Finance and Public Administration Committee
This report sets out the conclusions of the Finance and Public Administration Committee in relation to our scrutiny of the estimated costs arising from the Financial Memorandum for the National Care Service (Scotland) Bill.
The National Care Service (Scotland) Bill was introduced by the Scottish Government on 20 June 2022 and seeks to provide Scottish Ministers with powers to transfer social care responsibility from local authorities to a new, national service.
A joint call for views involving all those parliamentary committees conducting scrutiny of various elements of the Bill, ran between 8 July and 2 September 2022 and received 218 submissions, around a third of which provided comments on the FM in relation to the Bill1. The FPA Committee also took evidence from three panels of witnesses on 25 October2 and 1 November3, before hearing from the Minister for Mental Wellbeing and Social Care on 8 November4. The Committee thanks all those who took the time to contribute their views, which have helped to shape our findings.
This report is intended to inform the Stage 1 consideration of the Health, Social Care and Sport Committee as the lead Committee but also to be read as a standalone report, which requires the Scottish Government to formally respond to our recommendations. The Finance and Public Administration Committee has taken this approach given its significant concerns about the level of detail in the Financial Memorandum (鈥楩M鈥) which accompanies the Bill and in light of its recommendations which call on the Scottish Government to act prior to the conclusion of the Stage 1 process (currently scheduled for March 2023). This includes the FPA Committee鈥檚 request that the Scottish Government provides the Committee with a revised FM, including updated financial costings before the Stage 1 debate to provide greater transparency over the range of cost estimates to which the Bill would give rise.
鈥楩ramework bills鈥 tend to set out principles for a policy, leaving substantial detail on how that policy will work in practice to subsequent secondary legislation. This presents challenges for parliamentary scrutiny. This Bill is no different. In fact, the FM that accompanies the Bill provides more limited cost estimates than members of this Committee would have anticipated. We hope that our recommendations will prompt the Scottish Government to provide much needed clarity on the overall and specific costs to which the Bill would give rise.
While we make recommendations on specific issues throughout, our overall conclusions on the FM can be found at the end of this report. In so doing, we also draw on some of our previous recommendations made as part of our post-legislative scrutiny of a previous FM, aimed at helping to inform and improve the Scottish Government鈥檚 development of FMs and to support more effective scrutiny in future.
The National Care Service (Scotland) Bill (鈥榯he NCS Bill鈥 or 鈥榯he Bill鈥) was introduced by the Scottish Government on 20 June 20221, with the purpose of improving the quality and consistency of social services in Scotland2. The Policy Memorandum2 on the Bill explains that 鈥渙ver many years, various issues have demonstrated that social services and the integration of health and social care services are not working as well as they should鈥. In response, the Scottish Government established an Independent Review of Adult Social Care, chaired by Derek Feeleyi, in September 2020 鈥渢o consider the problems in a systematic way鈥4. The Review found that, while 鈥渢here is much about adult social care support in Scotland that is ground-breaking and worthy of celebration, 鈥 the story of adult social care support in Scotland is one of unrealised potential鈥5. It suggests 鈥渢here is a gap, sometimes a chasm, between the intent of 鈥 ground-breaking legislation and the lived experience of people who need support鈥, adding 鈥渨e have inherited a system that gets unwarranted local variation, crisis intervention, a focus on inputs, a reliance on the market, and an undervalued workforce鈥. The Review concluded that, 鈥渋f we want a different set of results, we need a different system鈥.
The Bill seeks to implement some of the key recommendations from the Independent Review of Adult Social Care (the 鈥楩eeley Review鈥), which reported in February 2021, that is: to create a National Care Service 鈥渢o drive national improvements; to ensure strategic integration with the NHS; to set national standards, terms and conditions; and to bring national oversight and accountability鈥. The Bill also enables Scottish Ministers to create new 鈥榗are boards鈥, gives them powers to achieve more consistency and better integration in relation to records about people鈥檚 health and social care, introduces a right to breaks from unpaid caring, and gives people living in care homes a right to maintain contact with family and friends (so-called Anne鈥檚 Lawii).
The Scottish Government explains that 鈥渢he Bill creates a framework for the NCS but leaves space for more decisions to be made at later stages through co-design with those who have lived experience of the social care system, and flexibility for the service to develop and evolve over time鈥2. It adds that some of these future decisions will be implemented through secondary legislation, others through policy and practice.
The Scottish Government consulted on its proposals in response to the Feeley Review between August and November 2021, and that consultation received 1,291 responses1. According to the Policy Memorandum, there was 鈥渂road agreement with the Scottish Government鈥檚 proposals to bring together social care and community health services for all ages under a National Care Service accountable to Scottish Ministers鈥2, and that people expected that this be delivered as soon as possible. The Minister for Mental Wellbeing and Social Care noted in his evidence that 鈥渢he Scottish Government said that we would publish the Bill [to create a National Care Service] within the first year of the current session of this Parliament, which we have done鈥3.
One of the questions posed by the Finance and Public Administration Committee [鈥榯he Committee鈥) in its call for views on all FMs is whether consultees feel that they have had sufficient time to contribute to the relevant Scottish Government consultation and to comment on the financial assumptions made. An overwhelming number of respondents to the joint call for views answered 鈥榥o鈥 to this question, with many noting that there was insufficient time for consultation for such a significant 鈥榝lagship鈥 bill. COSLA, for example, noted in evidence that 鈥渙ne cannot deny that there has been an engagement and consultation process鈥, however, 鈥渢he proposed change is huge [and so this] is not a standard policy consultation for which the Government can simply roll out the national standards for community consultation and engagement鈥4. It adds that the process involved a 鈥榦ne-size-fits-all鈥 approach, when different approaches should have been taken depending on the level of interest, involvement, and impact on consultees. South Lanarkshire Council had similar views, suggesting in addition that 鈥渢he outcome that we are being pointed towards, which is a huge change, does not seem to have varied across the period of engagement and consultation鈥4.
The Scottish Government鈥檚 Bill Team told the Committee that 鈥渢he time given for the consultation was in line with the time given for any other consultation on legislation鈥, adding that the 鈥榗o-design鈥 nature of the Bill would allow people 鈥減lenty of opportunity to engage鈥 on the detail. It suggested that 鈥渃learly, there are mixed views on the co-design process, but what we hear from people who use and work in the services is that they welcome the approach鈥4.
The Minister subsequently made the point that, 鈥渏ust because the consultation is over, that does not mean that engagement discontinues鈥, adding 鈥渋t will continue throughout the process鈥3.
While the Committee notes that the consultation on the proposals ahead of the Bill being introduced was in line with the length of usual Scottish Government consultations, we agree with stakeholders that, for a flagship policy with such significant financial considerations, this consultation period should have been longer. We ask the Scottish Government to take on board this feedback for future proposed legislation of such significance.
There was some discussion during our evidence-gathering about the merit of spending significant sums on structural reform and organisational change as opposed to allocating this money to the front-line delivery of services and building on existing arrangements. While this Committee is focused on scrutiny of the financial costs arising from the Bill, we consider that this debate does inform decisions around spending priorities, and we therefore explore some of the evidence gathered on this issue below.
The FM states that alternatives to the provisions set out in the Bill were considered, including (1) not transferring responsibility for social care to Scottish Ministers or establishing an NCS at national level or reforming Integration Joint Boards (IJBs), (2) the health board or local authority in an area agreeing to take full responsibility for the provision of care, and (3) creating an NCS to act as an advisory body at national level with statutory responsibility for social care provision remaining with local authorities. The Scottish Government notes that none of these alternatives would require changes to legislation, and concludes that 鈥渋n all cases, the lack of national leadership, oversight and accountability would continue, and therefore the scale and impact of the changes in the Independent Review of Adult Social Care (the Feeley Review) proposed could not be achieved鈥1. It suggests that these approaches therefore carry a risk that the current challenges facing the social care system will continue and concludes that 鈥渢he NCS can only effectively fulfil its purpose to improve social care if there is a clear line of accountability for improvement to the Scottish Ministers which can be exercised locally by care boards鈥.
Witnesses to the Committee also put forward alternative arrangements to those set out in the Bill, including local authority representative bodies who suggested that the existing structure could take on new powers and a new national care service could sit within existing structures. CIPFA Integrated Joint Boards Chief Finance Officer Section (CIPFA IJB CFOs) agreed, indicating 鈥渨e would like a hybrid model that builds on what we already have鈥攔ather than starting again鈥攁nd for money to be put into front-line social work services and service provision鈥2. It further said that it would 鈥渋nvest in the things that need to be invested in, such as capacity and fair work鈥. NHS Borders told the Committee that it had concerns 鈥渁bout the scale of organisational change and whether that will add the value that we believe is needed to deliver the improvement in social care that we all want to see鈥3. It went on to say that 鈥渢here are things to be learned but I think there is an opportunity to address that through the existing legislation, to build on that with local partners by understanding how they can make decisions better together and addressing some of the cultural and behavioural differences鈥.
The Minister has confirmed that the Scottish Government would 鈥渋ncrease our social care spend by some 拢840m by the end of the parliamentary session鈥4. However, the Fraser of Allander Institute warned the Committee that, 鈥渋f the service is underfunded, it is unlikely to be any better than the system it seeks to replace鈥5.
Audit Scotland suggested that 鈥渇ocusing on such a major transformation may divert attention from addressing the immediate challenges within the social care sector, including workforce issues and unmet demand for support鈥, adding that 鈥渋t will take considerable time and investment and the focus on improving lives should not be lost amid structural changes鈥6.
Given the magnitude of the potential costs from the creation of the NCS and the concerns regarding the uncertainty associated with the costs of the Bill, many respondents questioned the financial implications of the proposed reforms at a time when budgets are already stretched, with some also questioning whether the money would be better spent on improving services within the current delivery arrangements. CIPFA noted, for example, that the Scottish Government is committing a significant sum from its own budget at a time when savings are being sought from many departments and projects through the Scottish Government鈥檚 Emergency Budget Review. It states that 鈥渢his raises serious questions about the affordability of this major transformation project at a time when the Scottish Government as a whole is facing serious financial uncertainty as a result of the wider financial and economic climate鈥7. CIPFA concluded that 鈥渁 much greater level of detail is essential to conclude whether this is a worthwhile investment鈥. COSLA raised similar concerns, noting that 鈥渢he establishment of the NCS body alone will cost up to 拢250 million, with subsequent overall NCS running costs of up to 拢500 million per year spent solely on structural reform rather than directly on improvements.鈥8
We recognise that there are differing views amongst stakeholders on whether the aims of the Bill to improve quality and consistency of social care can be better achieved through the structural reform proposed in the Bill, through a hybrid model, or through diverting these funds to front-line services. It will be for the Health, Social Care and Sport Committee, as lead committee, to consider whether the case has been made for this Bill or whether other alternative proposals could achieve better outcomes. Whatever the final agreed model, this Committee requests that clear costings are provided. We set out more detailed recommendations on this later in this report.
As referred to earlier in this report, the draft legislation under consideration is a 鈥榝ramework bill鈥 which 鈥渓ays the foundations for a national care service, allowing for the substantive detail to be co-designed, chiefly with people who access support, those who deliver it and unpaid carers, later鈥1. The UK Government Cabinet Office Guide to Making Legislation describes 鈥榝ramework legislation鈥 as 鈥渁 bill that leaves the substance, or significant aspects, of the policy to delegated legislation [and] might amount to a series of powers providing for a wide range of things that could be done with the detail on what will be done, left to be set out in the regulations鈥2.
The Scottish Government has confirmed that the detail in relation to the NCS will be implemented through secondary legislation, as well as through policy and practice.
Its rationale for using a 鈥榝ramework bill鈥, as set out in the FM, is that it 鈥渋s committed to engaging with people with experience to co-design the detail of the new system, to finalise new structures and approaches to minimise the historic gap between legislative intent and delivery鈥. The FM notes it is 鈥渇or that reason the Bill creates a framework for the NCS but leaves space for more details to be made at later stages through co-design with those who have lived experience of the social care system, and flexibility for the service to develop and evolve over time鈥3.
The Scottish Government鈥檚 Bill Team further explained to the Committee that current legislation is not being implemented consistently and fairly, 鈥渢herefore, for good reason, we have taken a different approach to the development of the Bill, which obviously has implications for the FM because we have significant co-design work to do鈥4. It suggested that 鈥渃lear business plans will be developed for the detail of the plans, which will allow parliamentary scrutiny鈥 and confirmed that the Scottish Government is 鈥渁ware of and are actively managing the risks that are associated with the programme鈥. She went on to say that 鈥淚 think we are comfortable with the approach that we have taken, and I know that Ministers are comfortable with it鈥, adding that 鈥渢here is an opportunity to work concurrently to develop the detail while making sure that the Bill is effective, that it is good law, and that it is implementable鈥4.
A small number of witnesses appeared to accept that the approach taken by the Scottish Government of using a 鈥榝ramework bill鈥 would in effect mean less detail on cost estimates in the FM, even if that was not the most desirable outcome. The Fraser of Allander Institute, for example, told the Committee that 鈥渨e think that the Government has gone through a reasoned process to produce the FM, although 鈥 the documents do not contain all the detail that we would have liked and we have had to go searching for that鈥6. Audit Scotland noted that, 鈥渋n embarking on this path, there is a question about the range of costs that we are likely to incur and whether we can demonstrate that this is affordable and sustainable鈥6. It stressed that 鈥渇undamentally, what is important is that, as the Government goes forward and as the legislation goes through Parliament, there is an understanding of the full range of cost and of financial benefit鈥.
The majority of witnesses considered that a business case or business cases should have been brought forward prior to primary legislation to enable effective scrutiny by Parliament. For example, CIPFA IJB CFOs said that 鈥渨hile there is acknowledgement in the FM of additional work being required, 鈥 this work should have been significantly progressed as due diligence prior to publication of the FM to ensure the public and Parliament can provide informed opinions鈥8. It added that, 鈥渉ad the FM been informed by a business case on implementing the NCS this would likely have given a more informed and robust financial assessment of estimated cost implications.鈥
The Committee notes that two recent Scottish Government 鈥榝lagship鈥 bills that introduced an element of structural reform (of police and fire and rescue services, and social security administration) were preceded by business cases which helped to inform the costings in the associated FMs. While concerns were still raised at the time, particularly in relation to the cost estimates for the Police and Fire Reform (Scotland) Bill, it is fair to say that the outline business case set out in that FM supported greater parliamentary scrutiny as well as providing a baseline for monitoring costs and savings going forward.
In the case of the NCS Bill, business cases are still under development and the timing of their publication is yet to be confirmed. The Scottish Government鈥檚 Bill Team told the Committee on 25 October that 鈥渢he intention is to publish the Programme Business Case later this year鈥4. However, in a follow-up letter to the Committee on 10 November, the Minister said that 鈥渨e anticipate publishing [this Programme Business Case] in early 2023鈥10.
This suggests there has been some slippage in the programme and in the development of more detailed cost estimates based on the co-design approach. Indeed, in his letter to the Committee of 10 November, the Minister noted that, as part of the Scottish Government鈥檚 Emergency Budget Review announced on 2 November, 鈥渞ephasing has resulted in 拢15m of savings for financial year 2022-23鈥10. He explained that this rephasing 鈥渋s to ensure that we have right skills in place to take the programme forward, and to move at a pace that allows for meaningful engagement with people with living and lived experience鈥. He went on to confirm that 鈥渢he requirement has already been identified in conjunction with the budget setting process鈥 for next year.
The Committee believes that the Scottish Government should not bring forward primary legislation unless it is based on a full and proper business case to allow stakeholders and the Parliament to scrutinise and take a view on the full cost estimates, ranges of costs, and margins of uncertainty.
We seek clarification of whether there is slippage in the delivery of the programme given the delay in publishing the Programme Business Case and the rephasing of funds allocated for the programme in this financial year announced by the Scottish Government in its recent Emergency Budget Review.
The Scottish Government has indicated that, where secondary legislation is used, financial and regulatory impact assessments will be provided and that 鈥渢he Parliament will, therefore, have further opportunities to examine the implications鈥1 of these reforms.
However, significant concerns were expressed regarding the limited opportunities for scrutiny afforded through secondary legislation as compared to primary legislation. ALLIANCE Scotland told the Committee that 鈥渨e do have reservations about leaving quite so much detail to secondary legislation, because the parliamentary process means that there are fewer opportunities for editing proposals, subsequent transparency about why decisions are made and cross-examination鈥2. It added 鈥渨e would like to see careful movement through the first stage of the Bill to work out what needs to be shifted鈥.
CIPFA also recognised that 鈥渟ubsequent secondary legislation can significantly alter the financial implications of primary legislation, and there is a risk that secondary legislation provides fewer opportunities for robust scrutiny, even when subject to the affirmative procedure鈥3. Audit Scotland felt that there was a need for further updates as details are agreed and greater certainty emerges over the delivery model. It argued that 鈥渋t will be critical to regularly update estimates of overall costs and other financial implications and report on these regularly to Parliament and local authorities鈥4. When asked by the Committee during oral evidence whether they felt that the FM should be revisited, CIPFA IJB CFOs, COSLA and South Lanarkshire Council all agreed that it should be.
In response to questions around the lack of scrutiny opportunities arising from use of framework legislation, the Minister stated: 鈥淚 again pledge to the Committee and to Parliament that 鈥 we will be open and transparent about the expected financial costs of all of that work鈥5. He indicated that the proposals set out in the Bill are 鈥渄efinitely the biggest public service change since devolution, so it is incumbent on us all that we get it right鈥, adding 鈥淚 am, therefore, not afraid of scrutiny in that regard鈥.
He went on to say that 鈥渨e will consult stakeholders and the public on the secondary legislation and that we will allow the maximum time for scrutiny鈥, adding 鈥渨e need to ensure 鈥 that we provide Parliament with the ultimate amount of opportunities for scrutiny of not only the secondary legislation but every aspect of the financial and economic impact of the decisions that are made during the co-design process鈥5.
The Committee has concerns that the details of how the new social care arrangements will work in practice will be set out in secondary legislation, which limits scrutiny and does not provide the greatest opportunity to propose changes and shape its provisions. In a recent report on our post-legislative scrutiny of the FM for the Children and Young People (Scotland) Bill (Early Learning and Childcare Provisions), we recommended that, 鈥渢o enhance transparency and enable effective scrutiny, the Scottish Government should avoid implementing major policy expansions via secondary legislation鈥. We are therefore disappointed that secondary legislation is intended to be the main vehicle for future parliamentary scrutiny of the NCS proposals.
We do however acknowledge the Scottish Government鈥檚 intention, where secondary legislation is used, to provide financial impact assessments to support scrutiny, along with the Minister鈥檚 commitment to 鈥渁llow the maximum time for scrutiny鈥 of secondary legislation laid under the future Act if passed. The Committee asks that these financial impact assessments provide a sufficient level of detail to support effective scrutiny of proposals. The Committee further seeks clarification on the timeframe that the Scottish Government is seeking to provide for parliamentary scrutiny of this secondary legislation and notes that the Delegated Powers and Law Reform Committee is considering in more detail the delegated powers in relation to this Bill.
When asked why the Scottish Government had not undertaken the co-design process before the Bill was introduced, which would have allowed more detail to have been provided on the face of the Bill, the Minister explained that 鈥渨hat we need to do is progress with the primary legislation and then move on to the co-design process for the secondary legislation and service delivery鈥, arguing 鈥渋f we had done it the other way round, folk could equally have asked 鈥淲hy did you not deal with primary legislation鈥攖he framework鈥攆irst before moving on to co-designing of secondary legislation and services?鈥1 He went on to say that the 鈥渃o-design process is not lip service鈥 and that the Scottish Government is keen to demonstrate this to stakeholders in its approach. He stressed that the 鈥渒ey to all of this is improving services and moving away from that crisis spend, which costs the public purse a lot and also has a human cost鈥, adding 鈥渨e need to change that situation dramatically, no matter what鈥.
Pressed on this issue further, the Minister noted that the Government set out a number of commitments for the NCS, one of which was that 鈥渨e would publish the Bill within the first year of the current session of Parliament, which we have done鈥. However, he rejected the suggestion that the Bill had been rushed because of this commitment. He went on reiterate that 鈥淚 am sure there would be arguments galore no matter which way round we had chosen to do it, 鈥 however, we just need to get on with it [and] have faith and trust in the co-design process鈥.
The Minister also rejected the suggestion that the Bill be 鈥榩aused鈥 while the co-design process takes place. He recognised that there was opposition to, and concerns around, the changes proposed and committed 鈥渢o talk to and listen to folk about their concerns and [鈥 work our way through those with them鈥.
The Committee notes the Minister鈥檚 explanation that co-design before introducing primary legislation would have led to criticism from stakeholders, however, that is the usual practice in legislation design and development. The Scottish Government鈥檚 approach would still require the co-design process to be complete before the provisions in the Bill can be commenced, but this will come after parliamentary scrutiny has ended. The Committee seeks a timescale for the delivery of the co-design process.
An FM must set out 鈥渂est estimates of the costs, savings, and changes to revenues to which the provisions of the Bill would give rise, and an indication of the margins of uncertainty in such estimates鈥1. It is also required to include 鈥渂est estimates of the timescales over which such costs, savings, and changes to revenues would be expected to arise鈥, and should distinguish separately such costs, savings and changes to revenues that would fall upon鈥(a) the Scottish Administration; (b) local authorities; and (c) other bodies, individuals and businesses.
The FM notes that 鈥渢here are increased uncertainties surrounding the cost estimates, and the timing of those costs鈥2, as a result of the framework and co-design approach being taken by the Scottish Government. It goes on to state that 鈥渇uture decisions about the implementation and phasing of the NCS will take into account rigorous evidence-based options appraisals, value for money, where benefits and quality are paramount, and the resources available to ensure affordability鈥.
The FM estimates the total costs of the Bill over the five-year period 2022-23 to 2026-27 to be between 拢644 million and 拢1,261 million. Given the significance of the costs involved, the Presiding Officer confirmed on 1 July 2022 that a Financial Resolution (FR) would be required in respect of the Bill. FRs require parliamentary approval before the Bill can proceed beyond Stage 1 consideration of the general principles of the Bill.
Table 1 below shows the breakdown of the costs of key provisions in the Bill at both the upper and lower end, including for the establishment and running of the NCS and care boards, and for additional service provisions relating to rights to breaks for unpaid carers and 鈥楢nne鈥檚 Law鈥. This table reflects the correction of errors in the FM as set out in a letter to the FPA Committee from the Minister for Mental Wellbeing and Social Care of 30 June 20223.
| 拢 million | 2022-23 | 2023-24 | 2024-25 | 2025-26 | 2026-27 |
|---|---|---|---|---|---|
| Total costs | |||||
| Total estimated costs - lower end | 24 | 63 | 84 | 232 | 241 |
| Total estimated costs - upper end | 36 | 95 | 126 | 477 | 527 |
| Establishment and running of NCS national organisation (Scottish Administration) | |||||
| Total estimated costs - lower end | 24 | 60 | 72 | 92 | 83 |
| Total estimated costs - upper end | 36 | 90 | 108 | 138 | 124 |
| Establishment and running of care boards (Scottish Administration) | |||||
| Total estimated costs - lower end | - | 4 | 12 | - | - |
| Total estimated costs - upper end | - | 6 | 18 | - | - |
| Establishment and running of care boards (Care boards) | |||||
| Total estimated costs - lower end | - | - | - | 132 | 142 |
| Total estimated costs - upper end | - | - | - | 326 | 376 |
| Rights to breaks from caring (Care boards) | |||||
| Total estimated costs - lower end | - | - | - | 8 | 16 |
| Total estimated costs - upper end | - | - | - | 13 | 27 |
| Anne's Law (Care Inspectorate) | |||||
| Total estimated costs | 0.186 | 0.090 | - | - | - |
Source: FM, as corrected by the Minister's letter to the FPA Committee of 30 June 2022.
The FM is unclear whether these costs are presented in real or cash terms and, if the former, what assumptions have been made in relation to inflation over the period. Based on discussions with Scottish Government officials, COSLA noted that 鈥渧arying uplifts, generally of 2-3%, have been applied to different elements of the costs shown in the FM, based on a degree of intuition about each of these costs鈥4. It concluded that, 鈥済iven the nature and scale of the financial implications of what is being proposed, the lack of transparency around this process is disappointing鈥5.
The Scottish Government鈥檚 Bill Team confirmed that the FM reflects 鈥渋nflation 鈥 at 6.2% for this year and the next, and then [it] drops back down to 2% in line with Bank of England forecasts鈥6. However, this relates to the projections of social care expenditure in Table 2 of the FM and not to the wider costs of implementing the Bill provisions identified in Table 1.
The Minister for Mental Wellbeing and Social Care noted that 鈥渋nflation is very volatile at present and has moved markedly since the estimates in the FM鈥6. He explained that 鈥渁n average was based on the forecasts that were available when the FM was written鈥, but that recently available Scottish Fiscal Commission forecasts would be used to update the estimates.
There was significant and widespread concern expressed to the Committee about the lack of detail set out in the FM. In its written submission, CIPFA IJB CFOs suggested that the FM lacks the robust information needed 鈥渢o allow for any reasonable professional opinion to be given about the adequacy of the resource to ensure services are effective鈥1. It expanded on this view in oral evidence, arguing that 鈥渢he question of what it will really cost to set up the NCS in a way that is able to deliver on all its ambitions, as well as how it will be sustainability funded is unanswered at this point鈥2. Audit Scotland suggested that 鈥渢he potential costs summarised in Table 1 of the FM are likely to significantly understate the margin of uncertainty and range of potential costs of the Bill measures due to changes and increasing volatility of inflation expectations 鈥 and costs not yet assessed, 鈥 [which] have the potential to add significantly to the overall costs reported and are not currently reflected in the assessed margin of uncertainty鈥3. Audit Scotland went on to say that 鈥渢here is limited detail about where the numbers come from鈥, adding that 鈥渢here is narrative and then there are numbers and how the narrative related to the numbers is not as clear as it might be.鈥4
It was argued by COSLA that the FM presents 鈥渁n unacceptable lack of clarity鈥5, while SOLACE suggested that 鈥渙ne cannot assess the measures laid out in the FM and their associated costs against alternative models due to a complete lack of clarity on total costs鈥2.
Concerns were also expressed regarding the lack of information on the methodologies used and assumptions made to calculate the cost estimates in the FM. CIPFA suggested that this 鈥渕akes forming an opinion on the reasonableness and accuracy of the FM extremely difficult鈥7 and that 鈥渨ithout such information, conducting a comprehensive analysis of the estimates provided is problematic鈥. It went on to argue that a 鈥渓ot of the resistance [to the proposals in the Bill] results from the lack of detail in the FM鈥.
Both ALLIANCE Scotland and the Fraser of Allander Institute told the Committee that they had separately sought clarification from Scottish Government officials in relation to some of the cost estimates, as well as on methodologies used and assumptions made in arriving at these estimates.
When asked to respond to concerns around the lack of transparency and the inability to scrutinise the supplementary information that was being provided to stakeholders on an individual basis, the Minister said 鈥淚 want all channels to be open, but I also want to be open and transparent about all of that as we move forward鈥. He added that 鈥淚 am happy for folk to write to us about particular matters and we respond to them鈥 and that 鈥渢his will be in the public domain鈥8.
The Committee shares the views of some stakeholders that the level of detail provided in the Financial Memorandum is inadequate and neither supports effective scrutiny nor provides assurance that the new arrangements will be placed on a sustainable financial footing.
We believe that further detailed cost estimates underpinning the Financial Memorandum should be published. The approach currently being taken of the Scottish Government responding to individual stakeholders鈥 requests for clarification does not support transparency and proper scrutiny, which we have already found to be extremely challenging in the case of this FM.
The FM indicates that the NCS will be established by 2025-26 and that preparatory work is underway, including 鈥減olicy development and co-design, programme and project management, recruitment costs, financial forecasting, data and digital discovery work, and workforce planning鈥1. In that year, the FM estimates that establishment and running costs would at the lower end total 拢92 million and at the upper end total 拢138 million.
The Bill also creates care boards, which would replace the current Integration Joint Boards (IJBs) and would carry out the delivery functions of the NCS, be directly accountable to Scottish Ministers, and receive funding directly from them. Estimates are also provided for both the establishment and running costs of care boards, which are expected to become operational in 2025-26, with costs expected to range from 拢132-326 million in that year, rising to between 拢142-376 million in 2026-27. The FM assumes that 32 care boards would be established, one in each local authority area. The lower end estimates assume a more gradual set up of care boards, potentially in a smaller number of areas. Savings are expected to be made from the abolition of IJBs of between 拢25 million and 拢40 million, but no further detail is provided in the FM on how these figures have been arrived at.
The Fraser of Allander Institute noted that basing assumptions on a maximum of 32 care boards seems reasonable at this stage, adding 鈥渞eplacing what was there before with 32 care boards might not seem the most efficient use of money, but you would expect the Government to be considering the matter from an appraisal point of view and looking at the range of factors that it believes are important in meeting the national care service鈥檚 aim of providing consistent and higher-quality care鈥2. However, this lack of detail, with significant decisions on care boards to be determined via secondary legislation was a source of criticism from respondents to the Parliament鈥檚 call for views3 and from witnesses.
The Bill provides powers to allow for the transfer of social services functions from local authorities to the Scottish Ministers or to care boards, including adult social care and social work, children鈥檚 social work and social care, and justice social work. The FM states that work is to be undertaken in relation to services for children and justice 鈥渢o consider the risks and opportunities, and to rigorously assess the costs and benefits, before decisions are made about implementing the transfer and how it might be phased鈥1. There is therefore significant uncertainty about the costs that will be incurred through this process including, as explained in the FM, the potential for double running costs (which are not costed in the FM) if a phased approach is taken. Approximate current and projected costs of the services that could be transferred to care boards and to the Scottish Ministers are included in the FM. However, questions have been asked about the accuracy of the 3% standard increase that has been applied on all years to show growth in activity and any pressures above inflation.
CIPFA IJB CFOs for example suggested that this figure of 3% growth 鈥渋s possibly on the light side鈥5 and suggested that levels are currently sitting at between 4% and 6%. The Fraser of Allander Institute noted that 鈥渢here has not been a detailed analysis of the demographic changes that are expected and how those will impact on the cost of care delivery鈥2. It suggests that a figure of 3-3.5% is generally used in England, using modelling from the London School of Economics and Political Science, however, this level of analysis has not yet been done for Scotland. It concludes that the 3% estimate in the FM 鈥渟eems reasonable, but it is not founded on specific evidence of the drivers of social care in Scotland鈥, while Audit Scotland took the view that it is helpful to have the estimate in the FM, though 鈥渢here are some questions around the 3% figure and where the numbers have come from鈥2.
The Bill includes proposals to establish a statutory right for unpaid carers to take short breaks. The FM estimates costs based on a number of assumptions, for example, the number of carers who would exercise their rights to breaks and how demand and provision will evolve over time. The SPICe Themes Paper on the FM states that 鈥渢he assumptions are set out clearly in the FM, but the range of assumptions on which the calculations are based means that the estimates will be sensitive to alternative assumptions鈥1. The FM reflects this uncertainty in upper and lower estimates, and further provides estimated costs over a longer period of time than other aspects of the Bill in recognition that the demand and scale of provision is expected to build over time.
In the early years of implementation, costs are expected to be between 拢8-13 million in 2025-26 and 拢16-27 million in 2026-27. By 2034-35, these costs are anticipated to have increased ten-fold to between 拢82 million and 拢133 million. The FM makes assumptions that this policy can reduce costs in the long-term. It states that 鈥渋f the right to breaks helps prevent 1% of these intensive caring relationships breaking down, that will save 拢68 million per year in health and social care costs鈥2 and that saving would be 拢318 million annually if the right protects 5% of these intensive relationships.
The Fraser of Allander Institute noted particular uncertainties in relation to the costings provided for rights to breaks from caring, due to a lack of data at local authority level and no specific allocation for carer respite in the local government settlement. While it notes that estimated figures have been included in the FM, it is unclear as to how these figures were obtained or how accurate they are3. In contrast, CIPFA commented that some helpful detail had been provided in the FM in respect of this aspect of the Bill4.
The FM notes that the financial cost of the arrangements to support the right to visits to or by care home residents 鈥渟hould be viewed in the context of the progress made since 2021 in maximising meaningful social connections and visiting in adult care homes, effectively readying the care home sector for the implementation of the statutory requirements provided for in the Bill鈥1. It goes on to state that 鈥渢he Scottish Government will continue to consult widely on the anticipated practical application of Anne鈥檚 Law within the expected provisions of the legislation and make note of any divergence from current guidance and potential costs鈥, adding 鈥渨hile this process is ongoing, it has not highlighted additional costs to the sector鈥.
The FM does however identify modest costs to the Care Inspectorate of implementing the arrangements, estimated at 拢0.186 million in 2022-23 and 拢0.090 million in 2023-24. No further costs are foreseen past 2023-24.
While the Committee accepts that costings for all aspects of the Bill and associated elements highlighted above are difficult to predict due to the co-design approach being used for decision making, we firmly believe that even in the context of uncertainties, the Financial Memorandum should have included an indication of the potential scale of all costs associated with the Bill. Without these, it is difficult for the Committee to fully assess whether the proposed National Care Service is either affordable or sustainable.
The FM does not include any estimated costs associated with information sharing and information standards, which is the subject of Part 2 of the Bill and would 鈥渆nable the creation of the nationally-consistent, integrated and accessible electronic social care and health record鈥. The FM recognises that there will be costs associated with these measures, but states that 鈥渁t this early stage it is not possible to provide an exact position on the total cost of investment or how the costs will be phased鈥1. These costs will be included in business cases in due course.
CIPFA was one of those organisations who expressed concern about the lack of financial detail on this aspect of the Bill, which it argued 鈥渃ould represent a very significant outlay鈥2. It highlighted National Audit Office reports 鈥渢hat the track record for digital transformation in the NHS has been poor, with previous major national programmes being 鈥榚xpensive and largely unsuccessful鈥欌. CIPFA goes on to state that 鈥渢his precedent suggests that the Scottish Government needs to meticulously evaluate and analyse the costs of the proposed digital project, which will be very complex鈥攁nd potentially costly鈥攗ndertaking鈥, adding 鈥渇or such a major component of the Bill, it is surprising and disappointing that no estimates are provided鈥.
The Fraser of Allander Institute noted that 鈥渢he creation of an electronic integrated health and social care record is in the legislation, but no costing has been produced鈥 and suggested that 鈥渢he reason given is that the work is at a too early stage to estimate costs, but it will be provided in the Programme Business Case鈥3.
The Minister鈥檚 letter of 10 November argued that 鈥渢he information sharing regulations will support the integrated record, but not create it鈥4, therefore costs for the creation of the record have been omitted from the FM and will instead be included in a formal, dedicated business case. The Scottish Government鈥檚 position was challenged during oral evidence by Audit Scotland, who argued that 鈥渘one of the figures is exact, so 鈥 that is not a justification for not providing an indication of the range of costs that are likely to be associated with those areas.鈥5 It suggested that, in relation to IT costs 鈥渋t would be helpful to ask the Government whether the IT projects will be big, middle sized or small [and] it is important to provide those comparators in order to give a sense of scale.鈥
To illustrate the potential financial implications of such a project, NHS Borders highlighted that an integrated digital project in the Borders could incur costs of 拢20 million and, as 鈥淣HS Borders accounts for 2 per cent of the Scottish health budget, 鈥 that might give the Committee a bit of context in relation to what the costs might be鈥5.
The Minister however told the Committee that he was 鈥渦nable at the moment to quantify how much it costs to collect data, which is often quite disparate and can be very difficult in some regards鈥7. He said that 鈥渨e need to get better at that, and one of our ambitions is to streamline data collection and make it better.鈥 The Minister went on to comment that 鈥渨e must have a general stock take of what we have at the moment and whether we are able to use current systems and enable them to talk to one another鈥. He gave assurances that 鈥渂ecause I am well aware of IT cost overruns from a past life, I will keep a close eye on every aspect of the delivery of an IT system if it is required.鈥
In his follow-up letter to the Committee of 10 November, the Minister advised that 鈥渁s part of our work on data and digital infrastructure we are working to create the nationally consistent integrated and accessible electronic social care and health record鈥4.
Given the potential for significant financial impact from, and the risk of, cost over-runs of IT projects, the Committee expected that an indicative figure would have been included in the Financial Memorandum, even in the context of considerable uncertainties. This is particularly so given indicative costings for IT systems have been included in previous FMs, such as the one for the Social Security (Scotland) Bill.
By not including any estimated costs within the Bill it could be assumed that the costs will be 拢0. This is unrealistic, particularly given the Scottish Government鈥檚 previous experience in developing and implementing a range of IT projects over the years. We therefore ask the Scottish Government to provide a range of cost estimates based on its previous experience of implementing small, medium and large IT projects to enable an assessment of the level of costs that could arise.
The FM states that up to 75,000 social work and social care staff could transfer from local authorities to the new bodies under the new system. As rates of pay and terms and conditions for social work staff vary across local authorities, depending on the extent to which staff transfer to the new care boards, the costs associated with 鈥楾erms and Conditions鈥 for care board staff could reach 拢120 million in 2026-27, while additional pay costs could add a further 拢43 million.
The FM explains 鈥渋t is anticipated that the Scottish Ministers may transfer some functions, at least in part, to themselves, and the NCS at national level may plan, commission and procure social care services for people with complex and specialist needs across Scotland鈥1. It states that 鈥渇urther decisions will need to be taken, in discussion with those accessing and providing such services, about which services may be treated in this way, before any estimate can be made of what proportion of costs they will represent.鈥
While the FM provides the current costs of these services and explains how these costs were arrived at, it explains that 鈥渋n terms of the total costs to the public purse, it is assumed the transfer of services itself has no effect: the costs of providing these services will simply transfer from local authorities and health boards to the NCS.鈥
Many organisations raised concerns around the treatment of local government assets and liabilities and the Transfer of Undertakings (Protection of Employment) (or TUPE) implications relating to the transfer of staff. COSLA explained that the potential for large numbers of staff to be transferred from local government to the NCS has considerable implications for pension funds both for those who may no longer be able to remain members of the scheme and any impacts on the scheme for remaining members, which also do not appear to have been quantified. It indicated that this issue will be very complex and 鈥渄etailed assessment is required on whether and how this will impact on existing pension schemes, including viability given the Local Government Pension Scheme is a fully funded scheme, and whether or not the National Care Service would be able to be an admitted member of that Scheme.鈥2
It was also highlighted that there is a presumption that the people 鈥渨ho do the support and administrative tasks for health and social care partnerships are discrete and do that work only for the partnerships [but] that is not the case鈥︹3. Given this, they argued that there will be an impact on the critical mass of what is left. There was some dubiety about the Scottish Government principle that those staff who transfer would have no detriment to their terms and conditions where roles are split. As CIPFA IJB CFOs highlighted, TUPE has a threshold 鈥渨hereby, say, 80% of the role has to be transferrable for that to apply鈥, adding that 鈥渢he question is whether it would apply to all those posts.鈥3
Audit Scotland considered that 鈥渢here is likely to be significant uncertainty about the cost of harmonisation that goes beyond the extent of services and staff groups involved.鈥5
The same level of uncertainty applies to the transfer of assets from local authorities, also highlighted in the COSLA submission2:
鈥淭here is no clarity or detail about the financial treatment of assets, particularly whether they would simply be transferred to new ownership or whether they would be purchased. This causes great uncertainty and a risk of disincentives for local authorities to invest in assets they believe they are unlikely to have possession of in the coming years and where there is no assurance that they will be recompensed at market value; there is also no acknowledgement of the associated maintenance costs or clarity on how the National Care Service would continue to finance any assets it does take on.鈥
No capital costs in relation to asset transfer or maintenance costs have been included in the FM costings. Written evidence from Aberdeen City Council and South Ayrshire Council and Integration Joint Board raised concerns around the impact of uncertainty on financing options and capital investment plans during the transition phase. SOLACE also questioned whether the Scottish Government approach that decisions could be taken on an asset-by-asset basis 鈥渁mid all the other variables, does not guarantee consistency.鈥3
When queried on the transfer of staff, the Scottish Government鈥檚 Bill Team stated that, while the Bill provides the ability for staff to move, it does not guarantee it and decisions will be considered and taken on a local authority by local authority basis. The Bill Team confirmed that, 鈥渋n that regard we would like to fully engage with the 11 local government pension schemes to understand the impact of any members moving out of the schemes.鈥3
The Bill Team also confirmed to the Committee that decisions on buildings and associated debt will be made not only on a local authority by local authority basis, but on an asset-by-asset basis. It said that much more work with local authorities would be needed to understand the current cost base such as backlog maintenance and the numerous complexities with regard to the valuation method that would apply to each building.3
This was re-emphasised by the Minister in his evidence who added that staff transfers were identified in the Bill given that local care boards could be the provider of last resort. He said that 鈥渄iscussions are on-going with regard to the potential transfer of staff or assets from local authorities鈥10. He then confirmed 鈥渢hat is a key area for co-design and one that, given its importance, will not be rushed鈥, adding 鈥渨ork is on-going, and all financial considerations are under constant review as new information becomes available.鈥
The Committee notes the FM assumptions that the transfer of staff will have little or no impact on the public purse. We consider this to be unrealistic given the evidence we heard that there may be an impact on pension funds of staff, transfers, and on harmonising conditions as well as challenges for those organisations from where the staff transfer, especially where they work across a number of areas.
The Committee also notes that the FM contains no capital costs in relation to asset transfer or maintenance costs, with decisions to be made on an asset-by-asset basis. We doubt whether such an approach is achievable in reality, given there are over 1,000 care homes in Scotland. We therefore seek more detail on how this will be achieved and by when, as well as an indication of potential transfer costs.
For the reasons set out above we believe that the costs of the Bill regarding both the transfer of staff and assets will be significant.
The FM acknowledges that 鈥渁 phased approach may result in a period of double running costs or transfer costs in addition to the costs set out [in the FM]鈥1, however, it provides no indication of the potential scale of any double running costs.
Audit Scotland raised concerns that these un-costed double running costs 鈥渕ay be significant and it will not be [possible] to unpick existing services from the other services these bodies provide.鈥2 The potential impact of double running costs was also raised as a concern by the Fraser of Allander Institute during oral evidence on 1 November3 and by NHS Scotland in its written submission, which said 鈥渋t is assumed that the transfer of costs as described in the Bill would be cost neutral in totality but we have seen from other service transfers that this is not normally the case鈥.4 NHS Scotland went on to say that 鈥渃osts cannot be released, duplication of costs occur and time and resources are spent in analysing and protecting budgets and resources [and] in addition, phasing of transfers will result in double running costs.鈥
In evidence to the Committee, the Fraser of Allander Institute added that previous examples of change - such as the transition away from long-stay hospitals into communities for people with learning disabilities - had two systems running in parallel for a period, was not rushed and there was sufficient funding to ensure that the transition could take place effectively3.
The Financial Memorandum assumes that some double running costs will arise in 2025-26 when the care boards become operational. However, the Committee is concerned that this assumption could understate the position, given the scale of the change, the acknowledgement in the FM that it could take place over a number of years, and uncertainties such as on the transfer of assets.
The FM states that, as IJBs are established in a similar way to a local authority, they can therefore reclaim VAT on services. It notes that 鈥渋f care boards are not able to reclaim VAT in a similar way, there could be a significant financial impact [which] could reduce the overall funds available to spend directly on social care support鈥1, adding that 鈥渨ork is underway to understand this potential cost and how it might be mitigated to ensure maximum support for front line services鈥.
As the Scottish Government鈥檚 Bill Team explained, whether or not care boards will be liable for VAT is one of the 鈥渞ange of things we want to consider鈥 but that will be considered alongside the other outcomes that the NCS is being set up to deliver2.
While VAT is identified as a potential cost, no estimates are provided within the FM. As the Committee noted, this contrasts with the approach taken in relation to the Public Bodies (Joint Working) (Scotland) Bill and the Police and Fire Reform (Scotland) Bill, both of which provided indicative VAT costings. Such costings were provided despite similar uncertainties regarding the legal status of the bodies to be established or, in the case of police and fire bodies, restructured.
In its written submission to the Committee, COSLA highlighted that 鈥渢he proposed structure and governance of the NCS is such that it is likely to be liable for VAT, at least unless and until arrangements can be made to exempt it鈥3. It suggests that 鈥渃learly鈥攁s the FM itself acknowledges鈥攖his would significantly increase its costs of operating and consequently reduce the funds available to spend directly on social care support鈥. COSLA explained that 鈥渦nder HM Treasury rules, local authorities and certain other bodies are able to recover the VAT incurred on certain purchases鈥攊n order that VAT costs are not funded through local taxation鈥攚hereas other public sector organisations including the NHS cannot reclaim VAT incurred on many goods and services, which is therefore a cost that must be covered by departmental budgets鈥.
The above risks were further emphasised by CIPFA, who also warned of 鈥渟ignificant complications that may arise in the transfer of staff if there is any differential VAT regime between care boards and local authorities鈥4 and stressed that 鈥渋t is imperative that a favourable VAT settlement is reached before the NCS enters operation鈥.
The omission of potential VAT costs from the FM was raised with the Minister during evidence on 8 November. Following the evidence session, the Minister wrote to the Committee, advising that the Scottish Government has received independent advice on the potential VAT liability of care boards and that it continues to engage with HM Treasury in order to achieve 鈥渁 fiscally neutral VAT position鈥. According to external advisors Anderson Anderson and Brown (AAB), NCS care boards could potentially fall under Section 33 or Section 41 of the VAT Act 1994. The Minister鈥檚 letter explains that 鈥淪ection 33 is a Full Recovery Model which allows all VAT costs associated with both taxable business and non-business activities to be recovered, [while] Section 41 permits a body to claim a refund of VAT incurred on some services but not all.鈥5
The Scottish Government鈥檚 Bill Team had previously explained that, when IJBs were established in 2013-14, detailed assessments were undertaken which estimated the VAT impact to be in the region of 拢32 million2. While this figure has been cited during the Committee鈥檚 scrutiny of the FM on the NCS Bill, the Minister highlighted in his letter that the 鈥渢he worst-case VAT cost impact associated with the creation of the NCS would likely be in excess of this estimate.鈥 During oral evidence, the Committee heard that more detailed calculations would be undertaken over the coming months and updated figures would be presented either quarterly or via business case updates.
While the Committee acknowledges the Scottish Government鈥檚 intent to ensure 鈥渁 fiscally neutral VAT position鈥 for care boards, it is concerned at the lack of current information on potential costs, should this not be achievable.
The exclusion of VAT considerations from the FM, in practice, translates into an assumption of zero liability, which is potentially misleading.
We consider that the Scottish Government could and should have provided a range of estimates in the FM, as required by the Standing Orders of the Scottish Parliament, given it has adopted this approach for other Bills where potential VAT liability has been identified. We note that the Scottish Government subsequently provided some information with regards to VAT, but this does not clarify that costs will be reimbursed.
Among other costs omitted from the FM, the Fraser of Allander Institute highlights the procurement of services, noting that 鈥渘o costs are assumed for changes in procurement strategy that could lead to higher costs although such improvements are envisaged (i.e., via so-called 鈥榚thical procurement鈥)鈥1. The FM assumes that existing contracts for delivery of social care services with external partners will be transferred, with no immediate cost implications, although it accepts that changes to policies such as ethical procurement and Fair Work may have costing implications and will therefore be subject to financial and regulatory impact assessments.
The British Healthcare Trades Association questioned the potential impact of the Bill on procurement practices and the costs for businesses. Despite the assumption in the FM that the establishment of the NCS will not have any financial implications for businesses, the Association suggests that 鈥渋t would represent a change to business relationships and while contracts with external organisations will transfer, it's clear there will be wider changes in terms of procurement and Fair Work which may alter requirements and contracts in future."2 It went on to say that 鈥渢his level of detail is not set out in the Bill and we note [it] "will be subject to separate financial and regulatory impact assessment".鈥
Given the concerns raised with the Committee, we seek clarification from the Scottish Government of the basis on which it assessed that 鈥渘o costs are assumed for changes in procurement strategy鈥.
The Bill also allows for the creation of 鈥渟pecial care boards鈥 to provide central functions, in a similar way to the existing special health boards. However, potential costs associated with special care boards do not appear to be included in the FM estimates. The FM notes that the Special Health Boards (of which there are eight) have budgets ranging from 拢18-425 million, so the creation of special care boards could add significantly to costs.
The Financial Memorandum lists no costs to third sector organisations, as 鈥渋t is not anticipated that the establishment of the NCS and care boards, and the transfer of functions to those bodies, will have any financial implications for 鈥 third sector organisations.鈥1
This assertion was disputed by a range of stakeholders, including Scottish Care, who stated that 鈥渨e believe this to be entirely untrue in reality and the failure to recognise these sectors as being part of the significant changes planned points to a wider lack of understanding or recognition about their contribution to social care, to Scotland鈥檚 economy and to the wellbeing of citizens鈥. It went on to argue that 鈥渢his section does not even name the independent sector at all, which again reinforces Scottish Care members鈥 lack of confidence in the Bill鈥檚 objectives鈥2.
More broadly, the FM recognises that 鈥渢he creation of the NCS and other changes made by the Bill are only part of a wider programme of social care reform鈥1. It explains that 鈥渙ther elements of those reforms, that do not require primary legislation and could go forward irrespective of the Bill, are likely to have an impact on the overall cost and expenditure on community health and social care support during the time period covered by this FM鈥. The FM goes on to state that 鈥渢o focus only on the impact of the Bill鈥, estimates provided in the FM do not include the effect on the NCS of these other planned reforms, including:
to increase pay and improve terms and conditions for adult social care staff in commissioned services.
to bring Free Personal Nursing Care rates in line with National Care Home Contract rates.
to remove charging for non-residential care.
to increase investment in social work services.
to increase provision of services focusing on early intervention and prevention.
to invest in data and digital solutions to improve social care support.
The creation of the NCS will however support many of these reforms, 鈥渇or example, it is intended that it will support greater consistency in the provision of services focusing on early intervention and prevention, and in ethical commissioning which will promote Fair Work standards for staff.鈥
Several organisations questioned whether these costs could be seen as separate from the Bill given that its purpose is to deliver consistent, fair and high-quality care for everyone in Scotland. For example, COSLA argued that 鈥渢hose reforms are necessary for the future sustainability of an NCS, however delivered, so it is not credible to present the costs of the services to be delivered by the NCS without factoring those reforms in, and the expected costs of delivering them merit Parliamentary scrutiny as well as wider public discussion.鈥2
The Scottish Commission for People with Learning Disabilities, while acknowledging the rationale for the limited scope of the FM, commented that, while 鈥渢his may be a legitimate approach, it is very unhelpful for many of us [as] It invites scepticism about the commitment and even the ability to invest appropriately in this flagship legislation.鈥3 SOLACE echoed those comments, stating that 鈥渢he potential investment is not only a game changer, but a necessity鈥4. Ultimately, as noted by the Fraser of Allander Institute in their submission, and referred to earlier in this report, 鈥渁n underfunded National Care Service is unlikely to be any better than the system it seeks to replace鈥5.
Audit Scotland explained it was important that costs are as accurate as possible in the Bill 鈥渂ecause part of the job of the Government鈥攁nd of Parliament and Audit Scotland鈥攊s to help with the assessment of affordability and sustainability.鈥6 It argues that Government needs to have an overall sense of what the cost is likely to be and 鈥渁t the moment we feel that the cost is likely to be under stated.鈥 It goes on to suggest that 鈥済reater visibility is therefore needed as soon as possible to enable an understanding of what we are taking on from a cost perspective and how that sits alongside the wider financial environment.鈥
The Minister鈥檚 position is that 鈥渢he Standing Orders are very clear about providing an FM covering the aspects of the Bill [and] that is what we have done鈥7. As referred to earlier in this report, Standing Orders provide that an FM must set out 鈥渂est estimates of the costs, savings and changes to revenues to which the provisions of the Bill would give rise鈥8. When pressed on this issue, the Minister reiterated his position that 鈥渢he FM covers the Bill鈥, and that the Scottish Government did not want to undermine the co-design process by detailing assumptions for costs that were still the subject of discussion.
The Committee finds itself unable to assess the affordability of the Bill. This is why we are asking the Scottish Government to provide the detail that the Committee requires to be able to take a more informed view on the cost estimates relating to the Bill ahead of the Stage 1 debate expected in March 2023.
We set out our expectations in relation to future FMs in our post-legislative scrutiny report on early learning and childcare provisions in the Children and Young People (Scotland) Bill published in October 2022. While this included an acceptance that estimates in FM costings bring with them an inevitable level of uncertainty, the FPA Committee believes 鈥渢hat FMs should clearly set out the nature of any uncertainties and risks, and that costings in such situations should reflect a range, rather than a specific cost鈥.
The FM notes that 鈥渢here may also be potential savings on central services such as finance, digital systems and premises, if a significant number of staff move to the NCS鈥1. This will however depend on what services are to be included in the NCS amongst other current unknowns. There are also assumptions in the FM around the potential for savings to arise from shared services and from the move from IJBs to care boards.
Audit Scotland told the Committee 鈥渋t is being assumed that the model will allow any activity to be generated more efficiently either in terms of efficiencies within the cost numbers or in terms of restricting rises in costs, which is probably more likely in the future? Again, whether that is the case is not clear鈥2. South Lanarkshire Council suggested that 鈥渙ne of the shortcomings of the FM is in identifying whether there would be savings in moving from a series of health and social care partnerships to a system with a national organisation and local boards, regardless of how many there are鈥3, adding 鈥渢hat is quite an issue that [we] have with the FM鈥. CIPFA IJB CFOs added that 鈥渢he obvious way to create economies of scale, which has not been pulled out, is by reducing 32 partnerships to a smaller number, but there is no commitment to what that number would be鈥3.
NHS Borders told the Committee that 鈥渋t would be difficult to find efficiency savings鈥 and went on to say 鈥渨e need to be careful about how we describe the potential for efficiency savings associated with specific proposals in the Bill and the ability to actually then drive efficiency savings鈥2.
COSLA, along with others, expressed concerns about whether a consequence of transferring funding away from organisations could lead to greater inefficiency as a result of loss of economies of scale. COSLA considered that, in highlighting potential efficiencies from staff transfers, the FM 鈥渇ails to acknowledge the corresponding loss of economies of scale in Local Government arising from the loss of such a sizeable portion of its workforce [鈥. The mass transfer of functions, staff, assets and liabilities out of Local Government poses a risk to the effective delivery of services 鈥 or in some cases the sustainability of core statutory activities 鈥 that have a vital role to play in reducing demand for health and social care by addressing social determinants of health and wellbeing such as education, housing and employment.鈥6
The Minister noted that 鈥渢here are without a doubt, opportunities to have shared services鈥 and that 鈥渄ata collection will lead to savings鈥, however he was reluctant to expand on this, suggesting 鈥渋t would be foolish of me to make assumptions now about what those savings are likely to be鈥7.
We believe that the Scottish Government should set out, within margins of uncertainty, a range of assumptions for different scenarios given that it accepts efficiencies will be achieved through the arrangements in this Bill and we ask that this information is provided to the Committee as part of an updated FM ahead of the Stage 1 debate on the Bill.
There was widespread concern, particularly from health boards and local authorities, about the consequences for those from whom the funding for social care could be transferred. While COSLA acknowledged that the costs set out in the FM are described as 鈥渋llustrative鈥, it had concerns that these figures could form the basis for calculating 鈥渢he portion of local government funding that may be removed as a consequence鈥1.
COSLA told the Committee that 鈥渋t is essential that the Scottish Government undertakes further work jointly with COSLA and other stakeholders on the quantum of funding that would be transferred from Local Government to the NCS鈥1 and that 鈥渢he financial transfers cannot be based on the total actual expenditure of local authorities on social care, as this is funded from several income sources and not just Scottish Government grants鈥. Finally, it added that this 鈥渨ould also disadvantage councils which have sought to protect social work and care budgets, compared to others.鈥
The potential impact on NHS boards may also be significant although this has yet to be quantified. NHS Borders stated that it anticipated approximately half the budget of NHS Borders could go to the care board, threatening the viability of the Borders health board, which would still deliver primary care services, community services and mental health services, but without the ability to strategically plan and commission them.
The Scottish Government鈥檚 Bill Team explained that they had been as transparent as possible in setting out the potential costs of the current care services that could be transferred to the new NCS3. The Minister later explained that the annual budget setting process will identify where the resources will come from to fund it. He added that 鈥淚 am more than happy to come before the Committee again to talk about how we are moving forward with the Financial Memorandum and with updating our modelling and to talk about the business cases.鈥4
The Bill Team recognised that every council would have different funding arrangements for care services with funding from a mix of sources. As such 鈥渨e will have to work through all that as part of the business case process that we will need to go through for each of the care boards.鈥3 Part of analysis would include understanding the most cost-effective model in terms of cost and delivery of services including whether Arm鈥檚 Length External Organisations (ALEOs) would transfer or remain3.
In evidence, the Minister explained that 鈥渢he intention is for there to be no detriment to local government finances [and] any funding that is transferred would be directly associated with a similar transfer of costs to ensure an overall neutral impact鈥4. He said 鈥渨e recognise that, in establishing a national care service, including any transfer of accountabilities and associated financial resources from local authorities, we must take into consideration the impact on those local authorities and on their ability to resource and deliver other public services鈥.
The Minister did not necessarily agree that transferring services away from local authorities might impact on the economies of scale for some, highlighting 鈥渟hared services, co-operation and collaboration as a means of doing our best in delivering for the public, which is, ultimately, what we are all about.鈥 He went on to say that 鈥渨e will do all that we can to ensure that there is no detriment.鈥4
Following the Committee鈥檚 request for further information regarding his comments on cost neutrality, the Minister stated in his letter of 10 November, that 鈥渢he nature of the impact on local government from the establishment of the NCS will depend on the details of the transfer of functions to Scottish Ministers, and on local decisions about how services are to be provided鈥9.
The Committee notes that the costs of current delivery of care services which may in turn be transferred to the NCS do not represent 鈥榥ew鈥 costs arising as a result of this Bill and so are not included in the Financial Memorandum鈥檚 table setting out all headline costs. They do however provide an indication of the magnitude of the change that could arise from this Bill.
As COSLA and many others identified, these potential changes could have a significant impact on how local authorities, health boards and others continue to deliver their services and there remains considerable uncertainty over many aspects, including how any cost transfers will be agreed as being fair and accurate.
We note the Minister's argument that the costs transferred from local authorities and others to the NCS will be cost neutral, but given the complexities highlighted above, we emphasise the need for an equitable transfer which avoids a detrimental impact on the provision and quality of other public services.
The Committee recommended in our report on post-legislative scrutiny of the Financial Memorandum on the Children and Young People (Scotland) Bill that future FMs should 鈥渋nclude comprehensive information on the Scottish Government鈥檚 plans to monitor expenditure to ensure that new policy initiatives are being appropriately funded and ensure greater transparency around spending鈥1. While the Scottish Government has not at the time of writing formally responded to this report, we are however disappointed that the issues identified during our post-legislative scrutiny have been replicated with the current NCS Bill. In fact, the FM makes no mention of monitoring or assessing cost estimates against actual spend, though this could be due to the approach taken of ongoing development of costings.
When asked how the Committee would be able to compare the actions that are ultimately taken with the estimates in the FM, the Scottish Government鈥檚 Bill Team told the Committee that 鈥渨e will continue to track changes to any assumptions鈥2, adding that 鈥渟ince completion of the FM, we have continued to ensure that there is an audit trail of any changes to assumptions鈥. It explained that 鈥渁s policy and design decisions are made, we will continue to adjust the figures to ensure that there is a clear trail from our position in the FM to where we end up at the end of the gestation period鈥, adding 鈥渨e will ensure that those changes are transparent鈥.
As highlighted by Audit Scotland, 鈥渋t will be crucial to regularly update estimates of overall costs and other financial implications and report on these regularly to Parliament and local authorities鈥3.
The Committee recognises that tracking spend on social care is not straightforward under the current funding arrangements, so it is important to have a clear baseline position on services being transferred to the NCS to support future monitoring and spend in this area. We ask that costs are monitored and reported on twice a year, particularly given the high level of uncertainty in the current FM.
As noted in our recent post-legislative scrutiny report, the Committee believes that outcomes and monitoring information should be considered at an early stage in the development of policy. Evidence provided to the Committee shows that monitoring of expenditure continues to pose challenges to the Scottish Government and local authorities. Robust financial data is therefore needed to provide a clear assessment of outcomes, sustainability and value for money.
The Committee has significant concerns in relation to the costings within this Financial Memorandum, which it considers does not provide best estimates of the costs the Bill gives rise to.
The Financial Memorandum in its present form does not provide an overall estimate of the costs of creating a National Care Service. A large number of decisions are yet to be made, and no estimates of costings have been provided for VAT liability, transfer of assets and staff and the creation of a health and social care record, all of which have the potential to result in significant costs.
The Committee appreciates the Scottish Government鈥檚 intention to design the system in collaboration with those most closely affected, however, it has been argued that such work should have been completed prior to the introduction of primary legislation.
As previously recommended in the Committee鈥檚 report on post-legislative scrutiny of the Children and Young People (Scotland) Bill, major policies should not be implemented via secondary legislation or business cases which cannot be subject to the same in-depth and formal financial scrutiny as Financial Memorandums to bills.
The current Financial Memorandum relies heavily on future secondary legislation and business cases and does not provide the Committee with enough detail on costs to allow it to fully assess or scrutinise the financial implications of the Bill. The significant gaps highlighted throughout our report in combination with the Scottish Government鈥檚 approach to introducing the primary legislation prior to completion of the co-design process has frustrated the parliamentary scrutiny process.
The Committee therefore requests that the Scottish Government provides a revised Financial Memorandum, including full details of the underlying assumptions, updated estimates for the gaps identified in this report, as well as updates to the existing cost estimates set out in the FM. This updated FM should be provided at least two weeks prior to the completion of Stage 1 鈥 scheduled for March 2023 - to inform Members鈥 approach to the debate on the general principles of the Bill and consideration of the Financial Resolution.
Should the Bill be enacted, implementation costs, savings and forecast expenditure should be monitored and reported on to the Finance and Public Administration Committee twice a year. The Committee further recommends that updates are provided in a similar format to the Financial Memorandum, rather than simply as part of a Programme Business Case to allow proper comparative scrutiny.