6th November 2025
The Highland Council's latest Revenue Budget Monitoring Report (Q2 2025-26) paints a picture of cautious progress amid ongoing financial strain.
The Health Social Care & Wellbeing Committee meets on 12 November 2025 to scrutinise progress and agree ongoing monitoring of placement numbers and service transformation.
While the overall position has improved slightly since the first quarter, the underlying pressures—particularly in Children's Services and Adult Social Care—remain significant and are driving much of the Council's budget challenge for 2025-26.
Headline Financial Position
As of the end of Quarter 2, the Council forecasts a net overspend of £3.43 million, an improvement from the £4.12 million projected at Quarter 1. The reduction reflects active management and the implementation of targeted recovery actions across services.
However, the overspend still highlights ongoing volatility within high-demand care services, where both cost inflation and service demand continue to outstrip available budgets.
Children's Services: The Main Pressure Point
Children’s Services continue to represent the largest single area of financial pressure. The service is currently forecasting a £3.43 million overspend, primarily driven by the cost of out-of-area placements for children with complex needs.
Although the number of external placements has fallen slightly due to reintegration efforts, the average cost per placement remains high, reflecting both market pressures and a shortage of local provision.
To address this, the Council has rolled out a targeted Recovery Plan focusing on:
Expanding the "Home in Highland" programme to bring more children back into local, family-based or community-based care settings.
Developing additional local residential capacity, reducing reliance on high-cost external placements.
Intensive case reviews to ensure placements remain appropriate and cost-effective.
Recruitment of foster carers to reduce dependency on agency provision.
Early signs suggest these measures are beginning to have an impact—placement numbers are stabilising and costs have levelled off slightly since Q1.
Adult Services: Partnership Challenges with NHS Highland
Adult Social Care services, delivered under the Lead Agency model with NHS Highland, continue to face major challenges.
While the Council’s own accounts show no variance at this stage—because funding for Adult Services is transferred in full to NHS Highland—the health board’s internal forecast indicates a £19.3 million overspend for 2025-26, even after accounting for £6.2 million of planned savings.
The main cost drivers are:
High-cost care packages for complex adult needs.
Recruitment and retention pressures leading to higher agency staffing costs.
Increased demand for home care and community support.
Delayed discharges from hospital adding pressure to community-based care budgets.
Both organisations are working through a joint Recovery Plan focusing on service redesign, commissioning reviews, and efforts to improve workforce sustainability.
Wider Financial Risks
Beyond care services, other areas of the Council’s budget are generally operating within tolerance levels. However, the report highlights key ongoing risks:
Delivery of planned savings: Some approved savings for 2025-26 remain at risk due to delays in implementation or feasibility issues.
Inflationary pressures: Energy, transport, and contractual costs remain above initial budget assumptions.
Demand growth: Particularly in children’s and adult care sectors, demand continues to rise faster than anticipated.
Workforce costs: Pay settlements and recruitment difficulties add further volatility to forecasts.
The Council has also reiterated that reserves are limited and cannot sustainably cover recurring overspends.
Governance and Next Steps
The Health, Social Care & Wellbeing Committee will consider the report at its meeting on 12 November 2025. Elected Members are being asked to:
Note the Q2 financial position and the improvement since Q1.
Support ongoing monitoring of high-cost placements and the implementation of the Recovery Plan.
Endorse the continued focus on the "Home in Highland" strategy to improve outcomes and financial sustainability.
Recognise the significant partnership challenges with NHS Highland and the need for joint strategic planning.
Outlook: Signs of Progress, but Tough Road Ahead
The reduction in the overall forecast overspend shows that recovery actions are starting to take hold. Yet, the report makes clear that the Council still faces a structural funding challenge in meeting growing demand for social care and children’s services within its existing budget envelope.
The emphasis going forward will be on local provision, prevention, and partnership working—core principles of the Highland Council’s long-term financial and wellbeing strategy.
As winter pressures mount and service demand continues to rise, the Council’s ability to deliver on these strategies will be crucial to maintaining both financial balance and quality of care across the Highlands.
The full agenda can be seen at https://www.highland.gov.uk/meetings/meeting/5252/health_social_care_and_wellbeing_committee