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Six health boards breach break even duty amid wider financial pressures

08 September 2023
  • The audit of NHS bodies’ 2022-23 accounts is complete. Our data tool provides further information on NHS bodies’ current financial positions

    The Auditor General has concluded that eleven out of the twelve NHS body accounts recently published present their financial positions fairly. However, six of the seven Health Boards failed to meet their statutory duty to break even over a three-year period. As a result, the Auditor General qualified his regularity opinion for those bodies as failing this duty means that the bodies have exceeded their authority to spend. The three NHS trusts and two special health authorities all met their duty to break even.

    While Betsi Cadwaladr University Health Board reported that it achieved its duty to break even over a three-year period, there remains uncertainty on the reported outturn arising from the residual impact of the qualifications and uncorrected errors in the 2021-22 accounts. Consequently, the Auditor General was unable to conclude in all material respects that expenditure in 2022-23 was fairly stated and qualified the ‘true and fair’ opinion for the Health Board in 2022-23. He also qualified his ‘regularity’ opinion as the Health Board incurred irregular expenditure and breached its standing financial instructions in making payments to a former interim executive member of the Board.

    The Auditor General has therefore qualified his audit opinion on the 2022-23 accounts of all seven Health Boards.

    Health services in Wales received £9.894 billion of revenue funding in 2022-23, a cash uplift of £131 million in 2022-23 but less than the uplift of £175 million in 2021-22. With the impact of rising inflation, the 2022-23 cash uplift equated to a 4.9% real terms decrease in funding (compared with a 2.5 real terms increase in 2021-22). Against a backdrop of significant pressure, the total in-year deficit for 2022-23 has increased to £150 million (£47 million in 2021-22) and the three-year cumulative over-spend across the NHS increased from £184 million in 2021-22 to £247 million in 2022-23.

    Expenditure on agency staff has grown steadily over the last five years, with a further increase of 20% in cash terms in 2022-23, putting overall agency spend at £325 million across NHS Wales. The majority of the spend is to cover workforce vacancies but with some of the increase supporting additional activity.

    Positively, reported savings increased again in 2022-23, continuing the trend in 2021-22, but still at a lower level than in 2018-19. However, the proportion of savings delivered through one-off actions, such as delaying spend rather than driving efficiencies, continues to grow. One-off savings were 60% of total reported savings in 2022-23 and exceeded recurring savings for the first time in the last five years.

    Strategic planning will be key to delivering transformation in the NHS. From 2022-23, three-year planning arrangements were reinstated after the pause due to the COVID-19 pandemic. Bodies have now moved back to medium-term three-year planning from the more agile annual plans used in the previous two years. However, the current financial climate alongside the need to deal with service pressures means it will be increasingly difficult for NHS bodies to produce financially balanced plans.

    Further detail is set out in ‘NHS Wales Finances Data Tool 2022-23published today.

    Health revenue funding in the NHS in Wales fell in real terms in 2022-23 at a time when the service continued to face the challenges of tackling backlogs and responding to immediate service pressures and new patterns of demand. Whilst I recognise the scale of the financial and operational challenges faced by the NHS, I am concerned at having to qualify my audit opinion on the accounts of all seven Health Boards. In most cases this is because they have failed to meet the statutory duty legislated for by the Senedd, to break even over three years. The focus on recovery and remodelling must continue into the current year and beyond but our data points to ongoing workforce challenges, evidenced by growing expenditure on agency staffing, and a need to develop a more strategic approach to service transformation. NHS bodies will need to use the reinstated medium term planning process to set out a financially sustainable path to service recovery and modernisation. Adrian Crompton, Auditor General

    Related Report

    NHS Wales Finances Data Tool - up to March 2023

    View more