Urgent Need for Sustainable Cost Savings in NHS Wales

Audit Wales is urging NHS organisations in Wales to embed long-term cost savings strategies as financial pressures persist.

NHS organisations achieve savings in a number of different ways. These include stopping certain activities, reducing expenditure, and reshaping services to deliver care more efficiently.

Savings delivery in NHS Wales

In 2023-24, NHS organisations in Wales delivered £210 million in savings – an increase of £70.3 million from the previous year, which equalled the highest level of savings since 2018-19. Notably, 59% of these savings were recurrent, compared to 40% in 2022-23 and 51% in 2021-22. Despite this progress and an additional £425 million in funding from the Welsh Government, NHS Wales ended the year with a collective deficit of £183 million, up from £150 million in 2022-23 and £47 million in 2021-22.

Preliminary figures for 2024-25 suggest further improvement, with £253 million in savings, 61% of which were recurrent. Despite this positive progress and a further additional £450 million in government support, the system still closed the year with a £124 million deficit, underscoring the ongoing financial challenges facing NHS Wales.

Key findings from Audit Wales

We have recently published a series of reports on our website reviewing how NHS organisations approached cost savings in 2023-24. The reports highlight several important findings regarding how NHS organisations are managing cost savings:

Strong understanding of cost drivers:

NHS organisations demonstrated a solid grasp of their primary cost drivers. Significant savings were achieved in the following high-expenditure areas:

• Staff pay: £87 million
• Medicines management: £31 million
• Non-pay costs (e.g., utilities and premises): £65 million

However, there is still potential to reduce NHS Wales costs further, particularly by transforming service delivery. A major area for improvement is cutting down on the use of expensive agency staff, which cost £262 million in 2023-24.

Inconsistent use of benchmarking data:

While some organisations are using benchmarking data to identify savings opportunities, the application of this data is inconsistent. This limits their ability to fully realise potential savings. As a result, NHS bodies need to make more effective and consistent use of available data and insights to identify and act on cost-saving opportunities.

Over-reliance on non-recurrent savings:

Although the proportion of non-recurrent (one-off) savings dropped from 60% in 2022-23 to 41% in 2023-24, many NHS organisations still rely heavily on these short-term measures. This approach is unsustainable and does not address underlying financial issues. A focus on recurrent savings, therefore, is important to ensure long-term financial stability.

Limited engagement with clinical and frontline staff:

Audit Wales found that clinical and frontline staff were not sufficiently involved in identifying cost-saving opportunities. Their engagement is crucial, as they are best positioned to understand the practical implications of service changes. Additionally, NHS boards often lack clear updates on how savings are being achieved, which hampers oversight and strategic planning.

To address this, we have developed a checklist to help board members ask the right questions and ensure robust processes are in place for identifying, delivering, and tracking sustainable savings.

Recommendations for future action

Despite recent progress, the financial situation in NHS Wales remains precarious. We have identified several key actions that NHS organisations should take to strengthen their financial resilience:

• Focus on long-term, sustainable savings rather than short-term fixes.
• Apply benchmarking tools and data insights more consistently and effectively across all organisations.
• Enhance financial literacy and skills across the NHS workforce to support better decision-making.
• Involve clinical staff, operational teams, and service users in planning and implementing cost-saving measures.
• Embrace long-term strategies that focus on prevention, which can reduce future demand on services and improve public sector budgets.

A call for long-term thinking

A more strategic, long-term approach to financial planning in NHS Wales is critical if we want to have a positive impact on public sector budgets. Our reports on cancer services and the implementation of the Well-being of Future Generations Act highlight the benefits of preventive care and forward-thinking policies. As healthcare demands continue to grow, NHS organisations and the Welsh Government must embed these principles into their planning to ensure financial sustainability and high-quality care for the future.