NHSScotland Chief Executive's Annual Report 2011/12

CHAPTER 6 FINANCIAL PERFORMANCE

This chapter provides a summary of the key information relating to the financial performance of NHSScotland during 2011/12. The performance for the year was excellent with the key financial performance target, the Departmental Expenditure Limit (DEL), showing a small underspend.

NHSSCOTLAND FINANCIAL PERFORMANCE SUMMARY 2011/12

Departmental Expenditure Limit (DEL)	Revenue (£ million)	Capital (£ million)
Actual	10,537	474
Under/(Over) Spend	9	1

The level of spend available to NHSScotland is significant and it is important that it is managed effectively to deliver the best results for patients and good value for public funds. This is achieved by planning and managing financial performance across the whole of the budget, not only its constituent parts. The totality of the resource available to the Scottish Government Health and Social Care Directorates is therefore used fully and effectively.

The bulk of the above expenditure lay with the 21 NHS Boards and Healthcare Improvement Scotland, all of which achieved their financial targets in line with projections, all with unqualified accounts. The £10 million underspend represents less than 0.1 per cent of the health budget and has been achieved through the more efficient delivery of a range of policy programmes across the Scottish Government Health and Social Care Directorates.

Our financial planning approach supports Boards in achieving financial balance, in a controlled and effective manner through long term strategic financial planning over a five year period as evidenced through Local Delivery Plans and through short term operational financial planning. This is often in-year as evidenced through a range of mechanisms deployed where assessed as appropriate and effective, including brokering and banking funds and optimising the allocation of resource and capital. Short term support is always predicated on receiving assurance on long term financial sustainability.

Financial planning is an integral part of the performance management cycle with NHS Boards, from Local Delivery Plan sign off to risk-based in-year performance management and formal mid-year reviews and annual reviews.

Within realistic parameters (including for example Spending Review cycles and the ability of the Scottish Government to accommodate flexibility of funds across financial years), this allows both the Scottish Government and NHS Boards to plan for the future and manage the present in a controlled and effective way.

The strong financial position was maintained while managing the additional costs associated with increased activity in General Dental Services and General Ophthalmic Services and the transfer of responsibility for Prisoner Healthcare from the Scottish Prison Service. Also, in recognition of the wider pressures on the health and social care system, £70 million was provided from within NHS Board allocations for a new Change Fund in 2011/12 to support the redesign of services and help shift the balance towards primary and community care.

This report does not present the full accounts of NHSScotland, which form part of the overall Scottish Government consolidated accounts. The audit of the Scottish Government consolidated accounts for 2011/12 is unqualified. Audit Scotland has reviewed the accounts of all NHS Boards for 2011/12 and given an unqualified audit opinion on each. It has provided an independent commentary on NHSScotland finances in its health sector overview report which noted that: "Ending the financial year so close to budget highlights the high level of active management of the forecast position by both the boards and the Scottish Government."

Good governance is an important aspect of the management of all NHS organisations, which are required to follow Scottish Government policies in relation to financial, clinical, staff and information governance. These policies are advised in specific guidance issued through letters to NHSScotland Accountable Officers from the Scottish Government; the NHS Annual Accounts and Capital Accounting Manuals; Healthcare Improvement Scotland Healthcare Standards; and the Scottish Public Finance Manual, incorporating the Audit Committee Handbook. Accountable Officers are also required to sign a Governance Statement describing the arrangements in place to ensure that this guidance is adhered to.

KEY EXAMPLES OF CAPITAL EXPENDITURE PROGRAMMES

Capital expenditure was £474 million in 2011/12 and showed a small underspend. The money was used to fund numerous NHSScotland projects across the country such as the New South Glasgow Hospitals Project, which will deliver a truly gold standard of healthcare on the Govan site with maternity, children's and adult acute services all together on the one campus. It will also have the biggest critical care complex and one of the biggest emergency departments in Scotland.

REVENUE EXPENDITURE

NHSScotland's revenue expenditure of £10,537 million in 2011/12 represented over £2,000 for every person living in Scotland. Around 52 per cent of this funds staff costs for NHSScotland employees. A further 11 per cent goes on prescription drugs; 11 per cent on general medical, dental and ophthalmic services; with the remaining 26 per cent funding buildings and associated running costs, equipment, supplies and services.

Chart 16

EFFICIENT GOVERNMENT

The Efficient Government initiative was launched in June 2004 to help tackle waste, bureaucracy and duplication in Scotland's public sector and initially covered the period 2005/06 to 2007/08. The Efficient Government Programme continued through the period 2008/09 to 2010/11 with a target to deliver 2 per cent increasing cash-releasing efficiencies each year. The draft Scottish budget set out public sector efficiencies for the whole of NHSScotland of 3 per cent for 2011/12, therefore the target in 2011/12 was £335 million. For the period April 2011 to March 2012, NHSScotland delivered savings of £369 million - an overachievement of £34 million. Details of the savings in 2011/12 are as follows:

EFFICIENT GOVERNMENT PROGRAMME 2011/12

Project Reference and Description	Final Outturn £m
NHS Board local 3 per cent efficiency savings	313
Drug purchasing	15
Countering NHS fraud	1
NHS procurement and logistics	40
Total	369

NHSScotland has made considerable progress in improving efficiency and productivity as a result of a sustained programme of improvement work covering waiting times, cancer services, emergency care, long term conditions and mental health services. The main purpose of the Efficiency and Productivity Framework for NHSScotland* is to identify priority areas to improve quality and efficiency. Further information on the Efficiency and Productivity Framework is provided in Chapter 5.

* All publications referred to within this document can be found in the publications section of the appendices.

HEAT TARGET

NHS Boards are required to operate within their Revenue Resource Limit (RRL), their Capital Resource Limit (CRL) and meet their Cash Requirement.

All Boards met their 2011/12 financial targets.

HEAT TARGET

NHS Boards to deliver a 3 per cent efficiency saving to reinvest in front-line services (this target applies to 2011/12).

For the financial year 2011/12, NHS Boards delivered local Efficient Government savings of £313 million, representing 3.6 per cent of baseline funding against the 3 per cent efficiency target.

This contributed to the overall Efficient Government Programme savings of £369 million.