All seven Welsh health boards fail to achieve ‘break even’ rule

Martin Shipton

All seven health boards in Wales have breached their duty to break even over a three-year period, Auditor General Adrian Crompton has reported.

As a result, he qualified his audit opinion for those bodies. The three NHS trusts and two special health authorities all met their duty to break even.

Mr Crompton also qualified his opinion for Betsi Cadwaladr University Health Board and for Velindre NHS Trust for breaching their standing financial instructions.

Both NHS bodies incurred irregular expenditure in making payments to a former interim executive member of the Board and a former senior officer of the Trust respectively.

For Betsi Cadwaladr University Health Board, this was the second consecutive year that standing financial instructions relating to executive member payments were breached.

Health services in Wales received £10.638bn of revenue funding in 2023-24, a cash uplift of £744m. This was significantly higher than the uplift of £131m in 2022-23.

With the impact of rising inflation, the 2023-24 cash uplift equated to a 1.2% real terms increase in funding (compared with a 4.9% real terms decrease in 2022-23).

Against a backdrop of significant demand, the total in-year deficit for 2023-24 has increased to £183m (£150m in 2022-23) and the three-year cumulative over-spend across the NHS increased from £248m in 2022-23 to £385m in 2023-24.

Agency staff

Spending on agency staff has grown steadily from 2018-19 to 2022-23 but did reduce by 19% in cash terms in 2023-24 with annual overall agency spend being £262m across NHS Wales. While the majority of this spend covers workforce vacancies, some also supports additional activity to help meet demand.

NHS bodies are having to deliver significant levels of savings in their attempt to contain costs. Reported savings increased again in 2023-24, continuing the trend in 2022-23, and at £210m, are at the highest level since 2018-19. The NHS still relies heavily on one-off non-recurrent savings with 41% of total reported savings in 2023-24 falling into this category. Positively, this percentage has reduced from 60% in 2022-23.

Mr Cromption’s report states that sound strategic planning is key if the NHS is to deliver services which are clinically and financially sustainable. However, none of the health boards were able to secure approval for a three-year integrated medium-term plan for 2023-26 from the then Cabinet Secretary for Health, Social Care and Welsh Language, Eluned Morgan.

Medium term plans prepared by the three NHS Trusts and two special health authorities were approved by the Cabinet Secretary, but in general it is proving increasingly difficult for NHS bodies to produce financially balanced plans in the current climate of cost pressures and service demand.

Challenges

Mr Crompton said: “While I recognise the scale of the financial and operational challenges faced by the NHS, I am concerned at once again having to qualify my audit opinion on the accounts of all seven health boards because they have failed to meet the statutory duty to break even over three years.

“The growing cumulative deficit for the NHS in Wales demonstrates that despite record levels of investment and higher than ever levels of savings, the statutory framework put in place by the Welsh Government to drive financial sustainability in the NHS is not working.

“While there remains an urgent need for NHS bodies to continue to drive out cost inefficiencies in the way they work, this alone is unlikely to return the NHS to financial balance. More fundamental challenges now need to be grasped around the shape and infrastructure of the NHS, the level of funding it needs, its workforce challenges and how the demand for its services can be better managed. These are issues that should exercise the minds of politicians, government officials and NHS bodies and their partners in equal measure.”

Damning

Plaid Cymru health spokesman Mabon ap Gwynfor MS said: “This is a damning indictment of successive Labour Health Ministers who have failed to put the Welsh NHS on a sustainable footing.

“The financial pressures facing the NHS will not be alleviated by the UK Labour government’s austerity agenda – its impact which will be felt across Wales’ public services.

“Plaid Cymru has called on the Welsh Government to declare a Health emergency, but Ministers continue with a ‘nothing to see here’ approach – despite financial pressures and record high waiting lists.

“If the new First Minister’s listening exercise is to mean anything, she must take heed of the calls made by NHS leaders to place a greater focus on preventative health, ensure fair pay for care workers and come up with a long-term plan not sticking-plaster solutions.”

Darren Hughes, director of the Welsh NHS Confederation, said the report highlighted the “enormous financial challenges in the NHS, which is facing historic levels of pressure”.

He added: “We need commitments from governments to longer term thinking, including focusing on prevention to reduce demand, shifting more care into the community, sufficiently investing in NHS estates and infrastructure to improve efficiency and ring-fenced investment so social care staff can have parity of pay.”

Inflation

A Welsh Government spokesperson said: “During 2023-24, as a result of unprecedented and sustained inflation and demands on services, the Welsh Government made changes to its spending plans in-year to support the NHS. An extra £425m was reprioritised across the Welsh Government to support the NHS.

“Alongside the additional funding, NHS Wales continues to deliver record levels of savings to support financial delivery in addition to meeting the challenges faced by significant increases in demand and inflationary pressures.

“Although all health boards breached their financial duty in 2023-24 – against the background of a very challenging financial climate – four achieved the target deficit set by the Welsh Government and both special health authorities and all NHS trusts met their financial duty to break-even.

“Despite these ongoing challenges, the Welsh Government budget for 2024-25 has prioritised funding for the NHS with an increase of more than 4% compared to less than 1% in England.”

The Welsh Government’s view is that the NHS in Wales – like the NHS in other parts of the UK – has been facing the most challenging financial pressure in recent history. The Welsh Government insists it has protected the NHS budget despite the toughest financial situation since devolution.

During 2023-24, as a result of unprecedented and sustained inflation and demands on services, the Welsh Government made changes to its spending plans in-year to support the NHS and Transport for Wales. An extra £425m was reprioritised across the Welsh Government to support the NHS.