http://www.kirklees.nhs.uk/fileadmin/documents/publications/plans/NHSK_Finance_Plan_Feb_10

Realising our Ambition

Financial Commentary in Support of the Medium Term Financial Plan 2009/10 - 2013/14

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Realising our Ambition Financial Commentary 2009/10 - 2013/14

Contents Section 1

Introduction

4

Section 2

Financial principles which will underpin the long term success of the PCT

5

2.1 2.2 2.3 2.4

5 6 6 6

Section 3

Section 4

Section 5

Section 6

Planning for Financial Sustainability Contingency Utilisation of Strategic Investment Fund Summary Income and Expenditure Position

Income and Expenditure Assumptions - Base Cases

10

3.1 3.2 3.3 3.4

10 10 10 11

Allocation Growth Inflation Demographics National Efficiency Target

Income and Expenditure Assumptions - Scenario 1 Downside

12

4.1 4.2 4.3 4.4

12 12 12 13

Allocation Growth Inflation Mitigating Actions National Efficiency Target

Income and Expenditure Assumptions - Scenario 2 Upside

14

5.1 5.2 5.3 5.4

14 14 14 15

Allocation Growth Inflation Mitigating Actions National Efficiency Target

Commissioning Intensionts/Investments/Disinvestments/ Developments/ Risks

16

6.1 6.2 6.3 6.4 6.5

16 16 16 17 17

Activity and Finance Contract Management Resources and Applications Initiatives Risks & Opportunities

Section 7

Capital Programme

18

Section 8

Balance Sheet

18

Section 9

Cash Flow - Relating to Base Case only

19

Section 10

Govenance

19

Section 11

Summary

19

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Section 1

Introduction 1.1.1 The PCT is moving towards the end of the current 5 year comprehensive spending review, with the last year being 2010/11. During this period the levels of growth it has received have been relatively high compared with historic levels, and these continue into 2010/11.

1.1.2 However, as we move into 2011/12 and onwards, the levels of growth are anticipated to be much lower than recent years, as indicated in the 2010/11 Operating Framework. This plan has therefore been produced in the context of a more difficult financial climate and with greater uncertainty than recent times.

1.1.3 The financial plan now includes three different scenarios: the main base case scenario in which most of the detailed planning has been done; and downside and upside scenarios reflecting different PCT growth and NHS inflation assumptions.

This commentary focuses on the base case scenario and explains how the other 2 scenarios differ from this and how the PCT would respond in those circumstances.

1.1.4 The PCT has performed well financially in recent years. It has made an operating surplus and met the control totals agreed with the Strategic Health Authority (StHA) in each of the last 3 years, and is forecasting to do so again in 2009/10.

1.1.5 This provides the PCT with a sound basis on which to meet the more difficult financial climate that lies ahead. However, the financial position for 2009/10 is more challenging than at any time since the PCT was formed in 2006, mainly due to over spends on acute contracts. This is being aggressively managed to ensure the surplus 4

and control totals are delivered and this more challenging approach will continue into 2010/11 and beyond.

1.1.6 Consequently, there is a greater emphasis within the financial plan on delivering cost efficiencies than there has been in recent years. The PCT has well advanced plans in place to deliver these savings in 2010/11, and has processes in place to deliver further savings in future years. The PCT is still able to invest in unavoidable cost pressures and precommitted developments of ÂŁ26m in 2010/11 over and above inflation.

However, the scale of the financial challenge in 2010/11 means that in order to deliver financial balance the PCT has had to slip ÂŁ7.5m of planned investments from 2010/11 to 2011/12.

1.1.7 The PCT is developing how it reviews the effectiveness of the totality of its spend rather than just incremental investments year on year. It is linking outcomes to spend both on a macro level using programme budgeting information, and at the level of pathways and interventions. It has also developed a prioritisation framework to support the decision making process and to assess the relative merits of different proposals for investment and efficiencies. This process is supported by drawing on benchmarking information at a whole systems level, such as Better Care Better Value, and within programme areas to support pathway redesign.

Realising our Ambition Financial Commentary 2009/10 - 2013/14

Section 2

Financial principles which will underpin the long term success of the PCT 2.1

Planning for Financial Sustainability

2.1.1 The PCT recognises the need to plan for financial sustainability in an uncertain economic climate. We have a financial plan which covers 3 different financial scenarios and which delivers financial sustainability under each of these. The scenarios take into account the financial planning information contained in the recently published Operating Framework , and the Strategic Health Authority’s (StHA’s) guidance on the likely levels of PCT allocation growth, national tariff and other inflationary uplifts.

2.1.2 In particular, under the base case financial scenario, the PCT is planning: • for growth in its allocation of 5.6% in 2010/11 and 1% each year in 2011/12 to 2013/14 • for no tariff inflation in 2010/11 and a net tariff reduction of -2% each year in 20011/12 to 2013/14, • to increase CQUIN payments to providers from 0.5% of contract values in 2009/10 by 1% each year so that they stand at 4.5% in 2013/14 • to ensure that 2% of resources are either not committed or are only committed on a non-recurrent basis each year from 2010/11 onwards to increase financial flexibility • to deliver the StHA requirement of a 1.5% control total in 2010/11 which is an increase from the 1.1% control total in 2009/10

• to reduce the control total to 0.5% by 2013/14 • pick up its share of the £500m central funding responsibility being passed to the NHS in 2010/11, which equates to just under 0.6% of the PCT’s resources • to deliver the national annual efficiency requirement of 3.5% to 4.5% on its own expenditure base by delivering efficiencies in primary care prescribing, management and agency costs, and community services which equate to between £4m to £5m each year • to fund the recurrent over trades experienced in 2009/10, some of which have been managed nonrecurrently in that financial year.

2.1.3 The consequence of these planning assumptions is to create a significant financial pressure in 2010/11. This amounts to a £15m gap between planned levels of expenditure and available resources. This equates to 2.3% of total resources available in 2010/11.

2.1.4 In order to address this situation the following approach has been adopted: • invest only in unavoidable cost pressures and pre-committed developments of £26m in 2010/11 • delay investments planned for 2010/11 of around £7.5m to 2011/12, • realise additional recurrent efficiency savings of £7.5m in 2010/11 over and above those already detailed above.

2.1.5 In future years the PCT has unavoidable, and mainly recurrent, cost pressures and pre-committed developments of £7-9m in each of the years 2011/12 to 2013/14. It also has an underlying requirement to make additional recurrent efficiencies of a further £7m in 2011/12 and

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£1.2m in 2012/13 in order to bridge the financial gap in these years.

2.3

2.1.6 However, if the PCT is successful in delivering these recurrent efficiencies then it creates the financial headroom to be able to make non-recurrent investments of around £9m in each of the years from 2011/12 onwards. This investment will be made against the prioritised strategic aims of the PCT and in 2011/12 could be used to fund the slipped schemes. However, this ability to invest will be mainly non-recurrent so the PCT will have to be creative in how this is done to maximise service innovation and transformation whilst maintaining financial flexibility. It is not until 2013/14 that the PCT is in the position to commit additional recurrent investment of around £1m.

The PCT is drawing down the £4m remaining in its strategic investment fund in 2010/11. This forms the majority of the £5m contingency in that year, with the balance being made up from the returned surplus from 2009/10.

2.2

Contingency

2.2.1 The financial plans recognise that there is a degree of uncertainty and risk that arises from the complex and changing nature of the NHS. To ensure that this does not place an undue financial risk on the PCT an appropriate level of contingency is included in the plan.

2.2.2 An assessment of the likelihood and financial impact of the risks facing the PCT has been made and a contingency established based on the resulting financial value if the risk. This ranges from £5m in 2010/11 to £6.5m in 2013/14. As in previous years the contingency is funded non-recurrently in year. However, we have also acknowledged the fact that contingency is normally used to fund recurrent pressures which then have to be funded in future years. The plan therefore also includes the recurrent pick up of these pressures in future years.

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2.4

Utilisation of Strategic Investment Fund (SIF)

Summary Income and Expenditure Position

2.4.1 The financial plan is the culmination of a detailed and co-ordinated process in which the PCT has refreshed and developed both its Strategic and Financial Plans together. This process has: • built on the existing Strategic and Financial Plans • refreshed them in the light of changes in economic factors (and others, although this commentary is primarily concerned with the financial ones) • prioritised a range of investments and disinvestments in order to reach a balanced position in a way which leaves a manageable level of financial risk to be addressed over time.

2.4.2 The table below sets out the historic and forecast income and expenditure position of the PCT. This shows the position under the baseline financial scenario.

Realising our Ambition Financial Commentary 2009/10 - 2013/14

Table 1: Summary Financial Position 2008/09 £000s

2009/10 £000s

2010/11 £000s

2011/12 £000s

2012/13 £000s

2013/14 £000s

Total income

584,315

632,469

657,169

666,332

671,072

674,946

Primary and Community

170,455

179,195

179,348

180,698

182,380

183,844

Mental Health and Learning Disability

65,414

73,454

73,195

71,953

70,863

70,032

Continuing Care

17,517

18,863

22,275

24,147

25,960

27,766

278,980

287,108

302,701

299,195

298,056

297,143

Specialised Commissioning

12,120

24,602

25,533

27,021

28,542

30,055

Other Commissioning spend

13,033

17,347

15,643

18,470

18,697

18,524

Other PCT Spend

23,669

26,915

23,617

26,012

26,935

26,932

341

2,085

5,000

10,507

13,765

17,272

581,529

629,568

647,311

658,002

665,198

671,568

2,786

2,901

9,858

8,330

5,874

3,379

Secondary or Tertiary acute care

Contingencies Total Expenditure Surplus Source: World Class Commissioning Financial Plan

2.4.3 Key points from the table above: • The base case scenario provides for 1% growth in the PCT’s revenue allocation from 20011/12 onwards, • Other income sources are assumed to have no inflation from 2010/11 onwards and this reflects the expected tightening of NHS funding • The last of the PCT’s SIF resources are drawn down in 2010/11 • Net tariff inflation is negative from 2011/12 onwards and this results in an overall reduction in spend in those areas where the majority of the spend is either national tariff based or under contracts where the inflation rate is tied to PbR tariff uplift • The growth in continuing care reflects the impact of changes in legislation, demographic growth and the anticipated opening of care homes within the Kirklees boundary • Specialised commissioning spend is forecast to increase primarily due to the impact of increased specialist drug expenditure

• Other commissioning spend falls in 2010/11 as 2009/10 included a significant level of non-recurrent investment. It increases again in 2011/12 as the PCT then has the ability to invest non-recurrently again.

• Other PCT spend includes in some of the slippage in investment schemes in 2010/11, and the balance of the contingent investments from 2011/12 onwards. This distorts the underlying downward trend to deliver the reduction in management costs required in the Operating Framework.

• The contingency reflects the underlying 1% contingency and the recurrent impact of the utilisation of this in future years.

The table below sets out the underlying position:

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Table 2: Underlying Financial Position 2010/11 Total £000s

2011/12 Total £000s

2012/13 Total £000s

2013/14 Total £000s

9,858

8,330

5,874

3,379

Efficiencies included in plan

-20,352

-11,891

-6,211

-5,162

Underlying Position if Efficiencies not met

-10,494

-3,561

-337

-1,783

0

8,522

9,095

9,950

N/A

-140%

-68%

-52%

Surplus/(Deficit)

Investments included in plan Reduction in investments required if efficiency not met Source: World Class Commissioning Financial Plan

2.4.5 The efficiencies shown in Table 2 do not include tariff efficiencies passed through to providers as part of contractual arrangements. They are efficiencies which are to either be met from the PCT’s own cost base or by commissioning services in different ways. These efficiencies are all planned to be delivered recurrently.

However, in 2010/11 £7.5m of the efficiencies will be met from slippage in planned investments.

2.4.6. The investments in Table 2 are discretionary ones over and above funding for committed cost pressures and developments. The degree to which the investments can be funded is directly linked to the PCT’s ability to deliver the efficiencies. Table 2 demonstrates that, in the worst case scenario where none of the efficiencies are delivered, then the there is no further realistic ability to offset this from further slippage in investments in 2010/11.

In 2011/12 there is the possibility that some further slippage could be used, but this will begin to impact on the PCT’s ability to deliver the strategic plan. Table 2 also assumes that the planed contingency has been used to offset the financial risks and therefore is not available to offset un-met efficiencies.

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2.4.7 This demonstrates the focus that is required on delivering efficiencies since: • the underlying financial sustainability of the PCT is largely driven by this • the ability of the PCT to invest is predicated on delivering these efficiencies.

2.4.8 The PCT has plans in place to deliver the efficiencies required in 2010/11 and a process to continually identify and deliver further savings for future years.

2.4.9 The plan for 2010/11 has been developed by: • Identifying ‘bottom up’ efficiencies from programmes and health improvement leads which are a combination of: - existing work on pathway re-design - identification of new work on pathway re-design - identification of other efficiencies in areas such as improved contracting and procurement arrangements • Identifying organisational level ‘top down’ initiatives through a combination of: - Use of high level benchmarking information such as programme budgeting and Better Care Better

Realising our Ambition Financial Commentary 2009/10 - 2013/14

Value indicators - The StHA QIPP information pack - Partnerships with partner organisations.

2.4.10 These efficiencies have been prioritised. They will form the basis of a delivery plan for 2010/11. The intention is to have this in place by February 2010.

2.4.11 The process is then a continuous one such that new initiatives are added to the plan on an ongoing basis. The intention is that over time these will consider more radical and wide ranging initiatives, which the delivery of the 2010/11 plan allows the PCT time to fully develop.

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Section 3

Income and Expenditure Assumptions – Base Case 3.1

Allocation Growth

3.1.1 The PCT is planning for a 5.6% increase in its recurrent allocation for 2010/11 and a 1% increase in each of the next 3 years. This is in line with the StHA assumptions.

3.2

Inflation

3.3

Demographics

3.3.1 The financial plan includes an estimate of the expected impact of demographic changes over the next 5 years.

This is to reflect the projected population growth based on 5 year age bands, informed by the Office for National Statistics information. The 5 year age bands have been used to model the differential impact of the use of health services by age of population. In financial terms the major impacts are on secondary care and continuing care placements. In total ÂŁ4m is built recurrently in to the plan in each of the next 4 years to allow for demographic changes.

3.2.1 The PCT has used the inflation rates provided by the StHA, and these are summarised in Table 3.

3.2.2 The combined impact of these inflation assumptions and the growth assumptions above, result in the underlying position explained in more detail in Section 2 above.

Table 3: Summary of Base Case Inflation Assumptions 2010/11

2011/12

2012/13

2013/14

3.50%

2.50%

2.50%

2.50%

NHS Efficiency

-3.50%

-4.50%

-4.50%

-4.50%

CQUIN Increase

1.00%

1.00%

1.00%

1.00%

NHS Net

1.00%

-1.00%

-1.00%

-1.00%

Prescribing

7.00%

5.00%

5.00%

5.00%

GMS/PMS

0.50%

0.50%

0.50%

0.50%

Other (Excludes Dental)

3.00%

3.00%

3.00%

3.00%

NHS Inflation Rate

Source: World Class Commissioning Financial Plan

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Realising our Ambition Financial Commentary 2009/10 - 2013/14

Table 4: Summary of Efficiency Targets Achieved

Recurrent

2007/08 £000s

2008/09 £000s

2009/10 £000s

2010/11 £000s

2011/12 £000s

2012/13 £000s

2013/14 £000s

3,995

8,577

5,212

20,352

11,891

6,211

5,162

0

0

500

0

0

0

0

3,995

8,577

5,712

20,352

11,891

6,211

5,162

Non-Recurrent Total

Planned

Source: World Class Commissioning Financial Plan

3.4

National Efficiency Target

3.4.1. Table 4 summarises the PCT’s efficiency plans both in terms of historical achievement and future plans. These include efficiencies for prescribing, the PCT’s own provider function, head quarters functions and commissioning efficiencies required to underpin investments contained in the plan to support delivery of the strategy.

ongoing dialogue relating to the PFI development and possible additional capacity in Dewsbury includes discussions relating to efficiencies.

3.4.2. In addition to the savings shown in Table 4, there are additional efficiencies of £14.5m in 2010/11 and £20m in each of the years from 2011/12 to 2013/14 that fall on providers as a result of the efficiency built into tariff. This means that the Kirklees health economy in total is required to find £35m in 2010/11, £31.5m in 2011/12, and £26m in each of 2012/13 and 2013/14.

3.4.3 This represents a significant challenge, and one which cannot be delivered by organisations in isolation. The most effective way to deliver these efficiencies whilst maintaining or improving the quality of services is by working together with providers, partners, and other commissioners. In order to begin this process a joint approach has already been established with CHFT to identify and deliver efficiencies. The situation is more complex in respect of Mid Yorks, and the 11

Section 4

Income and Expenditure Assumptions – Scenario 1 Downside 4.1

Allocation Growth

4.1.1. The PCT is planning for a 5.6% increase in its recurrent allocation for 2010/11 and a nil increase in each of the next 3 years. This is in line with the StHA assumptions, and is a reduction of 1% from 2011/12 onwards compared with the base case scenario.

4.2

Inflation

4.2.1 The PCT has used the inflation rates provided by the StHA, and these are summarised in Table 5.

4.2.2 As can be seen in Table 5, the only change in inflation assumptions from the base case is the lower level of national efficiency which results in a 0.5% increase in the net tariff inflation. This has an impact on where the required efficiencies fall and this is explained below.

4.3

Mitigating Actions

4.3.1. The change in the assumptions does not impact on the financial plan until 2011/12, when it increases the level of efficiency required by between £8.5m and £9m per year. The PCT has adopted a two tiered approach to identifying and delivering efficiencies over the period of the plan.

Detailed work is already under way to identify specific savings plans for 2010/11 which will be sufficiently developed to be implemented for that financial year.

4.3.2 In addition, longer term work is ongoing to identify more strategic initiatives and actions to deliver savings in future years. This is looking at efficiencies which will take longer to deliver either because the work up time is greater or because more cooperation is required from partner organisations. The increased level of savings required in the down side scenario from 2011/12 onwards have been built into the process for identifying how to deliver them ie we are planning for the downside scenario. This is important as the time lag in developing and implementing these savings plans means the we cannot wait until the planning assumptions are firmed up before deciding how to deliver them.

Table 5: Summary of Down Side Inflation Assumptions 2010/11

2011/12

2012/13

2013/14

3.50%

2.50%

2.50%

2.50%

NHS Efficiency

-3.50%

-4.00%

-4.00%

-4.00%

CQUIN Increase

1.00%

1.00%

1.00%

1.00%

NHS Net

1.00%

-0.50%

-0.50%

-0.50%

Prescribing

7.00%

5.00%

5.00%

5.00%

GMS/PMS

0.50%

0.50%

0.50%

0.50%

Other (Excludes Dental)

3.00%

3.00%

3.00%

3.00%

NHS Inflation Rate

Source: World Class Commissioning Financial Plan

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Realising our Ambition Financial Commentary 2009/10 - 2013/14

Table 6: Summary of Efficiency Targets - Downside Achieved

Recurrent

2007/08 £000s

2008/09 £000s

2009/10 £000s

2010/11 £000s

2011/12 £000s

2012/13 £000s

2013/14 £000s

3,995

8,577

5,212

20,352

20,180

14,806

14,075

0

0

500

0

0

0

0

3,995

8,577

5,712

20,352

20,180

14,806

14,075

Non-Recurrent Total

Planned

Source: World Class Commissioning Financial Plan

4.4

National Efficiency Target

4.4.1. Table 6 summarises the PCT’s efficiency plans both in terms of historical achievement and future plans. These include efficiencies for prescribing, the PCT’s own provider function, head quarters functions and commissioning efficiencies required to underpin investments contained in the plan to support delivery of the strategy. It shows the increased level of efficiency required in the down side scenario.

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Section 5

Income Expenditure Assumptions – Scenario 2 Upside

level of resources available to the PCT to invest over and above recurrent commitments. The impact of this is explained in more detail below.

5.3 5.1

Allocation Growth

5.1.1 The PCT is planning for a 5.6% increase in its recurrent allocation for 2010/11 and a 2.5% increase in each of the next 3 years. This is in line with the StHA assumptions, and the 2.5% increase is a change from the assumption in the base case.

5.2

Inflation

Mitigating Actions

5.3.1 The PCT is already planning to deliver the underlying level of efficiencies required in the base case scenario for 2010/11, and these do not change under the up side scenario.

5.3.2 Under the up side scenario the plan assumes that the underlying efficiencies in the base case will continue to be delivered throughout the plan. It does not assume that the additional efficiencies required under the down side will be delivered.

5.2.1 The PCT has used the inflation rates provided by the StHA, and these are summarised in Table 7.

5.2.2. As can be seen in Table 5, the only change in assumptions from the base case is the lower level of national efficiency which results in a 1.0% increase in the net tariff inflation. When taken together with the increased allocations in the upside scenario this has the effect of increasing the

Table 7: Summary of Up Side Inflation Assumptions 2010/11

2011/12

2012/13

2013/14

3.50%

2.50%

2.50%

2.50%

NHS Efficiency

-3.50%

-3.50%

-3.50%

-3.50%

CQUIN Increase

1.00%

1.00%

1.00%

1.00%

NHS Net

1.00%

-0.00%

-0.00%

-0.00%

Prescribing

7.00%

5.00%

5.00%

5.00%

GMS/PMS

0.50%

0.50%

0.50%

0.50%

Other (Excludes Dental)

3.00%

3.00%

3.00%

3.00%

NHS Inflation Rate

Source: World Class Commissioning Financial Plan

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Realising our Ambition Financial Commentary 2009/10 - 2013/14

Table 8: Summary of Efficiency Targets - Upside Achieved

Recurrent

2007/08 £000s

2008/09 £000s

2009/10 £000s

2010/11 £000s

2011/12 £000s

2012/13 £000s

2013/14 £000s

3,995

8,577

5,212

20,352

11,309

5,609

4,541

0

0

500

0

0

0

0

3,995

8,577

5,712

20,352

11,309

5,609

4,541

Non-Recurrent Total

Planned

Source: World Class Commissioning Financial Plan

5.4

National Efficiency Target

5.4.1 Table 8 summarises the PCT’s efficiency plans both in terms of historical achievement and future plans. These include efficiencies for prescribing, the PCT’s own provider function, Head Quarters functions and commissioning efficiencies required to underpin investments contained in the plan to support delivery of the strategy.

5.4.2. The level of efficiency in Table 8 is broadly in line with the level required by the base case scenario. However, in the best case scenario the changed PCT uplift and tariff efficiency assumptions mean that this level of underlying efficiency generates additional funds for the PCT to invest. This equates to £4m to £5m in each year from 2011/12 onwards.

5.4.3 However, the PCT does not have firm plans to invest these funds as they are dependent on the ability to generate efficiencies. They are show in the plan as contingent investments rather than specific investment plans.

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Section 6

Commissioning Intentions/Investments/ Disinvestments/ Developments/Risks 6.1

Activity and Finance

6.1.1 The PCT has a robust and established demand planning process in place to support the negotiation and agreement of contracts. This ensures that activity and financial assumptions and plans are closely aligned with both each other and with those of the providers themselves.

6.1.2 These financial plans take into account: • SUS activity as the basis for PbR activity • The introduction of HRG 4 • Required adjustments for delivery of 18 weeks, cancer targets and identified developments and growth either as a result of changed national guidance or local agreement • Demographic growth based on ONS information and local modelling • Current year forecast over trades with main providers.

6.2

Contract Management

6.2.1 The PCT has robust contract management arrangements and these include robust systems for invoice auditing which are tailored to the value and underlying complexity of invoices received.

Approval officers and levels of authorisation are clearly established and reviewed.

Particular attention is placed on the review and checking of invoices relating to contracts for health care services as these are the more complex and higher value invoices. So for example, invoices for PbR services are supported by detailed information flows and these are robustly reviewed and challenged before invoices are approved for payment.

6.2.2 During 2009/10 significant levels of challenges have been made to acute providers from these processes and these have resulted in significant reductions in the amounts paid to acute Trusts.

6.3

Resources and Applications

6.3.1. The Resources and Applications form shows how the PCT has applied the additional resources received over the next 4 years against priority areas. A summary of this is shown below in Table 9, and these investments exclude the risk contingency.

Table 9 Summary of Investments

Funding 2009/10 demand pressures Demographic impact Investment in priority areas Contingent investment Total Source: World Class Commissioning Financial Plan

16

2010/11 £000s

2011/12 £000s

2012/13 £000s

2013/14 £000s

10,934

0

0

0

3,720

3,732

4,272

4,272

10,829

4,637

4,609

2,060

0

8,522

9,095

9,950

25,484

16,891

17,976

16,282

Realising our Ambition Financial Commentary 2009/10 - 2013/14

6.4

Initiatives

6.4.1 The PCT has set itself 4 strategic goals: • Raise male and female life expectancy at birth so that it is not significantly below the national average in any part of Kirklees • Improve health outcomes for children and young people, working in partnership to improve life chances and safeguard children.

• Target individuals and populations to tackle health and well being inequalities, focusing on the priority issues identified locally.

• Empower those people in Kirklees with a long term condition to exercise control over their own lives, so preventing problems arising or worsening and independently managing their own health and well being.

6.4.2 These goals will be delivered through a programme approach and the PCT has established 13 programmes in order to do this. Each of these programmes has a number of initiatives designed to deliver the specific goals and outcomes for that programme are. These relationships are described in the Strategic Plan.

6.4.3 The PCT has prioritised investment into the programme areas to support the delivery of these goals, outcomes, and initiatives. Investments in areas such as demographic growth have also been linked into programmes as resourcing this is an important part of achieving these goals and outcomes.

6.4.5 The investments in the financial plan were arrived at through a prioritisation process which considered both investments and disinvestments. This used the PCT’s prioritisation framework to inform the process, and was also informed by benchmarking information including programme budget quadrant analysis to help link spend and outcomes.

6.5

Risks & Opportunities

6.5.1 The financial plan includes an assessment of the level of financial risk over the period of the plan. These risks have been quantified both in terms of impact and likelihood. The risks reflected in the plan, and detailed in the WCC submission, are taken from the PCT’s Finance Risk Register. This risk register is regularly reviewed by the ‘Finance and Performance Committee’ which includes a review of the mitigating actions in place to reduce the likelihood and impact of the risks. Any risks which are of a significantly high level are escalated to the PCT Board.

6.5.2 The financial plan includes a level of contingency which is based on the assessed impact of the above risks. The plan also includes provision to pick up the financial impact of these on a recurrent basis given that experience shows that most of them are recurrent in nature.

6.5.3 The overall level of risk in the financial plan is shown as amber and this reflects the increased level of financial constraints and uncertainty that exists going into next year and beyond.

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Section 7

Section 8

Capital Programme

Balance Sheet

7.1.1. The capital programme consists largely of operational capital expenditure of around ÂŁ1.2m each year. This is supplemented by applying capital receipts from the disposal of surplus assets in the 3 years beginning 2010/11. In 2013/14 only the operational capital limit is included in the plan. No inflation has been assumed on the operational capital allocation over the period of the plan.

8.1.1. The impact of the capital plan has been included in the Balance Sheet with the increase in fixed assets being due to the delivery of the Community Hospitals Scheme in 2010/11. The Balance Sheet is not materially impacted on by the two alternative financial scenarios.

7.1.2. The plan includes the delivery of the Community Hospitals Scheme in 2011/12.

This has been included at ÂŁ12m which reflects the latest internal planning assumptions. However, this is still subject to an approval process and sign off by the StHA.

8.1.2 The PCT has robust processes in place for debt management with clearly defined procedures for the prompt and full collection of amounts due. There is a clear division of duties between the PCT’s own staff and those of the Shared Services Organisation which provides most of the routine debt management functions to the PCT. Regular meetings are held with Shared Services and there are additional internal meetings to discuss the level of outstanding debt and to take appropriate action to recover.

8.1.3 The PCT has clearly defined responsibilities for asset management and undertakes regular reviews of its asset base to ensure that it is appropriately and efficiently utilised. This has lead to the identification of some properties which are no longer required and which are in various stages of being disposed of so that the proceeds can be re-invested in the ongoing asset base.

8.1.4 The PCT has 5 health centres on the balance sheet which were constructed under a PFI scheme. The PCT manages the contract with the PFI provider to ensure that these are properly maintained and operated in order to deliver the maximum service benefit.

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Realising our Ambition Financial Commentary 2009/10 - 2013/14

Section 9

Section 11

Cash Flow – Relating to Base Case only

Summary

9.1.1 The financial plan demonstrates that the PCT has sufficient cash resources to support the level of revenue and capital expenditure within the plan. This includes an assumption that future draw downs from the Strategic Investment Fund and the return of historic surpluses continue to be back by cash.

Section 10

Governance 10.1

Medium Term Financial Plan SignOff Process

10.1.1 The Board have been pro-actively involved in the development of both the Strategy and Financial Plan. A number of time out session were held with the Board to facilitate this process. The World Class Commissioning Strategy and Medium Term Financial Plan were approved by the Board at its meeting on 27th January 2010.

10.2

11.1.1 The financial plan supports the delivery of, and is an integral to, the PCT’s strategic plan. It shows the level of investments and efficiencies required over the next 4 years. It reflects the uncertain financial planning environment and considers different scenarios. It includes an appropriate level of risk and has been prudent in planning for this.

11.1.2 As a result the PCT is in recurrent financial balance over the period of the plan. This should enable it to deliver its strategic plan and improve the health of the population of Kirklees.

11.1.3 However, the requirement to deliver a 1.5% control total in 2010/11 results in a level of efficiency which represents a significant challenge to the organisation.

2009/10 Annual Plan/Budget Sign-Off Process

10.2.1 In accordance with the PCT’s Standing Orders and Scheme of Delegation, the 2009/10 revenue and capital budgets were approved by the Board at its meeting in March 2009.

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Further information about the PCT can be found on the PCT’s website (www.kirklees.nhs.uk) or by contacting the PCT at: Kirklees Primary Care Trust Broad Lea House, Bradley Business Park Dyson Wood Way Bradley Huddersfield HD2 1GZ Tel: 01484 464000