Public Accounts and Public Administration Committee

So, moving on, we start today's proceedings with an evidence session on NHS finances and governance. The Auditor General for Wales published a data tool in September 2023, which summarised the financial position of each NHS health board in Wales, based on information from their 2022-23 accounts. During the financial year, the accounts of all seven health boards have been qualified by the auditor general. This committee have decided to conduct an inquiry to explore the pressures facing health boards in Wales and NHS Wales as a whole, considering their financial and governance issues. As part of this inquiry, the committee will consider NHS finances generally, the escalation framework, the accountability review, and progress in relation to the Velindre Cancer Centre project.

So, I'm pleased to welcome participants to the meeting, and the witnesses who have joined us. I'd be grateful if, for the record, you could state your names and roles.

Good morning. I'm Judith Paget.

I'm Judith Paget. I'm the director general for health, social care and early years within Welsh Government, and I'm also the chief executive of NHS Wales.

Good morning, everybody. Nick Wood. I'm the deputy chief executive of NHS Wales.

Bore da. Hywel Jones, director of finance for the health and social care group in Welsh Government and director of finance for NHS Wales.

Thank you, and thanks again for being with us. As you'd expect, we have many questions, and I'd therefore be grateful if Members and witnesses could please be as succinct as possible, so that we can cover as wide a range of the issues as possible, generated by this topic. Please note that there will be a short break after an hour, roughly, approximately, into the evidence session. So, as convention has it, I as Chair will ask the first question. So, on that basis: how would the witnesses sum up the Welsh Government's overall level of concern about Betsi Cadwaladr University Health Board at present?

Thank you. I'll start with that question, if that's okay. So, clearly, the committee will be aware that Betsi Cadwaladr University Health Board was put into the highest level of escalation special measures in February 2023, due to a series of considerable concerns across a range of areas. We set out, and the Cabinet Secretary set out, the special measures framework to guide our work over that first year and, clearly, our approach to special measures has been set out in four stages. The first one, a short discovery stage, which commenced in March 2023. That led into a longer period of stabilisation. And then the third and fourth stages are standardisation and sustainability. So, during the last year, clearly a huge focus within the organisation has been on that sense of stabilising the organisation, focus on appointing new board members, a new chief executive, making sure risk, performance and financial frameworks were agreed with the board, and starting to recruit additional independent members, and now, of course, a vice-chair and independent members are in place.

I think there has been some progress. There are signs of progress, which is positive to see. But I think it's fair also to say that there is still a substantial amount of work yet to be done. As we move into the second year of special measures, the Cabinet Secretary will be publishing, very shortly, a framework to guide the work over the next six months. It will set out all those areas in that special measures framework that require further attention. It will also set out what de-escalation might look like for the organisation, in terms of how we get to that point. I'm hoping that the Cabinet Secretary will share that and publish that over the course of the next week. So, I think a summary would be: some progress, lots more to do, and I think this is a piece of work that will stretch into the medium term; it's certainly not a short-term fix to address some of those issues.

Thank you very much. Anybody wish to comment? No. You mention independent members and, clearly, a key requirement of independent members on a board is to freely, openly and constructively challenge the executive. How confident are you that, within the new regime, the independent members appointed, and to be appointed, will be ready, willing and able to ensure that that function is carried out to the full extent?

So, I think it's important to say that, around the board table, it is a unitary board, so each member of the board has a really important role in determining the strategy and programme of work that the board is going to pursue, including approvals of plans, changes to services et cetera. But I think also, as you say, the executive team then is charged with the delivery of that plan, and it's important, at those board-level discussions, and through committees particularly, that board members feel able to challenge and scrutinise the progress that's been made. But also, of course, share their advice and support in terms of how progress could be delivered. So, I'm confident that the independent chair, vice-chair and independent members that have been appointed, through their induction, are well placed now to fulfil that, making sure that those committees are working effectively. But, clearly, that is one of the things that we will need to continue to work on and support the health board to do over the course of the next six months or so, as all those new independent members settle in to their roles.

To what extent do you think there's been enough accountability for the past failures identified at the health board?

The board feels, and we feel, that, absolutely, there is accountability. The board is in a very different place now than it was 12 months ago, and the health board has been clearly and visibly held to account by the Welsh Government, by the public, by elected Members, and committees such as this for the things that happened in the past and how they're going to work to put those right, going forward. As I said, we are all trying to work in an environment of openness, of transparency, of sharing what the concerns are, but also setting out where progress has been made, and I think that transparency and openness with the public, as well as with patients and staff, is really important. So, I think the accountability is felt very clearly by the organisation, and I think their evidence session to the committee very recently described that very well.

A series of publicly available reports have named—I'm not going to name them here—officers in the health board as having responsibility for some of the issues highlighted. How confident are you that all those persons have been removed from corporate decision-making roles?

There certainly have been changes in the board. As I said, the membership of the board now, both as chair and as independent members and executive directors, is very different. There have been some changes within the executive team. Clearly, the new chief executive has been appointed, the director of corporate governance appointed, and clearly there are still outstanding issues, which I know the committee won't want to go into—those issues need to run their course in accordance with due process.

How confident are you that those named in those reports, which are now public reports, are not in a position to influence corporate decisions? I think you're referring to investigations into one particular department—finance—but, as I recall, those officers weren't named in those public reports, except in the Ernst and Young report, of course.

Yes, so, I am confident that the health board has taken appropriate action as it relates to individuals who might have been named or implied in public reports. And of the people that I'm thinking of—clearly, we won't want to name them—they are no longer involved in making decisions within the health board at this time.

Okay. As you're aware, HM coroner has identified a disproportionately large number of prevention of future death notices issued to the health board. As I recall, it was more than the other health boards combined. How confident are you that the health board's services now are safe in that context?

So, I think, clearly, the safety of services, patient outcomes and clinical governance of the services was one of the key areas that prompted the special measures action. I think committee members will be aware that there were some specific services that there was a focus on in the course of the last 12 months—vascular services being one, and mental health services being another. Clearly, a significant amount of work has been done in relation to those two specific services, including assurance reviews and independent reviews of mental health in-patient settings. And, clearly, for those two services, there have been improvements, but more work to do.

I think there is a general issue that the board is addressing around the safe systems of care that they need to put in place and they need to ensure that they have. It's the board's responsibility to ensure that their systems of care are safe and reliable. And, of course, that has a number of components to it. So, one of the things that we have been working with them to support is, clearly, a review of clinical governance and patient experience, which has been done by one of the independent advisers, and actions related to that are now being implemented. One of those is, clearly, a new quality management system that I understand the board will be considering at its meeting later this month. But there's a whole host of issues that impact on that: clearly, how the organisation learns from incidents; how they listen to concerns from patients, from their families, and from staff members about concerns that they have; how they create an open culture that supports staff to come forward when they have concerns, or where there have been incidents or near misses, and that those are taken seriously and acted upon quickly and investigated, and changes have happened; and, also, making sure that they have a data system that allows them to understand the quality of the services that they're delivering, where there are issues, and to point them towards where improvements are needed, and that they act on that quickly.

I think the issue with the coroners—and I absolutely understand everybody's concern, and this is one of the areas that will feature in the work programme for the next six months—is making sure that the organisation has arrangements in place where, if there have been issues or concerns raised, in whatever way, that they grasp them, deal with them, investigate them, put changes in place, that they learn from that, that they disseminate that learning throughout the organisation, and they then follow up on that to make sure that changes are implemented.

So, I think there is still a significant amount of work to do in the organisation to get all those elements of a reliable, quality management system in place, and when that is in place, then I think we can be much more confident about the general safety systems in the health board. But, that said, I do know, every day, the clinical teams in Betsi Cadwaladr are working incredibly hard to make sure that patients get a good experience of their care and get good outcomes as well.

Thank you—[Inaudible.]

I think we're frozen.

Apologies. Whilst we get him back, I will carry on with the questioning.

Okay.

So, in relation to—

[Inaudible.]—the Welsh Government will need to provide to this end?

Chair, I do apologise, you did freeze. Do you just want to repeat the question for the panel, because I don't think they caught it?

I'm sorry. Yes. How long do you estimate that it will take to properly rebuild the health board to the standards you're indicating, and what additional support, if any, do you think the Welsh Government will need to provide to this end?

Yes, that's a question I've been asked quite a few times in the last year, and my answer has remained the same: it will take as long as it takes. As I said in response to a previous question, I don't think this is about short-term fixes. I think we are in this situation for the medium term. I think it's incredibly important that we continue to support the organisation with the improvements, and, clearly, hold them to account where changes are needed. I think we need to ensure that our programme of work gets reviewed and revised, and make sure that it addresses the issues that are of concern, both to us and, obviously, to patients and communities in north Wales.

I think, in terms of support, clearly, we have, over the course over the last year, made available, I think , around eight independent advisers to support the health board over a range of areas, and I know the health board has found that input to be incredibly helpful. All those independent advisers have given views and recommendations that the health board are now addressing. What we do have available to us now, of course, is the capacity within the NHS executive—which is already deployed in support of Betsi Cadwaladr, as it is in support of other NHS organisation around Wales—and, clearly, they have a suite of skills, capacity and knowledge that we're putting to good use in north Wales. But, of course, if there are other independent issues, advisers that are needed, then we will commission that on a bespoke basis. So, I think the commitment from Welsh Government is to continue that level of support. I think it's incumbent on us to do the best we can collectively for the people of north Wales, and, so, we will continue with this work until we're all satisfied that the changes have taken place and that they are sustainable.

Could I add something to that?

Okay—. Sorry, does someone else wish to speak?

Yes. Sorry, Chair. Could I just add something to that? Our focus is on being very clear as to the issues that need to be addressed and the action required, and the supporting evidence of improvement and delivery associated with that. That will be set out in the de-escalation criteria that Judith referred to, which is with the Cabinet Secretary and that we're hoping to have published. So, that will be a very clear framework to follow.

And I think the other thing I'd like to reflect is—Judith described the significant amount of support that's been put in—that it's imperative for us that we and the health board implement sustainable solutions, and that the health board is able to stand on its own two feet. So, I think we've been in a position where, in the past, there have been some sort of quick fixes or use of consultancy support. So, through our processes, we're looking to put the support requirements in place that also enable the health boards to develop and grow their own ability to allow that support to then be removed in the future.

Thank you. I'll bring in Natasha Asghar to take up the questions.

Thank you so much, Chair, and thank you so much for your answers so far. I'd just like to ask you—I like 'top' numbers, so top fives and top 10s—what are your top 10 key priorities for improvement in both service provision, performance and organisational governance, as the health board obviously moves forward to its standardisation phase.

Shall I take that?

Thanks.

You asked for a top 10. I think we'd probably summarise what we've described as a requirement for the health board in four or five key areas, and within there there will be, clearly, priorities. As Judith has alluded to, I think there's still much work to be done on the quality management system and the quality of care that is delivered to the public of north Wales by Betsi Cadwaladr, and that development of how we use the learning from issues, risks and events to drive that service improvement and that quality management improvement would be absolutely at the top of the priority list for where we want the health board to go. Clearly, some of that then translates into their wider performance and delivery standards that we set out an expectation for. We've set out expectations for all health boards this year in terms of performance standards, based around patient experience, patient waits et cetera. For the health board to get into a sustainable, improved position, which is clearly the desire as we move to de-escalate the health board, setting out very clearly performance targets that are aligned to the rest of Wales and that they can sustainably achieve would be, again, up there as a very clear priority.

Some of the earlier questions related to the board, the senior leadership team within the organisation, and whilst we've seen some changes around the executive table, with the appointment of a new chief executive, director of governance et cetera, there is still a need, really, to develop that top team and to put in play a very clear leadership structure in the organisation. So, I think, for the new chief executive, that's got to be a priority as we move through the next 12 months, or certainly six to 12 months, in filling some of those key positions in a substantive way so we're building that capacity in the organisation in order for it to deliver that sustained improvement.

And then, probably, as a final point around those priorities, there's the culture of the organisation, which we're never going to change overnight. But I think it's really important to recognise the challenge for all of the staff who work in the organisation. They're in special measures. That's very draining culturally, and I think it's really important that the leadership team are able to really start to embed that culture of improvement, the learning culture, the well-being of their people.

I don't know whether I've got to 10, but certainly, in terms of the four or five key areas that we're focused on and that we've set out for them, these run alongside, then, their de-escalation criteria as we move forward.

Okay. So, I understand, obviously, that Betsi is the focus today and, obviously, all three of you have quite a mammoth task with what you do. So, naturally, all the things that you've listed I can appreciate. I'm sure everyone in the room can as well. But how often are you, personally and professionally in your own roles, going to be having KPIs on those particular issues that you mentioned, to make sure that you actually hit those goals and hit those targets that you've just mentioned?

Sorry, how often—

How often are you going to be checking up, making sure that you're actually hitting those things that you mentioned?

So, there is a fairly well laid out, and now well-practised, assurance framework that exists, given that relationship between Welsh Government and Betsi Cadwaladr. So, firstly, the Cabinet Secretary, previously the Minister, meets with the board—this has been on a bimonthly basis and will be moving to quarterly, I believe, as we move into this year—where we work through some of the key areas that are in the special measures framework, and she takes assurance directly from the board in relation to some of those issues. The Minister for Mental Health and Early Years also has a separate meeting around her portfolio areas, particularly mental health and learning disability. That happens quarterly. And then I and my team—I personally chair an assurance board that meets at the end of each 90-day cycle to review the progress that has been made in the 90 days, and to make suggestions about where they need to go for the next 90 days. So, those are the regular touch points. There are also others. So, if we have a concern about a particular service, we might have a touch-point meeting on dermatology, orthodontics, et cetera. So, there's a frequency of contact and it's well structured, well laid out, and we've followed it over the course of the last year and we'll continue to do that this year.

Okay. Thank you so much. Has the health board delivered what the Welsh Government expects from a planning perspective, as it's been taking what was the special measures response plan for 2023-24 and its annual plan for that period into a single plan within a three-year context?

So, I think there is evidence of some progress in terms of where the health board has gone in the last 12 months. We've talked a lot about the stabilisation of the organisation, but I think importantly for the public and what they see in service provision, that's clearly got to be the measure. So, they've started to achieve some of the benchmarks and priorities that we laid out for them, or they laid out in their plan, if you like, for 2023-24. Some of that is evidenced in, perhaps, the waiting times performance having improved. I think we've seen a 22 per cent reduction in the longest waits in Betsi. We've seen quite a significant reduction in diagnostic waits. I'll just double-check. It's about a 30 per cent reduction in diagnostic waits. So, we've seen some progress in the planned care areas.

They're probably the only health board that has significantly reduced the size of their waiting list—the timeline, maybe not, but the actual physical size of the waiting list has come down quite considerably in north Wales. And they've made real progress in the longest waits. So, they had some very, very long waits for treatment that were completely unacceptable, and would be unacceptable in any health board area, but they've managed to eliminate six, five, and I think they're now down to four-year waits, and there are very, very small numbers of those, whereas previously we had seen very high numbers of very long waits.

Mental health performance has improved significantly over the 12-month period. I think they're achieving around about 80 per cent compliance in a number of the mental health areas. And whilst their cancer care in total number has dropped slightly over the last couple of months, they remain one of the better health board performers from a cancer perspective. They've got some particular challenges with certain tumour sites, particularly skin cancer, at the minute, where there is a capacity issue.

So, I think from a public service perspective in the delivery of key waiting-time measures, we've seen some progress. That really needs to be sustained. And what we're clear about now, as we move into this year, is that they need a very clear and coherent and deliverable plan on a number of those particular areas. So, yes, broadly I'd say that they've started to deliver improvement in overall terms from a service delivery perspective, what we've got to see now is real sustainability in that and some real key drives in some of the other KPI areas, because we have significant concerns remaining in some service areas.

Okay. Thank you so much, Chair.

Could I add some points from a financial perspective?

Yes, of course, please.

Just some points on the financial perspective just on the last two questions, if that's okay. Obviously, it follows a similar theme around stability. So, the organisation came into the year with a financial plan that wasn't robust, and they were significantly off that plan during the year. They've undertaken quite rapid improvement, in particular around grip and control into the special measures framework and increasing their savings delivery in-year, which has meant that they've delivered improvements from where they started. They are short against the target control total that Welsh Government have set, but have delivered significant improvements in-year, which obviously, we look to see maintained.

The other thing I could add to the previous question, to give some flavour of the interaction on some of the specific areas, is that, in addition to what Judith has described, we have, again from a finance lens, an escalation framework and a clear special measures action plan. We meet fortnightly as Government officials, lead officials from the financial planning and delivery function of the NHS executive, and the senior finance team at the health board, to review that action plan, review progress, seek some additional assurance, put some more support activity in those areas where progress hasn't been as we anticipated. And then we have strengthened—and obviously Betsi Cadwaladr has had a key part in that—our monthly monitoring arrangements and our wider escalation process around financial improvement in-year. So, just to give a bit of context to specific areas.

Can I just ask one final question, Chair, before—? I know Mike is waiting to ask his set of questions next. On a professional level—. I'm going to ask all of you the same question, please just answer with a 'yes' or 'no'. Are you 100 per cent confident with the plan in place now?

I can't give a one-word answer. I'd say—

Just 'yes' or 'no'.

—you're not going to be 100 per cent, but I'm reasonably confident in the plan that they've got.

Okay.

I think they understand their issues; they know what they've got to do. We've just got to support them to do it now.

Yes, I'm confident in the plan.

Okay, great. Thank you, Chair.

Okay. Mike Hedges has got some questions for you. So, over to Mike.

Diolch, Cadeirydd. Well, I've been on the public accounts committee on and off for 13 years. During the whole of that time, we've discussed Betsi Cadwaladr. What is your assessment of the root cause of the health board’s troubled history? My assessment is that it can't work; its geography stops it working. It's not one you agree with at the moment, but, at what stage will you decide that it can't work? And the second one is: how is the current special measures framework going to address the problems more than all the other targeted interventions and special measures we've had previously?

Shall I start with that one? I think it's really difficult for me to comment on the root cause of the problems in Betsi Cadwaladr. My personal involvement in it only stretches back to November 2021, and clearly the Member has got a lot more history and has observed what's happened over a much longer time.

I think in terms of the root cause, just based on my own experience of working in other parts of NHS Wales, where you're bringing large organisations together for the first time, I think there are all sorts of differences around the way teams work, the way hospitals work, the way geographies work, the way cultures work within individual teams—all of those things we need to be mindful of. And we need to, as a leadership team—when we're working in those organisations where we're trying to bring people who've worked separately together—focus on the things that bind and unify us: so, make sure we're focused on the most important things that we can all agree on and how we're going to work.

I think also there needs to be a focus on, not just the way we work together and how we bring teams and work clinically and engage with our staff and our communities, but also we are a public service, so, being well governed, well led, making sure our financial arrangements are strong, ensuring that we're responding to the reviews of stakeholders, creating opportunities to get external views on our performance, and focusing on culture, et cetera, are really, really important.

So, I don't know what the root cause is. I can surmise from my own personal experience, but I'm not absolutely sure. What I can say is that the special measures framework that we've put in place is very structured, it's very clear, it's very visible, it's very clear to the organisation what they need to do. We've put in support and we're going to continue with that support, so that we support them on their journey. And as I said before, I think it's incumbent on all of us to actually support them in that work.

The areas that we're focused on are governance, quality of care, performance, leadership and culture, finance and financial management, planning and service transformation and fragile services. And in all those areas, there is work to do. And I think the most important thing, and the thing that we've learnt through our escalation framework across Wales and the feedback we've had, is that we need to understand what the measures are that will support us to de-escalate. And I think we've provided greater clarity on that now than there's been in place before.

I take your point about it being a new organisation; I accepted that 15 years ago when it was just created. It's been there for 15 years now. I don't think, apart from you, many other people would describe a 15-year-old organisation as 'a new organisation'. I think the health board has been in different levels of escalation for as long as I can remember. I mean, why have the previous targeted interventions, special measures, failed? We know they've failed, because you're back in special measures again.

Well, I think that the most important thing around—. If you're talking about Betsi particularly—

Yes, only about Betsi at the moment.

—only about Betsi—is that we clearly have put frameworks in place now. I think we've taken a new approach. I can't comment, I genuinely can't comment on the whys and wherefores of the previous process, but I can speak with greater confidence about what we've put in place at the moment, and the support that the health board is getting in order to make those improvements. I think we have to continue on this journey; I don't think we can be knocked off it. I think there have been some elements of improvement, so we have seen some improvements in various services, and actually, as Carol Shillabeer said when she gave evidence to you, there are some excellent examples of good services in Betsi Cadwaladr and staff working incredibly hard every day to achieve them. And I think from my point of view, I'm focusing on the here and now and the future, and supporting them to move forward.

We were previously told by a middle-ranking manager who'd been given their budget in Betsi Cadwaladr that they'd decided it wasn't enough, so they ignored it. Can you confirm that that is not allowed to happen at the moment? Because there's been a tremendous lack of financial control, and, 'I don't think I've been given enough money, so I'll just spend what I need, or what I think I need.'

I'll bring Hywel in in a moment around financial controls, but I think one of the areas of work that the health board has already started on, to be fair, but there is some more work to do, is around supporting line managers, making sure that line managers are well supported and well trained in order to do the work that they've done, to make sure that they have training in financial control and financial control measures, which I know is happening. And that's just an unacceptable situation; the responsibility of line managers to manage and support their services, their staff and manage public money well is incredibly important and needs to be a key focus of their training and development.

How much is it costing to put them in special measures?

I've got the cost of the independent advisers. Nick might have—

Yes, so, I think the independent advice that we funded directly from Welsh Government is around about £164,000. In overall terms, everything else that's funded through special measures is through their directly allocated budget. So, circa £82 million per annum is going into the health board. Some of that is to fund their current financial position, and some of it's for transformation, but it's in the same way that we seek to set out a sustainable financial plan for each organisation in Wales.

I don't expect you to be able to do it now, but could you give us in writing a breakdown of what is being spent on the special measures?

Absolutely, yes, we could provide that.

I don't know if Hywel wanted to say anything about financial controls and training.

Yes, a couple of things and I'll also go back to the Member's previous question, if that's okay, just in terms of what's different in terms of our approach. So, it's a personal reflection that we sometimes see, or have seen in the past, for organisations with less maturity, that when they're in TI or special measures for a particular issue, it becomes about that issue, to the detriment of potentially other areas. The organisation is in special measures as a whole, so de-escalation will require a minimal level of improvement across the whole domain. We're operating in a challenging environment, but the challenge for health boards is to improve the health of their population, deliver improvements in outcome and quality, and deliver performance improvement and deliver financially; it's not one or the other. So, that is the framework that we're putting in place, which is holistic and will be evidence based.

In terms of financial controls, as part of the special measures action plan, the organisation has put a significant amount of work in place on strengthening and revising their scheme of delegation on their approval mechanisms around investments and on their budgetary frameworks. So, that whole control environment has strengthened in this financial year.

Obviously, if you're running an organisation well, you'll have monthly updates on finance, you'll run those against your plan and it's not necessarily one twelfth of the year's expenditure, it'll be a certain proportion of that. After three months, you'll have a quarterly report. Your quarterly report will be due in, I would say, May to July. What will that show?

Do you want to describe their reporting? Thank you.

The Member's absolutely right, and in broad reporting terms, just to give you some confidence, we have very robust monthly monitoring arrangements with health boards on a monthly basis to an incredibly granular level of detail. So, to give an illustration, savings plans that organisations are delivering across NHS Wales, we monitor them to individual scheme level, and we share that output across individual bodies.

In terms of this financial year, the organisation has submitted a plan that is a deficit plan. The plan that they've described doesn't have enough confidence at this point in terms of the savings that they've set out for the year ahead. That's part of some of the assurance mechanisms that we've put in place now over forthcoming weeks in terms of strengthening their plan.

When I was involved, many years ago, with Swansea, before they were created, local health boards, the two big problems in terms of costs were agency nurses and locum doctors. Is that still the problem?

Specifically for Betsi or across the system?

For Betsi at the moment.

So, it is still a challenge for Betsi. If I give some wider context around agency in particular, in 2022-23, we spent around £325 million on agency staff within NHS Wales. That's reduced in 2023-24 to a forecast of £263 million, so there is a reduction of about £62 million. Around half of that is in registered nursing. Through our value sustainability programme there's a significant amount of activity happening nationally and locally to drive down agency expenditure, but it is still a feature and a pressure for organisations.

In autumn 2020, the Welsh Government announced a financial assistance package for the health board of £297 million up to the end of March 2024. Has this money worked?

That's a good question. So, that £297 million essentially translates to £82 million per annum over a three-year period, and the residual balance is £51 million for year 1 when that was announced in autumn 2020. Of that £82 million, £40 million supported the organisation's underpinning deficit at that point in time, and £42 million related to improvements and transformation in particular priority areas, namely unscheduled care, planned care, diagnostics and also some funding to support mental health and transformation. Has it worked? So, there's a straight answer to that, which is they still have challenges to balance financially and their performance isn't where we would hope it would be. However, as Nick described earlier, we are seeing significant improvements in some of those areas—

Thank you. That was a very nice 'no'. Are there any consequences for NHS bodies that have not met their year-end financial targets?

A couple of reflections on that, in terms of the 2023-24 position, we set out a control framework and environment during the year. Colleagues will be familiar from our evidence paper in terms of the written statement the Cabinet Secretary made announcing additional funding to the NHS, and we issued significant additional funding to the system along with a reduction expectation of planned deficit of 10 per cent and issued target control totals for the seven health boards against which we held offsetted funding within the MEG. Of that £123 million deficit, our control total—the forecast outturn position, obviously subject to audit, is £183 million. That's £185 million across the seven health boards, which is £62 million short of the target control total set.

So, positively, four health boards have achieved those target control totals and achieved that deficit reduction expectation, and of those health boards, one—Cwm Taf Morgannwg University Health Board—is forecasting in-year financial balance. Three health boards haven't achieved the target control total, so Hywel Dda, Aneurin Bevan and Betsi Cadwaladr.

If I come back to consequences, which was the Member's question, I think there are probably a few things for me. The first one is I think the context for each health board that hasn't achieved their target control total is different. So, through the organisational framework and the control framework we put in place, we recognise national pressures that were consistently affecting all bodies. There are challenges for the three health boards I've described that are localised to them. So, if you took Aneurin Bevan as an example, there is significant underlying deficit going into the financial year and challenges around some of their service model and the cost associated with that, and the impact of COVID. They had an ambitious plan that they weren't delivering in-year, which meant that they didn't deliver the 10 per cent improvement expectation. Betsi I've already described in terms of where they were at the start of the year and the improvement they've been on. The challenge for Hywel Dda is different, around their inability, consistently, to deliver the level of savings that are being set out in their plans. So, I think the challenges for those three organisations are different.

We have, through the framework, put significant funding in place that is conditionally recurrent, which is a condition that the Cabinet Secretary agreed to, so what we mean by that is that that funding can be assumed by organisations non-recurrently, but it will not be made recurrent until we're satisfied that significant progress is being made in terms of delivering target control totals and maintaining them. So, in terms of consequence, that's a very active lever in terms of driving forward the level of improvement we expect. And then finally, the other obvious consequence is escalation, so, as we've set out, we've got clear framework and escalation criteria and a clear methodology and approach that we're following and that activity will increase, depending on that position.

One year, Aneurin Bevan broke even and they were punished for it. All the other health boards got additional money, but Aneurin Bevan, because they'd broken even, didn't need any additional money. What better incentive can you generate to make health boards overspend?

Again, I think there are a couple of contextual points that are important here. The first one is, as we've set out in here, we started the year with a £648 million deficit, we issued in-year actions and activity that I've described, and for the reasons that the Member set out, we deliberately did that in a very clear and transparent way. So, the quantum of resource that we were able to provide organisations in terms of support, that was allocated very transparently and published with a written statement. That was also allocated based on what we've described as a resource allocation formula, which is the formula that recognises population and demographic challenges, amongst other factors, for individual health boards, and is the way we typically allocate additional resources, and a consistent 10 per cent deficit reduction. So, we are implementing a consistent framework with all health boards.

Okay. I'll rephrase the question. If any health board this year breaks even and others don't, will they be financially punished for breaking even, i.e. the extra money will be given to those that didn't break even and the one that breaks even is told, 'You don't need any more money'?

So, there's no intention to financially punish or disincentivise any individual organisations. I think there are two relevant factors. The first is that we are—. Well, it plays heavy on my mind, and we are acutely aware, that we have quite a differential position amongst health boards, as it stands currently. So, Cwm Taf are forecast to outturn at financial balance and Hywel Dda are forecasting a £66 million deficit. It's actually a conversation that I've been challenged with in the system in terms of, 'How do we, if we financially balance, make sure that we're not disincentivised, or that we are appropriately supported for being in that position?' So, that is factoring as part of our thinking prospective in terms of incentives.

I think the second part of that is that one of the focus areas that we are focusing on, going forward, is refreshing that resource allocation formula and the organisation's position against that. So, for good reasons, some of our allocations to health boards through COVID and subsequently did move away from that formula in specific instances. If you took something like energy, because of the acute and significant pressure that was, we funded organisations on an actual basis. If you took something like planned care, and the £170 million we've allocated, that was disproportionately weighted for the areas of greatest challenge where we had stronger plans. So, we are reviewing those areas with a view to considering where additional resources prospectively are most required.

I don't want to anticipate your answers, but on energy I suggest you visit some hospitals—the numbers that are so hot that they have to open the windows to get the heat out. That's hugely financially disadvantageous. Can I urge you to go and visit some of these hospitals to see exactly what is happening there by wandering around the wards?

My final question is on additional funding provided in 2023-24. Do you think there is still a mindset that the Welsh Government will bail out NHS bodies? We know that they have to cover debt—recover any deficit—because it's part of the consolidated accounts, and, as such, they have to cover anything from wholly owned subsidiaries of the Welsh Government. So, although we have Ministers saying all sorts of clever things like, 'Oh, we won't bail them out', legally they have to bail them out, or they have to fund it, because it's part of the consolidated Welsh accounts. Do you think that there is a mindset—? I've talked to some consultants who believe that, 'We'll keep on spending and the Welsh Government will keep on providing.'

Can you describe our approach, which is quite different from that?

Yes, so I understand the question and I think it's a very important one. My honest reflection is that I don't think there is a bail-out mindset. So, the drivers of our position in 2023-24 were through unavoidable demand and inflation. We are not facing a financial challenge that's heavily being driven by discretionary investment—that's not the place that we're in. Health boards and health leaders fully understand, and we're very transparent with them around the budgetary challenges facing the Welsh Government. Health leaders fully understand that in the absence of additional funding from a UK Government perspective, the Welsh Government's choices—if there's additional funding to health, that results in a choice being taken elsewhere. That is very acutely understood by the senior leaders within our system.

I would also reflect that we haven't bailed out health boards in this year. Part of our rationale for the target control total and having that environment was that we could implement a very consistent control framework, being very transparent in how we allocate resources and a consistent approach in terms of deficit reduction, which meant that we held back funding in the main expenditure group and didn't bail out individual organisations. We could have taken a choice in that scenario to provide additional funding to Hywel Dda, with a significant deficit, but we had a very consistent approach for NHS organisations.

I think the last thing to reflect is—because I understand the suggestion, and, obviously, the implication is a disincentive in terms of cost control and balancing, if there's an understanding that it has to be managed—that these are acute pressures facing all NHS organisations across the UK. They're heavily driven, as I say, by an unavoidable demand and inflation, and there are real challenges and choices that boards have to make in terms of balancing their resources.

I'll ask you this, and the auditor general's staff may wish to come in: if the health boards overspend by £200 million, when we get the consolidated accounts that £200 million will show as overspend, but the money itself would have to come from the Welsh Government.

That's correct.

Thank you.

Okay, thank you very much indeed. Of course, this committee's interest is not only looking at how much is spent but how effectively and efficiently the public resources are applied, hence the nature of our questions today. There was a personal observation earlier. I should, perhaps, declare that my family and I have been patients of the health board throughout this period, and that the staff we encounter are unfailingly professional, caring and kind in all circumstances. But the problems operationally with the health board were first raised with me as a then Assembly Member in 2009 by families and staff, and the problem then, which persisted, was an apparent belief in the health board that if you targeted the whistleblowers and buried the problem the problems would go away, and of course the opposite happened: they escalated. However, that's my personal observation over. Back to the agenda. Can I'll bring Rhianon Passmore in for some questions?

Thank you very much, Chair. I'm going to move to value and sustainability as a subject area. What tangible impact has the work of the national value and sustainability programme board had to date? I don't know who'd like to take that first.

The value and sustainability board has played, actually, a really important part in our work this year to try and support the NHS to improve its financial situation, but also look at things like efficiency, productivity and the value we're getting from our investment. It's focused its work in a number of areas, and generally the support has been really welcomed from the NHS, which is really good to know. Each of the organisations has their own—many of them have their own—replicated arrangement in their own organisation, again which is supportive. I'll ask Hywel just to outline some of those areas and some of the changes and improvements we've made as a result of that. Thank you.

Thank you. Thanks, Judith. Thanks for the question. So, as Judith described, we strengthened some of these arrangements in August 2023. So, Judith chairs a monthly value and sustainability board with representation from lead chief executives and lead directors across peer groups and organisations. We've structured that work around five work streams that reflect our main spend areas within NHS Wales, namely workforce, medicines prescribing, CHC, non-pay procurement and clinical variation or service configuration. It is supported through the financial planning and delivery team of the NHS executive in terms of intelligence, insight, monitoring, benchmarking, all of the obvious information outlets.

Just in terms of tangible impacts, I think some headlines, really. I referenced earlier some of the national focus on agency, supporting the local work that organisations have been undertaking, and that's seen a reduction in our forecast agency spend of around £63 million. We've refreshed our interventions not normally undertaken policy and given a clearer framework on procedures that we perceive to be of lower value. That is supporting some of our health board work and plans. We've got a really comprehensive medicines value programme in place, which is proving very fruitful in terms of scale and spread of medicines opportunities in particular. From a CHC perspective, the national team have also undertaken a systematic review of some of the higher-cost packages of care to ensure that the package of care commissioned and the quality of care provided is robust and is against the standards set out. I guess finally, from a non-pay procurement perspective, we have got a single non-pay plan and framework that supports all health boards.

I think some of the value—no pun intended—of this is actually supporting the visibility of the actions that organisations are taking to deliver financial improvement and enhancing the scale and spread of those with urgency.

Thank you. So, in terms of the Welsh Government, then, holding bodies to account for achieving the opportunities identified through the programming board, what is your brief take on that and how well embedded do you think the concept of value-based healthcare across NHS bodies is? How would you comment on those two points?

Thank you. So, just in terms of the value and sustainability arrangements, in principle it's a support mechanism to support scale and spread for NHS organisations, who are ultimately accountable and responsible for delivering financial performance, including savings delivery. We are testing health board approaches to having a clear opportunities framework and translating that to delivery as a key part of the escalation framework and activity with all organisations. And finally, we're addressing it through very detailed monitoring.

I mentioned earlier the work of the financial planning and delivery team. So, two aspects to that. We've got monthly intelligence at a very granular level, where we will highlight where organisations have implemented changes effectively, which organisations are outliers and improvement expectation around those. We're also making some improvements to our routine monthly monitoring arrangements, which mean that that's very visible in terms of our activity. Can I ask for the second question again? Was it value-based healthcare?

Yes, value-based healthcare.

Yes, in regard to—. To be honest, you've actually referenced that in an earlier point. You'll just have to bear with me a moment, because my questions have disappeared off the screen. Two minutes. In reference to the point that Mike Hedges brought up, in regard to the fit-for-purpose nature of the financial accounting framework and the incentives or disincentives that are built in, I don't know if there's any wider point on that, but, based on your knowledge of that system and the Welsh Government's review of NHS bodies' plans, are you satisfied that the NHS has the capacity, bearing in mind how overstretched they are, and capability to plan and deliver financially sustainable services? What is your take on that?

Thank you. So, I guess, in broad terms, and reflected in part of the evidence today, our approach is to get to a position where we have a health balance that is within budget and we have health board plans on an improvement trajectory that get to a balanced position. I think that will be more challenging for some organisations than others, and the pace of that will, therefore, differentiate across organisations. I think it's challenging to deliver financially sustainable services within NHS Wales within the wider public finance environment that we are operating in. Like I said earlier, these are challenges facing all health boards in Scotland, all organisations in England, so it is really challenging.

I think we are challenged nationally at times, if I was honest, around our capacity to support organisations, with a number in escalation, for the volume of potential areas of support that could be provided. Another honest reflection is that I think 'it's variable' is the honest answer. Part of the process we're putting in place is looking to get absolute clarity on the improvement trajectory for individual health boards, what actions are required to deliver that, and therefore what capacity and capability may be required to deliver that, if that is in addition to what is already in place in terms of organisations' plans. Judith, Nick?

In regard, then, to those significant cost pressures, and the NHS facing difficult decisions, what does that terminology refer to? What sort of decisions might that entail? And are we now at a point where those difficult decisions have to be enacted? Could you shed some light on that? I don't know, Judith, if you can speak to that particular question.

I think the Cabinet Secretary has been really clear that, despite the increased investment in NHS Wales, for which everybody is hugely grateful, and recognises that savings had to be made across many parts of Welsh Government, and its ambitious plans—. I think the Cabinet Secretary understands, and I think the broader Cabinet understands, that actually some of the changes that are required as a result of the financial pressures will be considerable. But I think the most important thing to say is actually some changes are required because they're the right thing to do for service models to drive quality and sustainability into our system.

So, if I can interrupt you—. Sorry to interrupt you, Judith, because I know you want to finish. But what I'm getting at is: when you say these changes, what are these changes? How would you encapsulate them? Because it's sometimes quite nebulous, isn't it, difficult decisions and changes. What are we talking about?

I think we can probably see—. But not just—. The point I'm trying to make is that these won't just be driven by financial pressures, they'll be driven by other pressures, which are around how do we make sure that we provide services in NHS Wales that are to the highest quality, deliver the best outcomes and are sustainable over time from a workforce perspective. So, I think we will see—and I think we are already seeing in parts of Wales—changes to services. So, I know, in Aneurin Bevan, the patch that I live in, they've made some adjustments to their maternity services to close their midwifery-led birth units at the Royal Gwent and Nevill Hall, and centralise the service at the Grange. It's those sorts of services, and I think we'll see more of that. So, yes, they make better use of the workforce that we've got. That might then result in us not having to provide more agency or, indeed, for medical staff, locum costs. But actually they're delivering good quality care and the care that patients want.

So, to paraphrase what you're saying, because I realise that there's a limited time, we are talking in terms of the centralisation of excellence in a geographic cluster, and also you've mentioned less usage of agency and locums.

I'm going to move on, if that's okay, Chair. So, the majority of the Welsh Government's health and social care budget goes to the NHS. What is your department doing to ensure social care receives sufficient funding, noting, for example, the direct relationship between health and social care in areas such as securing timely discharge of patients from hospital? If you could speak to that.

Thank you. So, first of all, we absolutely recognise the critical relationship, obviously, between health and care. From a wider Welsh Government perspective, obviously the Member will be aware that the funding responsibility for social care core services is with local authorities, and there has been an uplift of around 3.1 per cent in core funding for 2024-25, while recognising, of course, the demand on those services.

I guess from my perspective, from our perspective, we absolutely recognise that local authorities are considering how services need to adapt to meet those demands, working with health colleagues, and there are two key focus areas from our perspective. The first is eliminating profit, which features heavily in our plans, and the second one in particular is the regional integration fund. So, we have maintained and prioritised the regional integration fund at £146 million, and we are investing heavily in regional partnership boards, local partnership mechanisms, with the integration fund as a key part of that, to look to drive that improvement.

I don't know if Nick wants to add anything on delayed transfers of care.

Yes, just on the discharge piece that you referenced, the Cabinet Secretary chairs a joint action group featuring health and local authority leaders, looking at all of the reasons and issues around delayed transfers of care and the pathways of care that patients experience coming in and out of hospital. I think the focus of both the regional integration fund but also the work that we've been doing locally on primary care clusters in terms of enhancing community capacity absolutely focuses on that discharge journey and how we can expedite that. I think there are two sides to that. One is obviously getting people home as quickly as possible, or as clinically safely as possible. But, more importantly, it's actually building capacity in the community to stop them having to use hospital services in the first place, and what can we deliver locally in the community. There has been a lot of work with local authorities, local third sector providers and health looking at how we enhance community capacity to avoid conveyance and avoid admissions into hospitals. It has got to be a balancing act on both sides of the coin, really.

And obviously, in that particular area, there is huge potential in terms of both improvement in patient service and delivery and the flow through, but equally in terms of being able to scale up that integrational progress. I suppose my question very briefly, if you could, is: is there enough capacity and money in the system to be able to at pace scale up the process that you're talking about sufficiently to be able to make the changes that are necessary?

[Inaudible.]—around money, it's around the capacity that's available and how quickly we can transform services and shift resources both from secondary care into primary care, but also build that capacity. There are sustainability challenges in local authority areas of care, as well as in health, and how we fill that gap is really challenging. It's not necessarily a monetary issue, it's more about available services and how we best use some of the technology or digital advances that are also in communities to support the need for fewer people, but a more enhanced service.

I don't have time to go into that further, but thanks for that. And finally, very briefly, in terms of the very large backlog of maintenance there is for the NHS, both estate and digitalisation, how are those issues being reconciled and balanced, as you put it, with the constraints on capital funding? I don't know who would like to answer that.

Thank you. 'With difficulty' is the honest answer; I think it's extremely challenging. And capital availability is challenging, obviously, across Government and all other parts of the UK. Our capital budget for 2024-25 has been increased, for which we are grateful; it's a £40 million increase to what is now a £440 million envelope. There is an expectation on that £40 million increase that £30 million of that will support as a contribution towards addressing some of those backlog challenges, and £10 million to support the transformation agenda and digital. It is a challenging ask, managing that balance of supporting backlog and investment in future services. We have recently undertaken a capital prioritisation exercise with NHS organisations, who have all submitted a 10-year capital outlook that is prioritised, that sets a clear framework for us to have a more robust challenge around those immediate priorities and how those solutions can be managed in the future.

Thank you very much. Thank you very much, Chair.

Thank you. Could we go into a short break as promised? If we could resume, please, at 10.55 a.m. Thank you.