Written Statement: LHB Allocations and Target Control Totals

On the 17 of October 2023, the Minister for Finance and Local Government provided an oral statement to the Senedd on the Welsh Government’s 2023/24 financial position. That statement detailed the outcome of the work over the summer to address the impact of the Welsh Government budget being worth around £900m less than it was when it was set in 2021.

The NHS in Wales, like other healthcare systems, is facing the most challenging financial pressure in recent history. This is due to the impact of continued increasing demand on services, persistently high inflation on costs including energy, medicines, and pay related pressures, in addition to the impact of the pandemic and ongoing COVID-related costs. In recognition of these challenges, an additional £425m has been allocated to support the NHS this financial year.

I have been working with Deputy Ministers and officials to review central budgets and repurpose funding towards NHS organisations where possible. Whilst this additional funding support is welcomed and essential, Health Boards will still need to make difficult decisions to balance their budgets both this financial year and next.

As a result of these actions, I can confirm that funding will be provided to organisations in support of the pay award commitments that have been agreed with and committed to our union partners. Local Health Boards have also been notified of the additional allocations being made in recognition of the challenges that are being faced, in addition to confirmation that each Local Health Board has been required to reduce planned deficits by 10%.

Plans submitted by Local Health Boards at the outset of this financial year detailed a combined deficit position of £648m. A 10% reduction to this planned deficit therefore equates to £64.8m.

In addition to providing funding to support pay awards, additional allocations, which total £460.2m, will be issued to Local Health Boards proportionately according to the established Local Health Board resource allocation formula. £336m of this funding is recurrent in nature and is conditional on each Local Health Board making progress towards the level of deficit which we have set for them to work towards (‘target control totals’) and which we will fund from the wider Health and Social Services budget. This constitutes £150m of funding to support organisational underlying deficits and the recurrent impact on the cost base as a result of the COVID pandemic, and £186m to support inflationary pressures including in relation to prescribing, medicines, and packages of care.

In addition, following the review of central budgets, a further £124.2m will be provided to Local Health Boards on a non-recurrent basis. Of this £75m is to further support inflationary pressures, and £49.2m to support the additional costs of energy above historical baseline levels.

Following these allocations and deficit reduction expectations, revised target control totals have been set for Local Health Boards which across the seven Boards combine to total a deficit of £123m. These are target deficit positions for Local Health Boards to work towards achieving and are offset by funding within central budgets.

All Strategic Health Authorities & NHS Trusts are forecasting to achieve financial balance and where there are opportunities to deliver financial improvement beyond those positions, I have asked my officials to ensure those opportunities are realised to support the delivery of this overall position.

I have also asked my officials, with support from the NHS Executive, to monitor progress against the target control totals set out, alongside implementation of actions with each organisation as part of the escalation framework. This includes working with organisations to support the delivery of savings that health boards have identified within plans and implementing processes to strengthen actions on a consistent national basis to support local savings delivery.

Delivery of the position set out will be challenging, but I expect progress to be made by Local Health Boards in delivering the target control totals set by organisation. We should be clear that these are not cuts to Local Health Board budgets, but Health Boards will need to take actions to reduce expenditure and manage to the target deficits we have set out. This will be an on-going process and my officials will continue to work with all NHS Wales organisations in progressing delivery of the target forecast positions set out for the remainder of this financial year.

Annex

Allocations & Control Totals by Local Health Board

All figures £M