Y Pwyllgor Iechyd, Lles a Llywodraeth Leol
Health, Wellbeing and Local Government Committee
Angela Burns AM
Chair
Finance Committee
National Assembly for Wales
Cardiff Bay
CF99 1NA
Our ref: HWLG(3)23-08
21 October 2008
Dear Angela
Draft Budget - Recommendations From The Health, Wellbeing And Local Government Committee
Introduction
The Health, Wellbeing and Local Government (HWLG) Committee considered the draft budget at its meeting on 15 October in line with Standing Order 27.3. I would be grateful if the Finance Committee could take account of the issues we have identified below in your report to the Assembly under Standing Order 27.4.
We were grateful to the Minister for Health and Social Services and the Minister for Finance and Public Service Delivery for making themselves available to attend our meeting on 15 October to answer questions on the draft budget from Committee Members.
The Minister for Social Justice and Local Government was also scheduled to attend but instead represented the Assembly Government at a meeting with the Treasury to discuss the problems experienced by public authorities in Wales whose assets are held in Icelandic financial institutions. We fully understand the reasons for his absence and were grateful that the Minister’s officials were able to attend and answer questions in his place.
General Observations
Expenditure falling within the Committee’s remit
Total proposed expenditure within the Health and Social Services (£6.0 billion), Social Justice and Local Government (£4.4 billion) and Public Service Delivery portfolios (£59.5 million) amounts to around £10.5 billion. The bulk of this expenditure falls within the Committee’s remit and represents almost 70% of the total Assembly Government budget of £15.2 billion in 2009-10.
Timescale
Standing Order 27.3 allows only 2 weeks for Committees to consider the draft budget. This effectively limits scrutiny to just one Committee meeting. It allows Committees very little advance time to adequately research and understand the implications of the budget before questioning Ministers. It allows no time for Committees to take evidence from stakeholders or others with relevant or wider expertise.
On this occasion we were unable to take evidence at all from the Minister for Social Justice and Local Government who is responsible for almost 30% of the Assembly Government’s budget. Although he has now agreed to attend our meeting on 22 October to answer questions, this will be too late for us to report to your Committee in time to be taken into account for your report to the Assembly. Although we appreciate the reasons why he could not attend, it again highlights a problem that we identified in our consideration of last year’s draft budget.
The Committee believes that the time allowed for consideration of the draft budget is barely adequate for anything other than the most cursory consideration. The Committee recommends that the Finance Committee considers whether the time allowed to scrutiny Committees to consider the budget is adequate.
Areas of Expenditure
Set out below are the areas where Committee Members have expressed concerns about, or asked for clarification of, particular budget provisions. These need to be read in the context of our general comments about the limited time available for the Committee to consider the budget.
I should also make it clear that the issues highlighted are not necessarily of concern or of equal concern to all Members of the Committee but we recommend that the Finance Committee draw these issues to the attention of the Assembly in its report on the draft budget.
Portfolio of the Minister for Finance and Public Service Delivery
General
The Minister answered questions in relation to his portfolio responsibilities for public service delivery rather than in his capacity as Minister for Finance.
Making the Connections SPA
Local Service Boards
Wales Spatial Plan
Governance in Wales
Committee Members queried how the funding for the Wales Spatial Plan would be used and whether the £0.49 million allocated was sufficient. The Minister felt that the funding proposed was adequate, particularly given the wider financial position.
Committee Members asked for an explanation of the reduction of funding in the "Making the Connections SPA” where there was an overall reduction of 14% compared to last year and a reduction of £2.4 million in the Making the Connections Improvement Fund. The Minister and his officials explained that the Improvement Fund was essentially pump-priming in nature and was always intended as a three year programme that was now coming to its end.
The Minister also explained how the Spatial Plan fitted in with some of his other responsibilities, including Local Service Boards and partnership working. He agreed to consider whether any further action was required to ensure that key cross-cutting equality themes were mainstreamed in the work of Local Service Boards and other partnerships.
In response to Members questions, he also explained that a further £50,000 would be available to each Local Service Board, from the making the Connections Development BEL, to help meet development costs. The Minister’s officials have since clarified that this is in addition to the £50,000 offered to the six pilot LSBs in 2007-08 and the same sum available to each of the 22 LSB areas in 2008-09.
Funding for Inspectorates
Care & Social Services Inspectorate Wales
Healthcare Inspectorate
Estyn
Members expressed concern that budgets for Inspectorates were showing little or no real terms increase. Good inspection helped maintain and drive up standards and required adequate funding. The Minister was confident that the funding proposed was sufficient to enable the various inspectorates to do their job well. However, he was also aware of demands from local government in particular that the burden of regulation should be reduced through less duplication and greater coherence of effort.
Concern was also expressed that cash reductions were proposed for the Social Services Workforce and Quality and Training Support Programme BELs (refs 0780 & 0800). The Minister and his officials explained that these budgets had under spent in previous years and the proposed funding was in part a reflection of this. The Minister has subsequently provided the following further explanatory background information on this point:
"Historically both of these budget lines have returned an under spend year on year. What appears to be a baseline reduction in the draft budget is not intended as a real terms reduction in resources available. It reflects management action to encourage these programmes to make more use of the resources available by eliminating the pattern of under spending whilst retaining the scope to increase activity and deliver more outputs. The amount of under spend in previous years far exceeds the baseline reduction in 2009-10 and 2010-2011 so by reducing the historical under spend it should be possible to increase investment in these areas.”
Committee Members also noted that funding for Inspectorates was now the responsibility of the Minister for Finance and Public Service Delivery rather than individual departmental Ministers and that this might be considered anomalous. The Minister explained that this funding route was felt to better reflect the professional independence of the inspectorates from the organisations they were meant to inspect and which were the responsibility of departmental Ministers.
Census
Committee Members noted the Minister’s assurance that there were no resource implications for the Assembly Government arising from the arrangements for the next Census. He was also satisfied that the UK Government had accommodated the Assembly Government’s priorities for the Census.
Portfolio of the Minister for Social Justice and Local Government
Provisional Local Government Revenue and Capital Settlement
The Committee was unable to consider the detail of the provisional Local Government settlement as it was not announced until after the Committee’s consideration of the draft budget. As noted earlier, there will be an opportunity for the Committee to question the Minister on 22 October but this will not allow time for recommendations arising from this scrutiny to be considered by the Finance Committee.
Assembly Government officials outlined some of the main features of the provisional settlement and these are set out in the written statement made by the Minister on 15 October and in the supporting information published by the Assembly Government. Among the specific points that officials drew to our attention were:
The overall increase in revenue support for local authorities in 2009-10 is 2.9% compared to the current financial year. This included provision for a "floor” arrangement where the minimum increase that any local authority would receive would be 1.5%;
the provisional settlement includes the additional £12.6 million announced as part of the draft budget proposals, £3.7 million to support the extension of free school travel arising from the Learner
Travel Measure, £250,000 for measures to support the take up of child benefit, and the full consequential of the funding for the Local Authority Business Grant Incentive scheme;
in addition to the unhypothecated support, the settlement also included hypothecated specific grants totalling around £676 million; and
£636 million was proposed for local authority capital programmes.
Local Authority Business Grant Incentive Scheme
Members queried whether the consequential funding from the Local Authority Business Grant Scheme could be considered additional funding for local authorities. Assembly Government officials said that the resources concerned (some £3 million) had been transferred to the Welsh Block and that the Assembly Government had decided to include the funding in the local government settlement although they were not required to do so.
Evaluation of Additional Costs and Role of Expenditure Sub Group (ESG)
Members asked what account had been taken of increased cost pressures on local government in arriving at the provisional settlement. In particular, energy costs had increased significantly and wider inflationary pressures had also increased significantly. Members also asked how far the ESG process reflected an agreed position between the Assembly Government and local authorities.
Officials explained that the additional £10 million was in part a response to wider inflationary pressures. While they accepted that energy costs had increased significantly recently there was considerable volatility which made it difficult to predict the overall impact on budgets. It had also proven to be quite difficult to get a firm figure on a standard increase for fuel increases. Authorities negotiated fuel contracts on a rolling basis, some for twelve months or longer. It was difficult to see the full impact of energy costs until it was clear when contracts came up for renewal. This may, therefore have implications for future years.
They also pointed out that a substantial element of local authority spending was taken up in wage costs where inflationary pressures were more predictable. The ESG provided a mechanism for a mutual understanding of the underlying basis on which estimates are prepared but it was recognised that there were differences of view between the Assembly Government and local government and that resources would always be finite.
Performance Targets and Efficiency Savings
Members asked to what extent authorities were meeting Assembly Government performance targets and efficiency savings and whether there was in fact scope for further efficiency savings given the relatively tight settlement proposed this year.
Officials explained that there were no plans to change the current 1% efficiency savings requirement. These savings are audited by the Wales Audit Office, which is generally satisfied that savings are being achieved as required. Performance targets were a matter between individual Assembly Government Departments and local authorities, although there was some central monitoring.
Child Poverty Targets
Committee Members asked how the Social Justice and Local Government budget was contributing to the Assembly Government’s commitment to halving child poverty by 2010 and eradicating it by 2020. Members were also concerned that specific funding was available to address deprivation taking account of indices such as the Index of Multiple deprivation.
Officials explained that around 25% of RSG weightings are deprivation related and there were a number of deprivation related specific grants. In addition there was also the £22 million deprivation fund. Specific funding was also provided to encourage families with disabled children to take up benefits and also to encourage take-up of Council Tax Benefit. More generally, the Government will be introducing an Assembly Measure which will seek to place a duty on local authorities to address child poverty. The Assembly Government were also working with the WLGA and the Save the Children’s Fund to develop a practical toolkit to help local authorities address the issue.
Mainstreaming Equality
Members asked how cross-cutting equality themes were being mainstreamed in the budget. Officials indicated a range of funding measures that supported equality issues. However, Committee Members were concerned that the concept of mainstreaming did not appear to have been taken on board in a cohesive way in setting the budget. Members indicated that this was a point which they intended to pursue further with the Minister on 22 October.
The Committee recommends that the Finance Committee considers how mainstreaming of equality issues can best be reflected in the budget setting process.
Equal Pay
Members asked for more information and clarity on progress by local authorities in implementing equal pay commitments. Officials indicated that funding was built into the proposed settlement as unhypothecated RSG and had been built in for a number of years. Officials agreed to provide the Committee with further detailed information tracking the amount of money that had been put into the system over a period of years. I attach a subsequent letter from the Minister for Social Justice and Local Government providing further information.
Gypsy Travellers
Members asked for further information on the use that would be made of the £200,000 for Gypsy Travellers in the Inclusion BEL. Officials explained that funding had previously been mainly capital expenditure aimed at Gypsy Traveller sites. The £200,000 was new and would be mainly used to support groups who work with Gypsy Travellers. Officials agreed to provide further information on the uptake of previous capital funding. I attach a subsequent letter from the Minister for Social Justice and Local Government providing this further information.
Impact of Potential Loss of Funds held in Icelandic Banks
Members asked what support would be given to local authorities to mitigate the impact of the potential loss of funds held in Icelandic banks.
Officials explained that this was something that the Minister was discussing with the Treasury at that time. It was too early to be able to say whether authorities would eventually be reimbursed for their losses, although this was clearly the hope.
If any authority was facing specific difficulties then the Assembly Government would consider each case to see what could be done to help them deal with the situation. This could for instance include capitalisation directions but the Assembly Government could not offer a blanket commitment to underwrite possible losses.
Officials felt that it was important to get the amounts concerned into context. The total exposure of Welsh Local Authorities was around £60 million out of total funding of around £4 billion. There was also no reason to believe that there was any immediate threat to services as most of the funding concerned was money held in reserve or on relatively medium to long-term deposit.
Members also expressed concern about the impact on local government if private sector bodies, working under contract or in partnership with local authorities, suffered losses. Although there were cases of this sort in England it was not clear whether this problem affected authorities in Wales. Officials agreed to discuss the matter with the Minister and ask the WLGA for further information on their understanding of the position.
Other Issues
Members questioned the reduction from £12.0 million to £1.5 million in the Social Services Capital BEL (within the portfolio of the Minister for Health and Social Services). This was mainly due to the end of a planned programme to purchase Telecare Equipment.
Members asked for further information on the significant reduction in the Town Centre Regeneration Programme. Officials indicated that funding had been transfers to the Community Facilities Programme Investment budget for an Asset Transfer Fund, which would be used for strategic regeneration.
The Severe Weather Capital Grant has been reduced from £1.5 million to zero. This was due to the grant not being used for a number of years. The reduction in funding did not affect the rules of the Bellwin Scheme which would continue to be available in exceptional circumstances.
Portfolio of the Minister for Health and Social Services
Main Features of Draft Budget
The Minister outlined some of the main features of the draft budget proposals. Among the specific points that she drew to the Committee’s attention were:
An increase of 5.3% in the Health and Social Services MEG, this included £63 million to meet and maintain the December 2009 waiting times targets;
Since the publication of the budget, the Finance Minister had also agreed a further £31 million from End Year Finance (EYF). £21 million of this would also be used to help meet the waiting times targets and £10 million would be directed to the NHS. This funding was shown as recurrent from 2010-11 in the draft budget;
£41 million was being made available for pandemic flu preparedness;
However, pressure on the budget is intense and around £80 million
was being redirected within the MEG to meet the most pressing service pressures. This meant that other pressures would be unfunded;
Health service inflation, outside of wage costs, was running at around 9.75%. The NHS was also being asked to make efficiency savings of 3%.
Inflationary Pressures
Members referred to the significant increases in inflationary pressures, including energy costs, the 9.75% inflation rate referred to by the Minister, and factors such as increased mileage rates and asked whether she was satisfied that these would be able to be accommodated within the draft budget.
The Minister felt that the additional funding and reprioritisation was sufficient to be able to deal with these pressures particularly as inflation was probably at a high point at present and would reduce over the coming year. She also felt that the NHS’s energy efficiency record was good and would help them deal with the current pressures. However, energy costs were a concern, particularly for the Ambulance Service. She intended to look again at this area in-year.
Members asked for further details on areas where there were unfunded additional pressures. The Minister highlighted social care, access to wheelchair services, academic clinical careers, adult social services, improving ambulance response times and cardiac services as areas that she intended to look at again to see if additional funding would be possible from 2010 onward.
Domiciliary Care
The Minister was asked about the funding available for the "One Wales” commitment in relation to domiciliary care services. She said that funding would need to be made available in due course in relation to the domiciliary care Legislative Competence Order (LCO).
Waiting Time Targets & NHS Capacity
Committee Members pointed to written evidence from NHS Finance Directors to the Finance Committee Meeting on 16 October. This questioned whether the resources available and the current capacity of the NHS would allow the Assembly’s Government’s maximum waiting time target set for delivery by December 2009 (26 weeks from referral to treatment) to be met.
The Minister felt that there was always doubt within the NHS about whether targets could be met and efficiencies made. Similar concerns had been expressed last year despite which the NHS budget had been in balance. She accepted that this was a very challenging target but was confident that the additional £63 million in this year’s budget combined with the £21 million from EYF would be sufficient to meet the target. There were continuing discussions with the NHS around capacity including how greater capacity could be delivered, as had happened recently in relation to Wet AMD.
Accident & Emergency Services
The 4 hour turnaround target for Accident & Emergency had not been met by April 2008 as planned. Some reports suggested the situation was getting worse. Members asked what specific funding was available to meet this target. The Minister indicated that she felt that these targets should be able to be met within existing budgets and that the inability to meet targets was in part a reflection of poor management within Trusts.
In response to further questions, the Minister did not feel that any greater allowance should be made within budgets for issues specific to urban or city areas. Rural areas also had specific pressures and the real issue was ensuring that services were managed as well as possible.
Continuing Care
Recent court judgements on continuing care are likely to increase cost pressures on the relevant budgets. Members asked whether the Minister was satisfied that these demands had been taken into account in the overall allocations. The Minister indicated that she had some concerns in relation to social services funding and would be looking at this area in more depth to ensure that budgets were in tune with needs.
Prescribing Budget
There is no separate budget line for prescribing. Members asked how much was available for prescribing and whether there had been an uplift in the amount available to ensure equal access to treatments. The Minister indicated that prescribing was included in the baseline figures for the LHBs and Trusts. There had been a re-prioritisation of resources to provide an additional £30 million for these budgets to meet prescribing pressures in the coming year as well as £10 million for Health Commission Wales. However, there was a range of difficult issues around the escalating costs of drugs, the relationship of Government with drug companies and the use of unlicensed drugs that might be less expensive than established treatments.
In response to further questions the Minister promised to let the Committee have further information in due course on the costs of prescribing in both primary and secondary care and in particular how the cost savings from medicines coming "off patent” were re-deployed by NHS organisations.
Primary Care SPA
The Primary Care SPA was to reduce from £21.1 million in 2008-09 to £16.6 million in 2009-10. Members asked for further information on what would be funded from this SPA. In response the Minister said that there were a wide range of initiatives but highlighted the eye care initiative, low vision aids, diabetic services and pharmacy and prescription issues as examples of the initiatives funded.
Wellbeing Centres
Members also asked for information on the source of funding for the piloting of wellbeing centres. The Minister indicated that the first pilot would be around the Merthyr Health Park initiative. This would initially be a capital project but the revenue consequences would be managed across a number of budget lines.
NHS Restructuring
Restructuring Costs
Members asked what allowance had been made in the draft budget to accommodate additional up front costs arising from the proposed NHS restructuring. The Minister anticipated long term cost savings following restructuring as a result of service rationalisation but did not see any immediate impact on next year’s budget.
Debt and Townsend Formula
Noting that the debts of the Hywel Dda Trust and new North Wales Trust were to be written off, the Minister was asked what the debt positions of the new NHS organisations and Health Commission Wales would be following restructuring. She was also asked whether she intended to review the Townsend Formula to ensure that debt was not due to any structural unfairness in the way the formula operates.
The Minister had not yet decided how to deal with historic debt. There was an argument in favour of providing the new organisations with a clean slate but the reason debt had built up in each case, in particular whether it was through poor management or some other reason, also needed to be taken into account in deciding the way forward. She felt the Townsend formula was generally accepted but was also aware of some anomalies and retained an open mind on whether changes to it were needed.
Redundancy Costs
Members asked whether, as a result of moving from a larger to a smaller number of NHS organisations, there would be significant numbers of redundancies among the senior staff of the current Trusts and LHBs, what the estimated cost of redundancies would be and in what financial year costs were likely to fall. The Minister said she was looking to minimise any redundancies and was looking at ways of keeping displaced staff working for the benefit of the NHS.
Cancer SPA
Members noted the £2 million increase in the Hospice BEL compared to the current year and that a further increase was planned for 2010-11 but asked for clarification of whether funding was available to children and young people’s hospices, such as Tŷ Hafan, or whether funding was designated for adult hospice care.
The Minister indicated that funding would be available for all types of care. However, Assembly Government funding would be for the clinical palliative care services that hospices provide. Other aspects of care would continue to be provided by the hospices themselves via their own fund raising.
Mental Health SPA
Members noted the increase of £1.4 in the Mental Health SPA compared to 2008-09 but queried how much of the total SPA of £16.1 million was designated for Child and Adolescent Mental Health Services (CAMHS).
The Minister pointed out that funding for CAMHS was in fact held in the Services for Children BEL. Within this BEL, CAMHS was to receive an additional £2.3 million in 2009-10. The Mental Health Spa included funding for Improved Adult Services, implications of the Mental Health LCO and work related to eating disorders issues. On eating disorders, funding would be geared toward advice on diet and dietetics as well as support for psychiatric and clinical psychological services where appropriate.
Children and Youth Justice Services
A further £2.3 million within the Services for Children BEL is to support vulnerable children and autism strategies. Members asked for more detail on how this money would be used. The Minister promised to provide a more detailed written response on this issue in due course.
Members also asked for an update on the work of identifying the various sources of funding for children and children’s issues throughout the budget. The Minister indicated that figure would be available by the time the final budget was published.
Local Authority Social Services Budgets
Members were aware of considerable additional pressure on local authority Social Services budgets and overspends against allocations of as much as £50 million. In the light of this the Minister was asked what discussions there had been with the WLGA or the Directors of Social Services to identify specific pressures and whether additional resources could be provided to help meet demands.
The Deputy Minister for Social Services had met regularly with Directors of Social Services to discuss pressures. However, the Minister would require more information from local government to back up their case for more resources. In particular, there was a paucity of information from them to demonstrate that they were making the sort of efficiency savings needed to demonstrate best value.
Other Adult Social Care SPA
Members queried whether the "One Wales” commitment, emphasising the importance that unpaid care provided by family and friends, was reflected in the draft budget and what mechanisms there might be to make this commitment more meaningful. In particular, whether possible legislative duties, to put statutory duties on authorities to support carers, might increase funding pressures in this area.
The Minister and Deputy Minister were concerned that the needs of unpaid carers were not being met and a possible statutory duty on local authorities was under consideration; this could well have financial implications. Carers in general were extremely undervalued for the work they do and how to value this work more was one of the major challenges facing society.
Social Care Workforce Development SPA
The Minister indicated that £0.5 million would be available to the Care Council for Wales (which was also the Sector Skills Council for this area) to register more of the social care workforce. The Minister acknowledged that with budgets tight this area was not considered to be of the highest priority.
Influenza Pandemic Preparedness
The Committee sought clarification of the apparent discrepancy of £19.4 million between the £66.3 million announced for the Influenza Pandemic Preparedness Programme (IPPP) and the £46.9 million that had apparently been allocated for this purpose in the budget over the next two years. The Committee also queried whether flu vaccine should properly be charged to capital budgets.
The Minister’s officials explained that the apparent discrepancy was because the shortfall would be met from 2008-09 allocations which would be provided for by an in-year budget motion around the turn of the year. The items being purchased were considered stock and were, therefore, properly allocated as capital rather than revenue expenditure.
Conclusion
As mentioned earlier, the Committee will take further evidence from the Minister for Social Justice and Local Government on 22 October. I recognise that this is outside the timescale allowed in Standing Order 27.3 and is unlikely to allow the Finance Committee time to consider any conclusions we may reach before you have to report under Standing Order 27.4. However, I will write to you again if any further issues arise from the Minister’s evidence as you may be able to append any additional evidence to your final report.
I would be grateful if you could draw this letter to the attention of Members of the Finance Committee. A copy of this letter goes to Edwina Hart, Andrew Davies and Brian Gibbons for information.
Jonathan Morgan
Chair
