerable adults irrespective of age. It is envisaged that some of the over commitment in costs of packages will be reduced and consequently the budget adjustment for 2007/08 has been reduced by £0.2m.

People with Learning Disabilities ( £2.7m overspend)

5.14 The overspend on People with Learning Disabilities has reduced since the beginning of the financial year but remains under pressure. These pressures relate to the following issues:

· For Section 28A agreements there are increased costs from additional needs and lack of clarity about funding successor placements as well as higher levels of needs of existing placements.

· Service users who would have gone into residential care/nursing care are being supported more intensely at home or in supported living making a proportionally higher increased pressure on domiciliary care budgets rather than residential budgets (which has increased as well).


· Higher numbers of transitional service users from Children's Services reaching 18 and requiring funding from Adult Services. These individuals also have higher levels and often very complex needs.

· A number of high need service users where continuing care eligibility is being challenged by Health.


People with Mental Health Needs (£0.5m saving)

5.15 The under spend on People with Mental Health Needs relates to short term vacancy management leading to savings in assessment and care management and savings in residential care and day care. These saving will not be sustainable in 2007/08.

Management and Support and Other Areas (£1m saving)

5.16. The under spend on Management Support and Other relates to planned savings including vacancies held in Strategic Commissioning, Partnership and Performance and Resources, only essential purchases in respect of renewal of office equipment, reductions in training expenditure, vacancy management, removal of relocation allowances and reductions in compensatory added years. In line with the authorities reporting requirements this is apportioned across all client groups. Consequently the variations in Appendix 2 do not show Management and Support costs separately.

5.1 The pressure on Older People, People with Physical Disabilities and People
with Learning Disabilities are reflected in next years service pressures.

6 Base budget 2007/08

7.1 A base budget for 2007/08 has been prepared which contains the current financial policies of the Council, in order to provide a starting point from which decisions can be made. The base budget for this service is £258.9m at outturn prices.

6.2 Appendix 3 shows the make up of the base budget.

6.3 Overall, the base budget includes a net reduction in expenditure at constant prices of £3.4m. The main variations are a reduction of -£2.7m for exclusion of non recurring funding in the 2006/07 budget, -£0.9m reduction for the transfer of budgets to Hants Direct and a +£0.2m increase for changes in grant funding levels and other miscellaneous changes.

6.4 The budget strategy allows for growth in addition to this of +£8.2m which results in a provisional budget of £267.1m. The difference of £0.3m from the revised guideline in paragraph 2.4 principally relates to the subsequent inclusion of the mental capacity grant. The +£8.2m increase comprises planned national formula grant (formula spending share, FSS) growth of +£2.7m, redistribution of guideline amounts of +£6.0m offset by pay and benefits realisation savings and other adjustments of -£0.5m as shown in the table below:

	£m
Base Budget 2007/08	258.9
FSS Growth	2.7
Pay and Benefit Realisation and other adjustments	-0.5
Guideline Redistribution	6.0
Provisional 2007/08 Budget	267.1

6.5 The planned FSS growth of £2.7m will offset the loss of non recurring 2006/07 funding with staffing efficiencies being used to ensure that the pay and benefits realisation savings will be met. This means that £6.0m will be available to fund the net Adult Services pressures after efficiency improvements.

7. Service pressures, redeployment proposals and efficiency improvements for Social Care for 2007/08, 2008/09 and 2009/10

7.1 Adult Services is faced by a very challenging budget position both in the short and medium term. The aim is to recover financially by the end of 2007/08 by taking a number of actions relating to financial recovery and efficiency. In addition there are also a number of pressures which need to be taken into consideration which relate to demographic changes, setting budgets at a sustainable level for current demand and additional inflation over 2.5%.

7.2 However the financial recovery plan also has the important aims to modernise services to achieve better outcomes and value for money to aid sustainable financial performance as well as maintaining performance against the CSCI performance framework.

7.3 The Cabinet requires all services to consider and report on:

· cost pressures absorbed within the budget guidelines (including the additional £6.0m available to Adult Services)

· the redeployment of any resources required to offset any new spending priorities, or inescapable budget pressures, or legislative requirements which otherwise cannot be met within their budget guidelines

· annual efficiency improvements.

7.4 Details of cost pressures absorbed of £19.9m and redeployment proposals of £12.4m are included in Appendix 4.

7.5 As part of the ongoing process to ensure robust budget monitoring in 2007/08, it is intended to use both the client and costing information from this budget to further refine current unit costing information. Once the budget is agreed further work will be undertaken to analyse the relevant costs as a consequence of the decisions made (both in terms of pressures and savings), and then unit costs can be calculated from the expected numbers of clients. This can then form part of the regular budget monitoring and will mean that costs and demand can be analysed together rather than separately.

7.6 The major issues relating to pressures and savings are highlighted below.

Unavoidable Pressures

7.7 The budget includes unavoidable service pressures which can be categorised as demographic changes, higher current care levels than budgeted, new legislation, inflationary pressures and other changes.

7.8 The following table shows the impact on the budget (see Appendix 4 for the detail):

Pressures

Category	2007/08 Pressures £'000	%	2008/09 Pressures £'000 Cumulative	%	2009/10 Pressures £'000 Cumulative	%
Demographic Pressures	4,317	22	9,464	36	14,709	46
Higher Current Care Levels than Budgeted (To bring budgets back into line with current demand)	14,266	72	14,342	54	14,420	45
New Legislation	20	0	209	1	184	1
Inflationary Pressures	596	3	1,046	4	1,496	4
Other	668	3	1,424	5	1,480	4
Total	19,867	100	26,485	100	32,289	100

Demographic Changes (£4.3m)

7.9 Demographic changes have been well documented in various reports to Members received from an operational as well as financial point of view. The pressure allowed in the report totals £4.3m for 2007/08 across the client groups. This equates to 22% of the pressures. The costs are also similarly increased for the following financial year as a result of current information. The numbers would need to be reviewed in the future as part of the budget preparation for next year.

7.10 For Older People the pressure is estimated to be £1.0m based on the increase in older people (101 clients) helped to live at home and also the increase in households (32 households) receiving intensive home care packages which can be expensive due to their increasing complexity.

7.11 For People with Learning Disabilities the pressure is estimated to be £2.9m and for People with Physical Disabilities the pressure is £0.2m. This is associated with `transitional age' clients entering adult services upon reaching the age of 18 as well as the full year effect of transition clients from the previous financial year. The needs of these clients tend to be more complex and consequently more expensive than existing clients. It is estimated for 2007/08 there will be a transfer of 16 clients for Physical Disabilities and 64 clients for Learning Disabilities from Children's Services to Adult Services.

7.12 These demographic pressures are likely to continue into the future and when this is combined with the increase in life expectancy for adults with disabilities means additional demand for services on an annual basis. As an illustration if there are an additional 68 people (the average for the next three years) with a learning disability needing a service and the average gross cost of a residential learning disability package is £50,000 this would lead to a part year cost pressure of £2.5m.

7.13 For Mental Health the pressure is £0.2m (reflecting the full year effect of 4 existing clients and 2 new clients), however the demographic pressures are more localised, especially the increase in the incidence of Early Onset Dementia and also Asperger's Syndrome. Joint monitoring work with Health is currently being undertaken in both these areas.

7.14 The following table shows the relationship between the additional costs for demography and the original budget.

Client Group	Demographics	% of Original Budget
	£m	%
Older People	1.0	0.4
Learning Disabilities	2.9	1.1
Physical Disabilities	0.2	0.1
Mental Health	0.2	0.1

Higher Current Care Levels than Budgeted (£14.3m)

7.15 This is the largest element of the total unavoidable service pressures and relates to the current cohort of clients which continues to drive the overspend in the current year. Although overspend predictions have reduced since the beginning of the financial year the underlying pressure as a result of client activity is still significant. The increases relate only to 2007/08 and there is no incremental impact on the following financial years. This is to ensure the budgets are set at current demand levels; future demographic changes are dealt with separately.

7.16 In addition as highlighted within the Revised Budget further checks have identified an over ambitious estimate of numbers of clients leaving the service which requires one off funding and this has been distributed across the client groups.

7.17 The pressures relate to demand and costs from previous years and set new budgets which meet current commitment. The figures reflect the overspend position for the client groups as at the end of Period 7 (October). These pressures total £14.3m and equate to £9.6m for Older People, £3.0m for People with Learning Disabilities and £1.7m for People with Physical Disabilities.

7.18 For Older People the main pressures relating to external domiciliary, residential and nursing are offset by reductions relating to in house domiciliary care, in house residential care and direct payments. Client numbers are shown in the following table (however the numbers in the revised budget reflect the forecast average for the year):

Client Numbers for Older People

Service	Client Numbers
	March 2006	September 2006	October 2006
Residential Care	2,337	2,308	2,321
Nursing Care	1,606	1,635	1,637
Domiciliary Care	6,362	6,258	6,278
Day Care	1,691	1,649	1,625
Direct Payments	273	261	255
Other	56	51	48
Total	12,325	12,162	12,164

7.19 For People with Learning Disabilities the pressure reflects ongoing demographic as well as more complex service provision. This is most clearly demonstrated in purchased domiciliary care where although the client numbers have reduced by 80 there is a pressure of £1.1m which relates to more expensive packages. The unit costing analysis to be carried out before the start of the 2007/08 financial year will enable more robust monitoring of the relationship between client numbers and the cost of packages. In addition there is a pressure of £0.6m in purchased day care which reflects the drive to support clients in the community. As a result , despite the demographic pressures the purchased residential and nursing budget pressures were £0.2m each, partly as a result of more complex cases. There are also pressures of £0.2m for other care groups and £0.2m for non-client expenditure.

7.20 There are also outstanding continuing care cases which are being discussed with Health which could result in these pressures reducing.

7.21 The Client numbers for People with Learning Disabilities are shown below (however the numbers in the revised budget reflect the forecast average for the year):

Client Numbers for People with Learning Disabilities

Service	Client Numbers
	March 2006	September 2006	October 2006
Residential Care	935	971	964
Nursing Care	31	31	31
Domiciliary Care	844	765	764
Day Care	1,301	1,284	1,274
Direct Payments	127	140	141
Other	192	130	126
Total	3,430	3,321	3,300

7.22 For People with Physical Disabilities the key underlying factors are similar to Learning Disabilities both in terms of demography and also continuing care.

7.23 The client numbers for People with Physical Disabilities are shown in the following table (however the numbers in the revised budget reflect the forecast average for the year):

Client Numbers for People with Physical Disabilities

Service	Client Numbers
	March 2006	September 2006	October 2006
Residential Care	158	146	143
Nursing Care	96	90	91
Domiciliary Care	770	768	762
Day Care	348	350	347
Direct Payments	434	406	395
Other	42	41	40
Total	1848	1801	1778

7.24 The following table shows the relationship between the higher current care levels than budgeted and the original budget.

Client Group	Higher current care levels than budgeted	% of Original Budget
	£m	%
Older People	9.6	3.7
Learning Disabilities	3.0	1.2
Physical Disabilities	1.7	0.7
Mental Health	0.0	0.0

New Legislation

7.25 There is a pressure of £20,000 for Mental Health in 2007/08 which relates to the Mental Health Act Practitioner approval and training requirements. For 2008/09 onwards there is an additional pressure of £0.2m relating to the Mental Capacity Act. Nothing is included at this stage for any financial implications from the Local Government White Paper.

Inflationary Pressures (Above 2.5%) (£0.6m)

7.26 £0.6m has been allowed for inflationary pressures in 2007/08, £0.3m for Older People and £0.3m for People with Learning Disability to take into account ongoing disputes with providers. There is an incremental impact on the budget for both 2008/09 and 2009/10, which would need to be reviewed in the future as part of the budget preparation for next year.

Other Unavoidable Service Pressures (£0.7m)

7.27 There are also other pressures which total £0.7m in 2007/08, the main pressures within these sum include:

· The full net cost for the Enhance nursing care is £8.9m, of this sum £8.8m has already been funded leaving £0.1m to be met. There are however additional savings to absorb this pressure in the financial recovery plan.

· Additional investment in the Joint Equipment Service to address the shortfall to meet demand across Hampshire (£0.2m in 2007/08 with additional sums in the following financial years).

· Additional costs in Mental Health from reductions in Supporting People Services in North and East Hampshire (£0.130m) on two schemes which as a result of assessment require continued support.

Savings

7.28 The savings plans for the next financial year under financial recovery and efficiency savings include estimates of the direction of travel agreed by Cabinet on 18 December 2006. Many of these plans are long term plans and will need careful implementation including the appropriate consultation, detailed business planning and project management which will be the principal tasks for the new management team. Consequently the savings are in many cases estimates at this stage which need further analysis and therefore there is some uncertainty with the figures included. As the business plans are written and signed off there is an expectation that the savings targets in the financial recovery plans may change and this will need to be closely monitored. However, the Executive Member will expect to sign off firm action plans for all savings included in this budget before the start of the financial year.

7.29 In addition there will be regular reports to the Financial Recovery and Modernisation Group which is chaired by the Leader so that progress can be monitored and advice can be sought as appropriate.

7.30 Where applicable the incremental impact of the proposals have been taken into account in 2008/09 and 2009/10 but these assumptions will need to be reviewed.

7.31 Total savings included in the proposals add up to £12.4m in 2007/08 (see Appendix 4). The following table shows the impact on the budget over the three year period.

Savings

Category	2007/08 Saving £'000	%	2008/09 Saving £'000	%	2009/10 Saving £'000	%
Financial Recovery Plan	9,343 *	76	11,548	74	13,370	76
Added Efficiency Savings	2,615	21	3,598	23	3,698	21
Scope for Increased Income	430	3	430	3	430	3
Total	12,388	100	15,576	100	17,498	100

*Note that the initial financial recovery plans were £8.4m. These have been reviewed as part of the budget setting process and now total £9.3m (reported to the Financial Recovery and Modernisation Group on 6 December 2006)

7.32 These savings are categorised under the following headings:

Financial Recovery Savings (£9.3m)

7.33 Savings to the value of £9.3m are included in the budget for financial recovery. These savings are shown separately because they specifically relate to the financial process which is being monitored by reports to the Financial Recovery and Modernisation Group. However some of these savings will count as efficiency savings. Cabinet agreed the strategy relating to these savings on 18 December 2006.

7.34 For People with Learning Disabilities there are savings of £1.0m included which cover day care modernisation, high cost placements and in house residential reviews, and individualised budgets.

7.35 For Physical Disabilities there are savings of £0.8m included which cover day care modernisation, reduction in the use of block contracts, vacancy management, a review of all purchased day care, domiciliary care and HDPS packages, reduction in the average weekly cost for residential care, and ensuring the correct funding of packages.

7.36 For Older People there are savings of £4.2m included which cover domiciliary care purchases, day care, meals on wheels, nursing, better housing solutions.

7.37 In addition there is income from non residential charging valued at £3.3m.

7.38 There are additional savings in 2008/09 of £2.2m and £1.8m in 2009/10 across the client groups building on those allowed for in 2007/08.

Added Efficiency Savings (£2.6m)

7.39 Savings to the value of £2.6m are included for efficiency savings.

7.40 For People with Learning Disabilities there are savings £0.4m relating to effective procurement and day care reprovision.

7.41 For People with Physical Disability there are savings of £0.2m relating to purchased services.

7.42 For Older People there are savings of £1.3m relating to purchasing and management savings.

7.43 For Mental Health there are savings of £0.2m relating to efficiency savings for purchasing.

7.44 In addition there is an ongoing review being undertaken in conjunction with PBRS examining various elements of procurement within Adult Services. Although no detailed estimate is available at this stage for this project £0.5m has been included in 2007/08 as an initial estimate to cover assessment, commissioning and procurement.

7.45 There are additional savings in 2008/09 of £1.0m and £0.1m in 2009/10 across the client groups building on those allowed for in 2007/08.

Scope for Increased Income

7.46 There is increased income of £0.430m for Older People relating to continuing care beds for nursing homes and using six intermediate care beds to generate income.

Incremental Impact on the Budget

7.47 The incremental impact on the budget for the next three financial years taking into account pressures, savings and a 4.3% increase in the cash limit is shown below (it should be noted that this is on the basis of current information particularly relating to the recovery plans which are subject to detailed business plans). In addition the impact on 2008/09 and 2009/10 would need to be reviewed as more information becomes available, although the additional sums have been included in the contingency to cover any 2007/08 pressures, and additional and demography pressures in 2008/09 and 2009/10.

Impact on the Budget

Category	2007/08 £'000	2008/09 £'000	2009/10 £'000
Pressures	19,867	26,485	32,289
Savings	12,388	15,576	17,498
Net Position	7,479	10,909	14,791
4.3% Cash Increase	(6,000)	(12,500)	(19,200)
Net Position	1,479	(1,591)	(4,409)
2006/07 Contingency Carry Forward and 2007/08 Contingency	1,479	0	0
Additions to Contingency to cover additional demography and new pressures	0	1591	4409
Balance	0	0	0

Efficiency Improvements

7.48 The County Council is required to identify annual efficiency improvements of at least 2.5% for the annual efficiency statement (AES) for the period to 2007/08. At least 1.25% of the improvements in each year needs to be `cashable' in the Government's terms. These occur when inputs (money, people, assets etc) are reduced but outputs remain unchanged or when the price of inputs are reduced but outputs remain unchanged. However, not all cashable efficiency savings in AES terms provide usable cash in budget terms. For example, absorbing the cost of increments within the base budget counts towards the AES but does not generate new budget provision. The basis for future efficiency targets will be determined as part of the Comprehensive Spending Review (CSR) in 2007, but the Chancellor announced in his pre-budget report that the baseline savings ambition for the 2007 CSR period will be at least 3 per cent per year across central and local government with a focus on net cashable savings.

7.50 Appendix 5 identifies redeployment proposals and efficiency improvements totalling £13.7m (5.3%). Of these, £6.5m (2.5%) is eligible for inclusion in the annual efficiency statement and £12.4 (4.8%) represents usable budget savings. As the Adult Services modernisation strategy (approved by Cabinet 18 December 2006) is implemented further efficiency improvements are likely to be identified and these will be reported as appropriate.

7.51 Government Grants - Change in funding arrangements

7.52 The latest specific grant guidance has been received which highlights an overall level of funding in 2007/08 very similar to that in 2006/07. The principal changes relate to a small reduction in the mental health grant (-£0.2m), a reduction in the grant for preserved rights of -£0.5m and an increase in the grant for preventative technology of £0.4m. Also included in the figure is a new grant of £0.3m to implement the requirements of the Mental Capacity Act. This funding is to train staff and increase available assessment time and to appoint an independent advocate. Finally there is no financial capacity to add inflation to the grants and therefore it is assumed that service delivery is contained within this lower grant entitlement.

Contingency

7.53 A contingency of £3.0m has been maintained in 2006/07 to meet pressures not originally envisaged that may arise in the year. This will continue to be maintained in 2007/08 in case it is required for new unforeseen pressures and also to meet any shortfall arising from proposed efficiencies not being met in full during 2007/08. The contingencies have been supplemented by £1.6m and £4.5m respectively but the overall amounts in the budgets for 2008/09 and 2009/10 would be reduced if it was necessary to use any of the contingency in 2007/08 on recurring expenditure.

7.54 In addition if there is no carry forward from the 2006/07 contingency the 2007/08 contingency would need to be reduced at the beginning of the financial year.

Supporting People (£33.0m)

7.55 As Members will be aware the Supporting People Programme funding is external to the core budget of the department is met entirely by specific grant. This funding will remain at a broadly similar level in 2007/08 as the previous financial year - effectively a real term reduction after the impact of inflation and there is continued uncertainty in the longer term. Consequently work is on going to align service delivery to the grant awarded and maintain longer term financial stability.

7.56 The impact of both the real term reduction and the continued long term uncertainty will need to be reported back to the Executive Member so that the savings required to keep within the cash limit are understood and agreed.

8. Review of charges

8.1. The service's 2007/08 revenue budget includes income of £76.1m from fees and charges (excluding government grants). Approximately £33.1m is received from Health and other local authorities. Approximately £43.0m relates to fees and charges. £6.4m relates to fees and charges set by Adult Services. Details of the material headings are included in Appendix 6.

8.2. There are some mandatory and national charges which the County Council is not able to vary. Charging for residential care has been governed by CRAG (Charging for Residential Accommodation Guide) since 1992, which provided a high level of consistency between local authorities. Charging for non-residential care on the other hand, whilst still subject to national guidance, has been much more variable. Therefore Adult Services has reviewed its charging policy during 2006/07 to ensure greater consistency with other local authorities and link to the government's push to support a greater proportion of the population at home. The budget proposals in this report incorporate the full year impact of this change. Many of these charges require a financial assessment to be undertaken and the charges detailed in Appendix 6 relate to the provision of County Council services but the exact charge may be dependant on this assessment process. Clients placed in independent sector accommodation are subject to the same financial assessment process.

8.3. Discretionary charges are revised annually except when they are subject to agreements which cover longer periods when the review takes place at the end of the period of the agreement. These charges are set to recover the full cost of the service provided. The recent Enhance nursing care project, the refurbishment of in house residential homes and the Adult Services modernisation programme mean that an in depth review of charges need to be undertaken in the near future to ensure current assumptions are still valid. Until this review is undertaken charges have been increased by the standard inflationary rate. Examples of those charges reviewed annually are provision of meals for adults and older people.

9. Other expenditure

9.1. The budget includes some items which are not counted against the cash limit. This includes budgets for central department support services, except where they have been given to service departments to buy services, and repair and maintenance of buildings. It also includes costs of member support within Adult Services and budgets that are rechargeable to Policy and Resources (for corporate and democratic core services).

10. Legal implications

10.1. The modernisation programme which the department is entering into will require legal implications to be considered particularly where they impact on the provision of services to clients and how the appropriate consultation should be undertaken. This will be included as part of the business planning process so that appropriate advice is sought.

11. HR implications

11.1 The workforce implications of the proposed budget for 2007/08 are set out in Appendix 9. The 2007/08 base budget supports a planned workforce of 3,585 full time equivalent (FTE) staff. This compares with the original estimate for 2006/07 of 3,493 which is an increase of 92. The increase principally relates to increased nursing care staff

11.2 The net effect of proposals for growth and redeployment of resources (Appendix 4) on staffing levels are as follows:

2007/08

(270) FTEs

12. Provisional budget for 2008/09 and 2009/10

12.1 The provisional budget at outturn prices for 2008/09 and 2009/10 for this service is set out in Appendix 11 and summarised below:

2008/09	£ 276.3m
2009/10	£ 288.2m

12.2 The main variations from the 2007/08 proposed budget are inflation of £4.9m for 2008/09 and £5.1m for 2009/10, additional resources from redeployment of £6.5m in 2008/09 and £6.7m in 2009/10 and a reduction for pay and benefits realisation of £0.5m.

13. Impact assessment

13.1 The proposals in this report are derived from the departmental service plans and are in accordance with the budget strategy and the County Council's financial management policy. An impact assessment of the financial management policy has been carried out and the proposals in this report are not considered to be discriminatory.

Recommendations

To approve for submission to the Leader and Cabinet:

1. The revised budget for 2006/07 totalling £268.7m (as set out in Appendices 1 and 2)

2. Any remaining balance of the 2006/07 contingency at the year end be carried forward to 2007/08 to offset pressures in that year

3. The base budget for 2007/08 totalling £258.9m (as set out in Appendix 3)

4. The proposals for growth totalling £19.9m (as set out in Appendix 4)

5. The proposals for redeployment of resources totalling £12.4m in 2007/08 (as set out in Appendix 4)

6. The balance of £7.5m be met from the extra guideline growth of £6.0m and from the budgeted contingency

7. The proposals for efficiency improvements totalling £6.5m (2.5% of the base budget) in 2007/08 (as set out in Appendix 5)

8. The annual review of income and charges (as set out in Appendix 6)

9. The detailed budget for 2007/08 (as set out in Appendix 7)

10. For Supporting People the impact of both the real term reduction and the continued long term uncertainty be reported back to the Executive Member so that the savings required to keep within the cash limit are understood and agreed

11. The workforce implications of the proposed budget for 2007/08 including plans for workforce reductions to contribute towards the increased cost of the new pay framework (as set out in Appendix 9)

12. The provisional budget for 2008/09 of £276.4m and for 2009/10 of £288.2m (as set out in Appendix 10).

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

Published works.

Documents which disclose exempt or confidential information as defined in the Act.

TITLE FILE

Financial Management Policy Impact Assessment

http://intranet.hants.gov.uk/ctequalities/ctequalitiesimpactassessment.htm

Links(s) to Corporate Strategy
	Yes	No
Hampshire safer and more secure for all	√	_
Maximising well-being	√	_
Enhancing our quality of place	√	_

(On yellow paper - so it is easier to see where appendices start)

Appendices

Appendix		Colour
1	Revised budget 2006/07 - calculation of the cash limit	yellow
2	Revised budget 2006/07 - comparison with cash limit	yellow
3	Base budget 2007/08 - summary of cash limit	pink
3 - Annex 1	Base budget 2007/08 - definition of base budget	pink
3 - Annex 2	Base budget 2007/08 - significant costs of inflation	pink
3 - Annex 3	Base budget 2007/08 - significant variations from 2006/07 repriced budget	pink
4	Proposals for growth and redeployment 2007/08, 2008/09 and 2009/10	yellow
5	Efficiency statement	yellow
6	Review of income 2007/08	yellow
7	Revenue budget 2007/08 - analysis of variations	Blue
8	Revenue Budget 2007/08 - budget book detail	Green
9	Workforce levels and costs 2006/07 - 2008/09	Blue
10	Provisional budget 2008/09 and 2009/10	Pink
10 - Annex 1	Provisional budget 2008/09 - analysis of variations	blue

Appendix 1

Adult Services

Revised budget 2006/07

Calculation of the cash limit for the revised budget 2006/07

The following table shows the progression from the original budget for 2006/07 to the cash limit for the revised budget 2006/07. Both are at estimated outturn prices 2006/07.

				£'000	£'000
Original budget 2006/07 at outturn prices				256,940
Transfers to/from other services and contingency allocations: Health and Safety Officers Drug and Alcohol Action Team Procurement Savings Transfer between Adults and Children's Services				79 120 (30) (22)
=	Adjusted original budget				257,087
Inflation Provision added since the original budget for: Business rates				29
Other variations:
Second home council tax adjustment				19
Transfer of recruitment costs				(75)
Contribution to Nursery Scheme				(9)
Pay and Benefits Realisation				(165)
LPSA Pump Priming Grant				93
Children's Act implementation				149
Variation in Expenditure financed by Government Grants: Mental Health Grant Drug and Alcohol Action Team Supporting People Independent Mental Capacity Act				(86) 100 992 116
=		Cash limit for the revised budget 2006/07			258,250

Appendix 2

Adult Services

Revised budget 2006/07

Summary comparing the revised budget with the cash limit

	Cash Limit	Revised Budget	Variation
	£'000	£'000	£'000	%
Service Strategy and Regulation	436	442	6	1.4
Unallocated	3,054	1,954	(1,100)	(36.0)
Older Persons	128,855	137,255	8,400	6.5
Adults under 65 Years with a Physical or Sensory Impairment	23,816	25,581	1,765	7.4
Adults under 65 Years with a Learning Disability	53,861	56,373	2,512	4.7
Adults under 65 Years with Mental Health Needs	12,453	11,847	(606)	(4.9)
Other Adult Services	1,513	1,431	(82)	(5.4)
Asylum Seekers	0	4	4	-
Supported Employment	970	970	0	0.0
Supporting People	32,960	32,960	0	0.0
Non Distributed Costs	332	330	(2)	(0.6)
Total	258,250	269,147	10,897	4.2

Appendix 3

Adult Services

Revenue budget 2007/08

Calculation of the base budget 2007/08 - summary of cash limited expenditure

The following table shows the progression from the original budget for 2006/07 which was prepared at outturn prices 2006/07 to the base budget 2007/08 at outturn prices 2007/08.

		£'000	£'000
Original budget 2006/07 at outturn prices		256,940
Transfers to/from other services and contingency allocations Health and Safety Officers Drug and Alcohol Action Team Procurement Savings Transfer between Adults and Children's Services		79 120 (30) (22)
=	Adjusted original budget		257,087
Increases for inflation to reflect November 2006 prices (see Annex 2)
-	Inflation allocated during 2006/07 from the central inflation contingency - Business Rates	29
Original budget at November 2006 prices			257,116
Other variations (see Annex 3)
-	Hants Direct Adjustment	(866)
-	Exclusion of non-recurring 2006/07 funding	(2,700)
-	Joint Finance Taper	7
	Second Home Council Tax Adjustment	20
	Revenue Impact of Capital Programme	6
-	Variations in Expenditure Funded by Government Grants
	National Training Strategy and Human Resources Development	(47)
	Access and Systems Capacity	31
	Mental Health	(152)
	LPSA Pump Priming	93
	Supporting People	(9)
	Preventative Technology	404
	Preserved Rights	(453)
	Carers	(57)
	Delayed Discharge	22
	Mental Capacity Act	262
Allocation for future inflation		5,177
=	Base budget 2007/08 at outturn prices		258,854

Annex 1 to Appendix 3

Adult Services

Calculation of base budget 2007/08

Parameters used in the compilation

1	Definitions
1.1	The first stage in the construction of the budget for 2007/08 is the preparation of a base budget. The rules used this year are similar to those applied in 2006/07, which are summarised below.
1.2	The 2007/08 base budget is defined as the current year's budget adjusted for: · allocations made for inflation in 2006/07 including the full year effect of the provision made for outstanding pay awards from 2005/06 · exclusion of expenditure included in the 2006/07 budget which was financed by the carry forward of planned underspendings from 2005/06, the one-off use of reserves or balances, or which was approved on a non-recurring basis · the revenue effect of past capital programmes, subject to its inclusion in the approved capital programme unless a specific Cabinet decision to the contrary · the full year effect of council-approved policies included in the 2006/07 original budget, which have been introduced part-way through the year · changes in income volumes which are not the result of policy decisions · correction of arithmetical errors in the current year's budget · The following specific items:
		Adults		Increased cost of joint finance schemes with health due to operation of the taper

Annex 2 to Appendix 3

Adult Services

Calculation of base budget 2007/08

Significant costs of inflation

1.	Variation between the actual cost of inflation in 2006/07 (as at November 2006) and the provision for inflation included in the 2006/07 budget
						£'000	£'000
	Additional cost of inflation - Business Rates					253
	Less:
	-	Allocation from contingency for business rates				(29)
	=	Shortfall in the provision					224
2.	Significant costs of inflation between budgeted 2006/07 outturn prices and November 2006 prices
2.1	Pay awards
	Provision was originally made in 2006/07 for pay awards of 2.95% for teachers and other employee groups.						£2,368
	No additional cost in 2007/08 of the pay awards agreed in 2006/07 is anticipated.
	The pay awards agreed were:
	Negotiating body: Effective date:						%
	Local Government Services Staff Hampshire Management Grades				1 April 2006 1 April 2006		2.95 2.95
2.2	Non pay inflation
	Provision was originally made in 2006/07 for a net amount of						£2,316
	This was for general price increases of 2.5% (£4,291,000) offset by increased income to match inflation in gross expenditure
	An additional allocation was made to cover social care inflation above the general inflation rate of						£1,500
	The most significant variations within this additional cost are as follows: Older Persons - residential, day and domiciliary care Adults - residential, day and domiciliary care				Outturn 2006/07 to November 2006 % 2.9 - 3.0 2.7 - 3.0		Cost in 2007/08 £ 52 44
3.	Allocation for future inflation						£'000
	Provision for all pay awards of 2.25% in 2007/08						1,840
	Increase in local government employers' pension contributions (from 275% to 295% of employee contributions)						638
	Provision for non-pay inflation at 2.5%						2,948
	Reduction for increased income						(249)
	Total allocation for future inflation						5,177

Annex 3 to Appendix 3

Adult Services

Calculation of base budget 2007/08

Significant variations

Major variations between the repriced budget 2006/07 and the base budget for 2007/08 at November 2006 prices contributing to the decrease of £3,439 (1.3%) are set out below:

		Variations against the repriced 2006/07 budget
		£'000	%
	Exclusion of non recurring 2006/07 funding	(2,700)	(1.0)
	Hants Direct adjustment	(866)	(0.3)
	Variations in government grants (itemised in appendix 3)	94	0.03
	Joint finance taper and other adjustments	33	0.01

Appendix 4

Adult Services

Proposals for growth and redeployment 2007/08 to 2009/10

					Staffing (FTEs)
		2007/08	2008/09	2009/10	2007/08	2008/09	2009/10
		£'000	£'000	£'000
	Growth proposals and unavoidable service pressures:
	Demographic Pressures:
	Older People Domiciliary Care	1,000	1,430	1,600
	People with Learning Disabilities - Transition and Aspergers	2,870	3,287	3,400
	People with Mental Health Needs - Aspergers, Twilight Service & Early Onset Dementia	210	0	0	1	0	0
	People With Physical or Sensory Needs	237	430	245
	Sub Total	4,317	5,147	5,245	1	0	0
	Higher Care Levels Than Budgeted
	Ongoing impact of pressures within People with Learning Disabilities from 06/07	3,021	76	78
	Ongoing impact of pressures within Older Persons from 06/07	9,565	0	0	(142)	0	0
	Ongoing impact of pressures within People with Physical Disabilities from 06/07	1,680	0	0
	Sub Total	14,266	76	78	(142)	0	0
	New Legislation
	Mental health practitioner training & mental capacity act	20	189	-25
	Inflationary Pressures
	Inflation on purchased care services in excess of corporately assessed inflation	596	450	450
	Other:
	Additional costs from loss of supporting people funding	130	350	0
	Enhance nursing care homes - additional revenue costs	145	0	0
	Integrated community equipment store	200	100	50
	Loss of income from other local authorities	145	0	0
	Revenue implications of well being agenda	0	300	0	6	0	0
	Additional information system requirements for People with Mental Health Needs	48	6	6
	Sub total	668	756	56	6	0	0
	Total increase	19,867	6,618	5,804	(135)	0	0

					Staffing (FTEs)
		2007/08	2008/09	2009/10	2007/08	2008/09	2009/10
		£'000	£'000	£'000
	Redeployment and savings proposals:
	Financial Recovery Plans
	Review and modernisation of People with Learning Disabilities services	1,030	500	0	14	0	0
	Review and modernisation of People with Physical Disabilities Services	845	561	430
	Review and modernisation of Older People Services	4,188	1,144	1,392	41	0	0
	Additional income from the revised non residential charging policy	3,280	0	0
	Sub Total	9,343	2,205	1,822	55	0	0
	Other efficiency savings:
	Purchased residential and day care for Older People	958	668	0	57	0	0
	Purchased residential and other care for People with Physical Disabilities	235	175	0
	More effective procurement for People with Learning Disabilities	190	140	100	2	0	0
	More effective procurement for People with Mental Health Needs	172	0	0
	Staffing efficiencies for Older People	300	0	0
	More efficient assessment commissioning and procurement - all client groups	500	0	0
	Further service reductions for day and other care in Learning Disabilities	260	0	0	21	0	0
	Sub Total	2,615	983	100	80	0	0
	Scope for Increased Income
	Increased income over and above inflation	430	0	0
	Total redeployment proposals	(12,388)	(3,188)	(1,922)	(135)	0	0
	Net increase	7,479	3,430	3,882	(270)	0	0

Appendix 5

Adult Services

Efficiency improvements 2006/07 to 2009/10

		2006/07 £m	2007/08 £m	2008/09 £m	2009/10 £m
Cashable efficiency improvements:
a	AES eligible and budget saving
	More cost effective placements and keen price negotiation	179	3,144	1,271	430
	More efficient administration and reductions in management costs	594	385	0	0
	More effective service provision and delivery on domiciliary, day and residential care: Older People Younger Adults	750 645	1,075 578	668 100	0 100
	More effective use of vacancy management	850	0	0	0
	More efficient supplies and services procurement and reduced travel costs	380	0	0	0
	Total AES eligible and budget saving	3,398	5,182	2,039	530
b	AES eligible but no budget saving
	Absorption of increments	570	575	0	0
	Supporting People contract review savings	793	737	0	0
	Total AES eligible but no budget saving	1,363	1,312	0	0
c	Budget saving but AES ineligible
	Reductions in placements:
Nursing Care		500	1,757	0	0
Day Care		700	250	0	0
Residential and Other		524	1,349	1,144	1,392
Transition - savings from clients leaving adults		662	0	0	0
New service model for meals on wheels		0	115	0	0
Remodelling of OT equipment servcie funding arrangements from health		60	0	0	0
Other miscellaneous		0	10	0	0
Additional income from fees and charges		570	3,725	5	0
Total - budget savings but AES inelligible		3,016	7,206	1,149	1,392
Total AES eligible (a+b)		4,761	6,494	2,039	530
% of base budget		1.8%	2.5%	0.8%	0.2%
Total Budget Saving (a+c)		6,414	12,388	3,188	1,922
% of base budget		2.5%	4.8%	1.2%	0.7%
Total of all efficiency improvements and savings (a+b+c)		7,777	13,700	3,188	1,922
% of base budget		3.0%	5.3%	1.2%	0.7%

Appendix 6

Adult Services

Review of income 2007/08

			Current charge	Total income (Budget 2006/07)	Date of last review	Proposed new Amount	Charge Effective Date	Is charge set to recover full cost? Yes/No	Is charge subject to an assessment scale determined locally? Yes/No
			£	£'000		£
1	Mandatory/National Charges
	Nursing Care for Older People		434.00	4,095	April 06	446.00	April 07	Yes	No
	Residential Care for Older People		392.00 .00	5,502	April 06 0554	403.00	April 07 0554	Yes	No
	Residential Care for the Elderly Mentally infirm		434.00 .00	729	April 06	446.00	April 07	Yes	No
	Residential Care for people with Physical or Sensory Disability		868.00 .00	181	April 06	891.00	April 07	Yes	No
	Residential Care for Adults with a Learning Disability		777.00	546	April 06	798.00	April 07	Yes	No
	Orchard Close - Standard Week		658.00 03.00 .00	128	April 06	676.00	April 07	Yes	No
2	Discretionary charges
	Residential Accommodation for Adults
	Orchard Close - Client Contribution		119.00	In above	April 06 04April 04April 04April 03	122.00	April 07 April 04	No	No
	Day Care Establishments
	Day Services for Older People		155.00	220	April 06	159.00	April 07	Yes	No
	Day Services for People with Mental Health Needs		220.00	9	April 06	226.00	April 07	Yes	No
	Day Services for People with Physical or Sensory Disabilities
		including transport	295.00	200	April 06	303.00	April 07	Yes	No
		excluding transport	245.00	In above	April 06	252.00	April 07	Yes	No
	Day Services for Adults with a learning Disability
		including transport	180.00	2,555	April 06	185.00	April 07	Yes	No
		excluding transport	150.00	In above	April 06	154.00	April 07	Yes	No
	Full Cost Annual Charges
	Day Services for Adults with a Learning Disabilities
		including transport	4890.00	Included	April 06	5022.00	April 07	Yes	No
		excluding transport	3870.00	Above	April 06	3974.00	April 07	Yes	No
	Banded Charges for Day Services for People with a Learning Disability
		including transport	4505.00	Included	April 06	4627.00	April 07	Yes	No
		excluding transport	3510.00	Above	April 06	3605.00	April 07	Yes	No
	Plus banded charge for each hour per week		610.00	.	April 06	626.00	April 07	Yes	No
	Non Residential Charges		13.32	3,881	April 06	13.68	April 07	No	Yes
	Charge to external organisations		23.60	N/a	N/a	24.24	April 07	Yes	No
	Other Charges
	Meals for Adults:-
	Day Services for People with a Physical Disability, Learning Disability, Mental Health Needs or Older People, Meals on Wheels and Luncheon Clubs per meal		2.80	0	April 06	2.90	April 07	No	No
	Hostels for People with a Physical Disability:- Transport charge per week		7.80	In above	April 06	8.00	April 07	No	No
	Hire of Rooms - per hour		24.00	1	April 06	24.60	April 07 05April 04	Yes	No

Appendix 7

Adult Services

Base budget 2007/08

Analysis of variations

	Adjusted original budget 2006/07	Variation in inflation to November 2006 prices		Other variations	Growth and redeploy-ment proposals	Inflation allocation to 2007/08 outturn		Base Budget 2007/ 08
	£'000	£'000	%	£'000	£'000	£'000	%	£'000
Cash limited expenditure:
Service Strategy and Regulation	430					12	2.8	442
Unallocated	2,000				6,346			8,346
Unapportionable overheads	352				(20)	5	1.5	337
Older Persons	129,694	154	0.1		(1,093)	3,069	2.4	131,824
Adults under 65 years with a Physical or Sensory Impairment	23,980	35	0.1		(317)	568	2.4	24,266
Adults under 65 years with a Learning Disability	54,078	58	0.1		(531)	1,183	2.2	54,788
Adults under 65 years with Mental Health Needs	12,378	6	0.1		(127)	306	2.5	12,563
Other Adult Services	1,416				144	20	1.3	1,580
Supported Employment	921				18	14	1.5	953
Supporting People	31,838				120			31,958
Net cash limited expenditure	257,087	253	0.1	0	4,540	5,177	2.0	267,057
Expenditure outside cash limit: Capital charges FRS17 pension adjustment	5,677 (104)			754 857				6,431 753
Specific grants
Home workers	2							2
National training strategy / Human resources	1,740			(47)				1,693
HIV / AIDS Support	133							133
Access and systems capacity	10,728			31				10,759
Delayed discharges	1,959			22				1,981
Mental health	2,534			(152)				2,382
Supporting People	31,939			(10)				31,929
Preserved rights	6,478			(453)				6,025
Preventative technology	592			404				996
Carers	2,710			(57)				2,653
Drugs and alcohol	120							120
LPSA Pump priming grant	0			93				93
Mental Capacity Act	0			262				262
CSCI reimbursement	13							13
Total net expenditure	203,712	253		1,518	4,540	5,177		215,200

Appendix 8

Adult Services

Revenue Budget 2007/08

Reconciliation of the original 2006/07 budget on the following pages with the 2006/07 budget in the published budget book.

		£'000
Net expenditure on page B3 of the published budget book		256,940
Adjustments for items not included in the budget book:
Adjustments made to the original budget figures: Transfer from Children's Services - Drug Action Team Transfer from Human Resources - Health and Safety Officers Corporate Procurement Savings Transfer from Adult Services to Children's Services		120 79 (30) (22)
Total net expenditure for 2006/07 original budget shown overleaf on page B3		257,087

Appendix 9

Adult Services

Workforce levels and costs

	2006/07	2007/08
	£'000	£'000
Analysis of workforce costs in base budget:
Salaries of permanent staff (including employer's national insurance and pension contributions)	79,464	83,383
Temporary/fixed term/casual staff	589	865
Agency staff	2,825	2,500
Additional hours	1,936	1,936
Total workforce costs	84,814	88,684
Average FTE staff actually in post	3,154	3,585
Staffing changes in growth, redeployment and efficiency savings proposals:
Variation in staff (FTEs)		(270)
Variation in budget (£'000)		(4,113)
Variation in budget - Pay and Benefits (£'000)		(660)
Workforce implications of budget proposals:
FTE posts available		3,315
Workforce budget available (£'000)		83,911

Appendix 10

Adult Services

Provisional budget 2008/09 and 2009/10

The following table shows the progression from the 2007/08 proposed budget at outturn prices to the provisional budget for 2008/09 and 2009/10 at outturn prices.

				£'000	£'000
Proposed budget 2007/08 at outturn prices					267,057
-	Base budget variations: Hampshire Direct				(1,211)
-	Exclusion of non-recurring 2007/08 expenditure: Removal of second homes council tax adjustment				(9)
Growth and redeployment proposals:
	Passport of growth				(500)
	Redistribution from other services				6,500
	Variations in Specific Grants:
	Mental Capacity				(262)
	LPSA Pump Priming Grant				(93)
Allocation for future inflation					4,881
Provisional budget 2008/09 at outturn prices					276,363
Growth and redeployment proposals:
		Redistribution from other services			6,700
Allocation for future inflation					5,138
Provisional budget 2009/10 at outturn prices					288,201

Annex 1 to Appendix 10

Adult Services

Provisional budget 2008/09 and 2009/10

Analysis of variations

	Proposed Budget 2007/08	Base budget variations	Growth and redeployment	Inflation allocation to 2008/09 outturn		Provisional Budget 2008/09	Base budget variations	Growth and redeployment	Inflation allocation to 2009/10 outturn		Provisional Budget 2009/10
	£'000	£'000	£'000	£'000	%		£'000	£'000	£'000	%	£'000
Cash limited expenditure :
Service Strategy and Regulation	442			10	2.3	452			10	2.2	462
Unallocated	8,346		4,634			12,980		6,700			19,680
Unapportionable overheads	337			6	1.8	343			6	1.7	349
Older Persons	131,824			2,847	2.2	134,671			2,997	2.2	137,668
Adults under 65 years with a Physical or Sensory Impairment	24,266			542	2.2	24,808			571	2.3	25,379
Adults under 65 years with a Learning Disability	54,788			1,162	2.1	55,950			1,222	2.2	57,172
Adults under 65 years with Mental Health Needs	12,563			281	2.2	12,844			296	2.3	13,140
Other Adult Services	1,580		(209)	13	0.9	1,384			13	0.9	1,397
Supported Employment	953			20	2.1	973			23	2.4	996
Supporting People	31,958					31,958					31,958
Net cash limited expenditure	267,057		4,425	4,881	1.8	276,363		6,700	5,138		288,201
Expenditure outside cash limit Capital charges FRS17 pension adjustment	6,431 753					6,431 753					6,431 753
Specific grants:
Home workers	2					2					2
National training strategy / Human resources	1,693					1,693					1,693
HIV / AIDS Support	133					133					133
Access and systems capacity	10,759					10,759					10,759
Delayed discharges	1,981					1,981					1,981
Mental health	2,382					2,382					2,382
Supporting People	31,929					31,929					31,929
Preserved rights	6,025					6,025					6,025
Preventative technology	996					996					996
Carers	2,653					2,653					2,653
Drugs and alcohol	120					120					120
LPSA Pump priming grant	93		(93)			0					0
Mental Capacity Act	262		(262)			0					0
CSCI reimbursement	13					13					13
Total net expenditure	215,200		4,780	4,881		224,861		6,700	5,138		236,699