Good morning, and welcome back. Agenda item 3 is consideration of the Auditor General’s report “NHS in Scotland 2025: Finance and performance”. I am pleased to welcome to the committee Stephen Boyle, the Auditor General, to give evidence on the report. This morning, he is joined by Leigh Johnston, senior manager at Audit Scotland, and Bernie Milligan, audit manager at Audit Scotland.
We have some questions to put to you, but before we get to them, Auditor General, I invite you to make an opening statement.
Good morning and happy new year to the committee from all of us at Audit Scotland. As you mentioned, convener, this morning we bring you our annual overview of the national health service in Scotland. The report looks at how the national health service in Scotland performed financially and operationally in 2024-25. We also examine the progress that has been made towards delivering the ambitions for reform of health and social care in Scotland.
Health spending remains the single largest area of the Scottish Government’s overall spending in Scotland, accounting for around 38 per cent of the Scottish budget. In 2024-25, that equated to £20.6 billion. Even with that increased level of spending, the NHS in Scotland, in our view, is not yet in a financially sustainable position. NHS boards struggled to break even, with seven territorial boards requiring Scottish Government loans. Even allowing for that, it is important that we also note that NHS boards achieved unprecedented levels of savings in 2024-25.
The Scottish Government has forecast that health spending will continue to grow over the medium term, but that backdrop also means that there will be prioritisation, which could mean less money for other vital public services. The delivery of efficiencies and reform in the health and social care system will play an important role in the overall medium-term financial sustainability of both the NHS and Scotland.
Despite more money and more staff, NHS Scotland’s performance has not yet improved in line with the commitments made by the Scottish Government, particularly on eradicating long-term waits for treatment. Activity in secondary care increased last year but remains below pre-pandemic levels. However, waiting lists and waiting times are starting to fall. Improvements in productivity and reform of health and social care systems are needed if health outcomes are to get better, health inequalities are to be reduced and service delivery is to improve.
The recent publication during 2025 of an operational improvement plan, a health and social care service renewal framework and a population health framework are welcome steps forward in setting out the key principles for delivering reform. However, it is fair to say that some of the ambitions in those documents are long standing and have yet to be delivered, particularly the ambition to shift the balance of care to community and local services and away from secondary services.
That persistent implementation gap between policy ambitions and delivery on the ground needs to be addressed if the Scottish Government, together with health and social care leaders, is to realise its ambitions and take the opportunity to drive forward the necessary changes in direction this time around. The Scottish Government now needs to publicly set out detailed, measurable actions that will enable change and help everyone understand how a different health service in Scotland will work.
As ever, Leigh Johnston, Bernie Milligan and I will do our utmost to answer the committee’s questions.
Thank you very much, and a belated happy new year to you, too.
I will start by looking at progress through the lens of your annual reports, Auditor General. To some extent that is captured in appendix 5 of the report that the committee has before it today, but when I went back to look at the equivalent report from 2024, I saw that you made recommendations that certain things should happen, and I want to check the extent to which progress on those fronts has been made.
One of your top recommendations was that there ought to be a capital investment and asset management strategy. Is there one? You talked about the need for a revised medium-term financial framework for health and social care. Has there been one? You also talked about the importance of lessons being learned from the negotiations following the contractual end of the private finance initiative/public-private partnership contracts, which have been a long-standing feature of the NHS. Could you update the committee on the progress on that front?
Yes, I am happy to, convener. As I suspect I will do a number of times over the course of the meeting, I will turn to colleagues to come in with a bit of detail.
You mentioned PFI contracts. As has been said in discussions with the committee, we are now beginning to enter a cycle where many of the early PFI contracts, which date from perhaps the early 2000s and were typically of a 25-year term, are coming to an end and returning to the public sector. I know that the committee is looking at a different sector, but one of the first examples of that was Kilmarnock prison, which has returned to public ownership. Preparation for that cycle is under way through the work of the Scottish Futures Trust and some specialist services.
In an NHS context, examples of PFI contracts that have returned to the public sector include New Craigs hospital in Inverness, and the Larkfield unit, which is one of the specialist services in NHS Greater Glasgow and Clyde. University hospital Hairmyres in NHS Lanarkshire is one of the other large entities that will return to the public sector over the next few years. We have stated the overall status of that recommendation to be “In progress”. I think that that is fair, convener. There probably will not be an end point to PFI until the contracts all come to an end.
As shown by evidence that the committee has taken before, there was no single template for how PFI contracts were structured or what happens at the end of the contract. That is the case even within the NHS. NHS leaders can share the detail with the committee, but a range of outcomes could happen, including an extension of the contract. However, what matters most is that the experience and learning are shared. The Scottish Futures Trust is undertaking the important role of providing that detail and information across the system, so that the public purse is being well managed and we are managing the risks, and so that the public sector knows what it is getting from individual assets and can factor that into its future maintenance and financial projections, as well as service operations.
11:30On the other two points, I might bring in Bernie Milligan if she wants to say something about the capital plans and arrangements. Before that, I point out that the Scottish budget, which happens next week, is relevant for both revenue and capital medium-term financial projections. Coupled with the spending review, that will set out much of the intention as to the expected revenue and capital plans for health and social care services.
Just for completeness, before passing to Bernie if she wants to add anything, I point out that we recommended that a medium-term financial framework be published for health and social care. Although that did not happen, the committee will know that, in June last year, the Government published a medium-term financial framework that includes service reform, prevention and wider plans for the health and social care system. As I alluded to in my opening remarks, a range of additional strategies were published during 2025. As we set out in the recommendations that we are discussing today, we are looking to see the detail underpinning that. That now needs to come through, so that the committee, Parliament more generally, the public and those working in health and social care services have a clear understanding of what reform, change and financial sustainability look like.
I have said quite a bit, so I will turn to Bernie, if she wants to add anything.
As yet, there is no capital investment strategy or infrastructure investment plan for the health sector. As the Auditor General said, we expect a bit more detail next week with the budget and the spending review.
A number of capital projects are under way, as we set out in the report. A number of them, particularly the national treatment centres, are paused. On capital, boards were required to submit business continuity plans in January 2025. That was about day-to-day maintenance of the estate, and a whole raft of projects are now being put in place. I understand that about £100 million has been allocated across boards.
On the bigger strategic capital investment, we have heard that boards are now being consulted on their strategic priorities for health infrastructure. That involves the bigger builds such as health facilities and hospitals. Those strategic assessments will take place in 2026-27 and any ministerial decisions on the future estate will not happen until 2027. The expectation is that any decisions would be in line with the ambitions for renewal of the health and care system, as set out in the service renewal framework, where there are ambitions around shifting the balance of care to community settings and so on. As yet, we are possibly a wee bit away from a plan.
Yes. A plan and a strategy would, I presume, reflect the shift in resourcing that has been spoken about for a long time but has not necessarily been delivered.
In the interests of time, I will move on to another area. You said in your opening statement, Auditor General, that, despite more money going into the national health service and more staff being employed by it—you choose as a baseline 2019 and say that there have been additional resources of £3 billion and 20,000 additional staff members in the workforce—sustainability in the health service is not improving. Could you explain that for us?
I can, convener. The figures that you refer to are really important. There has been a real-terms increase of 25 per cent in total health spending during the past 10 years. We have also seen staff costs increase by 31 per cent since 2018-19. It is also important to recognise that activity has been increasing recently, so there has been more activity in secondary care, which this report primarily looks at.
I refer the committee to exhibit 2 in the report. I appreciate that, towards the end of last year, the committee took evidence from us on the two section 22 reports that we prepared on NHS Ayrshire and Arran and NHS Grampian, which are two of the NHS boards that are facing financial challenges. Exhibit 2 shows that seven NHS boards in Scotland required brokerage during the financial year 2024-25. Only one health board in Scotland has ever repaid brokerage, so we are now sitting with around £500 million of outstanding brokerage to health boards.
The Scottish Government is looking into bringing out new arrangements for support and intervention. I know that the committee is familiar with some of the detail of the support intervention framework that the Scottish Government has with health boards in Scotland. For completeness, I note that one board—NHS Grampian—is at level 4 in terms of its financial sustainability, and eight are at level 3. Enhanced monitoring supports the definition of that. Of those eight, five have financial management or financial sustainability as part of the rationale for enhanced engagement. Those are the indicators that show that we do not yet have a financially sustainable model to deliver health and social care in Scotland.
Thank you. Other members of the committee will get into some of those areas in a bit more depth, so I will avoid stepping on their toes and making myself unpopular by moving on and inviting Jamie Greene, the deputy convener, to put some questions to you.
I will carry on with the line of questioning about the state of the finances of NHS boards. As you have already noted, a number of them have received considerable amounts of brokerage. Just for the benefit of the public out there, what exactly is brokerage and how does it work?
We have a small explainer that defines brokerage on page 10 of the report. It is effectively a form of loan funding and it has something of a history. The Scottish Government’s health department intends to move away from brokerage, and some of the detail about that is set out later in the report. Brokerage is a loan to support a health board to achieve its financial targets—principally, to break even each year. As I mentioned, seven boards received brokerage in 2024-25, and that is set against a backdrop of a cumulative balance of just over £500 million of brokerage.
As we understand it, the Scottish Government’s expectation is that those amounts will still be due to be repaid by the health boards to the Scottish Government once they are deemed to be in a stable financial position.
In your professional view, is there any evidence that those boards will be able to repay the loans in future? I point to exhibit 6 in the report, which indicates an on-going remaining deficit for the next three financial years within each of those boards. There does not therefore seem to be any evidence that any of those boards will either break even or make a surplus, or have any ability to repay that money without finding it from further savings down the line.
You are right. It will be about prioritisation and whatever expectation is set by the boards, or set for them by the Scottish Government, for if and when the brokerage will be repaid.
As we understand it, it is the Scottish Government’s position that the amount that is outstanding will be repaid by boards once their financial position allows, and I think that you would typically expect to see that in boards’ forward financial plans. As I mentioned in relation to the support and intervention framework, if that is the Scottish Government’s expectation, I would expect it to be working with the boards to plot into future plans when those amounts will be repaid.
Clearly, that will be a real prioritisation and policy matter, but history suggests that, given the amount outstanding—which is now half a billion pounds—and given that only one board, NHS Tayside, has ever repaid brokerage, it will be challenging and a significant departure from the arrangements that we have had up to now.
At a more forensic level, have you seen from any of the audits of these boards any evidence of the repayments featuring in their accounting?
They would be part of their forward financial projections. As you know, audit is typically more retrospective, which means that the detailed analysis that auditors do is of the transactions that have taken place.
My colleagues might have further insights with regard to the consideration of plans, but we are sceptical, given what has gone before, and it will be important to see evidence of amounts actually being repaid, if that remains the Government’s intention. If we have information on that just now, we will share it with you, but if not, we can come back to the committee in writing.
My colleague Mr Beattie will be asking about the new arrangements that are replacing brokerage, so I will just park that issue.
What I could not quite understand from your report is the variety of deficits that the boards are facing. I note that, in the last four financial years that your report covers, at the top of the list—the worst offender, if you like—seems to be NHS Ayrshire and Arran, an area that I have represented for nearly a decade now. I find it hard to understand why it has received £130 million of brokerage, while Fife has received only £44 million, or less than a third of that. Is that because there is a view that these boards are just struggling to make ends meet? Is it because of higher demand? Do they have a different demographic from other NHS boards? Are there other fundamental reasons relating to the way in which they are governed or operated?
It is a combination of all of those things, to be frank. I appreciate that you do not want to drift into what the new arrangements might be, but I think that it is relevant to your question to point out that, as we reference in paragraph 31, the Scottish Government has not only stated that brokerage has
“increased sharply in recent years”,
and that there is a question about its sustainability, but highlighted an issue of equity in health boards across Scotland, if there is a pattern of provision of brokerage to some health boards but not to others—in other words, if there is some sense of incentives. Are some boards making the difficult prioritisation decisions, while other boards are not?
Without delving into individual health boards, I will make just one comment. I thought that it was telling from the evidence that we gave to the committee on NHS Ayrshire and Arran that that board had been at level 3 of the support and intervention framework for seven years, whereas other boards seemed to come on to and off the support framework much more quickly.
It is a set of arrangements that needed to be reviewed. You can see from the Scottish Government’s intention and updated arrangements that there will be no more provision of brokerage. As we understand it, the expectation from the Scottish Government is that, if a board exceeds its support funding cap, it will go into deficit. That will be a matter for auditors to consider and, indeed, for me to consider in future reporting.
In your opening remarks, you made it clear, as you have in the past, that there has been what one might call record, or increased, funding for health—I guess that it depends on how you quantify it and over which period of time—with health spending by the Government 25 per cent higher in real terms than it was 10 years ago. One could argue that it is a good thing that the Government is spending more money on the health service but, in the same breath, you said that the outcomes are not necessarily matching the extra spend.
I do not know whether any analysis has been undertaken of what is driving that or what we might need to change. I will not ask you to delve into policy changes—I understand why you would not want to do that—but I am interested in what was said earlier about the disparity between the performances of health boards. I will come on to levels of intervention in a second, but I note that exhibit 1 paints a complex picture of how the funding is allocated and spent through the territorial boards, the national boards and the complicated integration authority structure. Is that complexity part of the problem?
11:45
The health and social care system in Scotland is complicated, probably by necessity, although some parts will be complex by design. The area concerns not only health services; it also involves social care arrangements that relate to the journey that people take through their lives and the points at which they are in contact with public services, much of which will involve health and social care models. In Scotland, we have a range of structures, which we explored to an extent through the report that we produced last year on governance, and aspects of which have been captured in the report that we are currently discussing. Tomorrow, the Accounts Commission and I will publish a report on delayed discharges, alongside an examination of how integration authorities are performing.
The system that we operate is not delivering on the ambition of the Scottish Government—and, now the Convention of Scottish Local Authorities, as stated in some of the strategies that it produced in 2025—to take steps to make Scotland healthier through the adoption of a more prevention-based approach that keeps people out of hospital for longer. That move to a more sustainable model is consistent with Audit Scotland’s commentary over a number of years. The committee might want to explore our view on the matter but, as I said in my opening remarks, that is not a new ambition but what we have not seen up to now is the ability to deliver on that ambition in a way that moves the dominant spending away from the provision of treatment in a secondary care setting and towards keeping people healthier for longer outside of hospitals.
You have stated on the record in this committee and publicly elsewhere that you believe that there might be areas of healthcare provision that the NHS provides at the moment but which might not be offered in future. We can perhaps pick your brains on that some other day.
Going back to the finances, I was intrigued to see that you report nearly £700 million of savings in a single year across the NHS. That is a marked increase on previous years. Do we have any understanding of how boards have made those savings? Savings can sometimes be a dangerous word. What kind of things have been cut? We know that staff costs have gone up and that some salary settlement agreements have been reached, so there will have been no savings in that regard. Equally, we know that some waiting lists have come down, which will have required investment. Where are the savings being made? What do they look and feel like in the NHS on a daily basis?
The volume of savings that have been made is significant and welcome. The committee will be familiar with the distinction that we have drawn for many years between recurring and non-recurring savings. It is particularly important to acknowledge that the proportion of recurring savings jumped from 37 per cent in 2023-24 to 46 per cent in 2024-25. Recurring savings support the financial position not just in the year in question but into the future, if they result from sustained approaches.
We have spoken to the committee before about some of the innovations that the Scottish Government team has sought to bring in, one of which is the financial delivery unit. At exhibit 4, we show a savings grid that demonstrates how some of the approaches to making savings will change. Bernie Milligan can talk about the detail of that, but I will just say that one of the most significant changes that can be seen in today’s report is the change in the cost of agency nursing. For example, some of the detail on that is in exhibit 5, which shows that, in one year, there has been a 31.3 per cent reduction in agency nursing costs. There have been financial benefits and also benefits in service provision with regard to continuity. Those are important developments.
I have noted one development, but Bernie Milligan is more than welcome to elaborate on that or any of the others if she wants to.
We found that there has been big progress this year regarding savings, particularly recurring savings. Savings have been a third higher this year than in 2023-24, and there has been an improvement in recurring savings from 37 to 46 per cent. It is worth reminding the committee that savings are essentially an efficiency, and that the savings are retained by the boards. That allows boards to cope a bit better with some of the other cost pressures that they are under, and it helps them to achieve the statutory break-even.
As the Auditor General said, we highlighted the activity of the financial delivery unit in the Scottish Government, which was set up in 2023. Since then, there has been an improvement in recurring savings. The 3 per cent target has not yet been achieved, but recurring savings of 2.2 per cent were achieved this year, compared with 1.3 per cent in the previous year.
The Government has put in place hands-on support to help boards to deliver better insight and data so that they can look at how other boards are performing. The 15-box grid has been one of the key tools. As part of that, boards have been given access to a Power BI benchmarking tool, which allows them to compare their performance against any of the different saving opportunities that are set out in exhibit 4. That is a way of sharing best practice and so on, and boards will self-assess against each of the areas. We have also highlighted the improvement in nurse agency spending, which increased hugely during the pandemic and has now declined by 70 per cent over the past couple of years.
The Government is doing a bit of a refresh to the 15-box grid—it has not remained the same. For example, sustainable prescribing has been added as a new area. Another area in which progress is being made is medicines of low clinical value. There is now a list of medicines that boards are advised not to prescribe, because they have limited value. That has certain savings attached to it.
Those are some examples. As you pointed out, deputy convener, there is still a forecast deficit across the next three years, but there has been an improvement in the forecast of just over £300 million. When we reported last year, there was a forecast three-year deficit of £1,235 million, and this year it is £918 million. There is potential for those savings to have an impact on the forecast position and the future position of boards.
That is extremely helpful—thank you. From a constituent’s point of view, they are still sitting on a waiting list and wondering why their health board is making savings. That is the crux of my question. We know that five boards are sitting at level 3 intervention and one is at level 4. Is there any evidence that that situation will improve any time soon?
It will be a moving picture for individual boards. I appreciate that the committee heard from us and will, in due course, take evidence from the Scottish Government and accountable officers on the impact of the interventions, but it is not immaterial. NHS Grampian’s level 4 intervention was accompanied by an external consultancy report by KPMG that sought to dig into some of the detail as to why its financial and service performance was causing challenges.
The impact of that and of other levels of intervention remains to be seen. What is important—I apologise for referencing it again—is that support and intervention do not become the norm, and there is the risk of that happening in NHS Ayrshire and Arran. We need to see tangible impacts and benefits from the support and intervention arrangements rather than those simply continuing for many years.
Thank you. I might come back in later, convener.
Okay. Colin Beattie has some questions.
I have one or two questions about the financial support for NHS boards, particularly in relation to the proposed change of support. Paragraph 31 of your report says that
“brokerage had increased sharply in recent years, that it was unsustainable, and that it created an inequity with those boards who were operating within their statutory duty to break even.”
The report mentions three sources of funding that the Scottish Government has replaced brokerage with: sustainability funding; deficit support funding; and financial support funding. It also states that there is a
“lack of clarity and transparency around the introduction”
of those deficit support funding mechanisms. Will you elaborate on why you reached that conclusion?
Yes, of course. I will shortly turn to Bernie Milligan, who has also looked at the issue in detail.
You are right that there is a change of plan. For the reasons that we set out in the report and which you referred to, the Government’s intention is to provide clarity not just to boards that have received brokerage but to boards across the system.
The equity point matters. For boards that have been experiencing financial problems but have been able to manage them, it gives them certainty around the use of the wider resources.
In terms of clarity and transparency, our sense was that there was more for the Scottish Government to do to communicate across the system about how the new approaches would operate, because many boards have not received brokerage. Some have consistently been able to manage their financial position and will not be familiar with that mechanism, whereas there are other boards—some of which we have referenced this morning—that have been part of the brokerage, support and intervention system for many years. Bernie can say a bit more about how that will operate.
It remains to be seen how things will play out if a board exceeds its cap and cannot deliver financial balance. Will the Scottish Government say that it will have to report a deficit? At what point do deficits risk becoming unsustainable, and what might that mean for wider financial positions?
This is new territory, and it is important that there is openness and transparency across the piece about how the new arrangements will be delivered together. That should cover not just the base scenario but some of the what-if scenarios.
The Scottish Government’s position was that brokerage was coming to an end—it had increased sharply, it was financially unsustainable and it was creating inequity. That was set out in a letter to boards in December 2024. It also warned that, for those boards not achieving financial balance, that could show as an overspend on their financial statements and potentially lead to modified accounts.
We knew that sustainability funding was being put in place. That was baselined into budgets at the beginning of the year, and that is allocated to all boards on the basis of the NHS Scotland resource allocation committee formula. That was a £250 million pot. However, there is a lack of clarity and transparency on the deficit support funding, which was introduced at some point in 2025-26.
We have seen some communication between boards and the Scottish Government’s financial delivery unit, which carries out quarterly financial reviews. Following the quarter 1 review, which would have been in August, there was communication about deficit support funding and a new pyramid of support, as it has been termed, which comprises not just the funding but the provision to boards of other forms of financial advice and support. Deficit support funding is for the boards that are already on the support and intervention framework. There is detail on the maximum amount of funding that boards can draw down, but the overall pot is £166 million.
12:00
I want to clarify one basic thing. Your report says:
“The Scottish Government advised NHS boards in December 2024 that there would be no brokerage for NHS boards in 2025/26”,
which implies that brokerage is already in place.
That is the Government’s position for the financial year 2025-26 and, as Bernie Milligan mentioned, the pyramid of support arrangements that we set out in paragraph 32 is how the system currently operates. Auditors will be looking at that during the annual audit of individual boards, and it is a topic that we will return to in next year’s report, to see how it has all ensued.
You have said that there is a lack of clarity and transparency on the issue. Do you know whether the NHS boards have been properly briefed on it? Do they understand it? Did you pick up anything about that in your audit?
As Mr Beattie has perhaps alluded to, we are picking up that some boards are really clear on how brokerage works, because they have been in that system for many years, but not necessarily all of them are. We make a point in the report about what happens for the boards that are in recurrent deficit; that is the essence of the first recommendation that we make. It is about how financial balance will be achieved and the role of deficit support funding, given that it is capped and that circumstances might occur that mean that the cap is breached nationally. It is about financial support through the financial delivery unit, exploring arrangements and how that interacts with the Government’s support and intervention framework. Indeed, that will be happening live right now as we move into the three months before the financial year end.
We will certainly return to the issue in next year’s report to explore how it has all worked. It is important for everyone—the Scottish Government’s health department and boards—to get off on the right foot, and for boards to be absolutely clear about what happens in different scenarios.
I have to confess that, in looking at it, I am not entirely sure how it will work, but they no doubt have something in mind.
You mention in the report that the Scottish Government has said that, in part, the brokerage system has been replaced due to the
“inequity with those boards who were operating within their statutory duty to break even.”
The new system has a deficit support funding component that is not repayable, and it is given to boards that are escalated to the support and intervention framework. Given that boards that perform well will not have access to that element of the funding, does that not risk preserving elements of the inequity from the previous system?
There is a risk but, for the Scottish Government and health boards to manage that, it ought not to be the case that a board is continually on a support and intervention framework standing and that it receives what was brokerage and is now deficit support funding. Instead, through the support that a board receives, its status on the support and intervention framework should be a short-term matter, unlike the examples that we have talked about today in which that can go on for many years.
It is ultimately a call for the Scottish Government to make, having satisfied itself that its support and intervention arrangements are meaningful and are making a difference. It will not just be a matter of getting over the line in the short term regarding the financial position or deficit support funding; it is also about making more fundamental changes, such as efficiencies and changes in service models, that can make a difference.
Referring again to why the reform ambitions matter so much, I note that that reform is the route through from reactions and accompanying financial support, moving instead to a more sustainable model of health and social care.
You have already stated that you will be looking into the matter to see how the arrangements were applied in reality. We look forward to seeing the results—or, indeed, our successor committee will.
On capital spending, with previous reports, we have considered the difficulties with the backlog in repairs and so on. Your report states that capital investment has been “on a downward trend”, with a 22 per cent decrease since 2021-22. That is quite a big difference, given the huge deficit. Can you clarify some of the reasons, as you understand them, for that fall in capital investment? How do the current levels compare with those before the pandemic? Is that even relevant? We keep referring to “pre-pandemic” as if it were a wonderful era, but we are in a new reality now, so we should perhaps be more cautious in that respect. Do you foresee any patient safety or service delivery issues or risks with the current levels of capital investment?
I am happy to start, and colleagues might wish to say more.
On the point about references to the situation before and after the pandemic, we do think carefully about the years that we reference to draw a trend. At some point we will stop talking about the “pre-pandemic” situation in our reporting, but I think that it is still relevant, especially in the health and social care context. The disruptive effect that the pandemic had and its legacy are still undoubtedly being felt in Scotland’s health and social care system, but, clearly, that will not always be the case. Each time that we prepare a report, we will think carefully about what the best reference point is.
On capital, the trends are clear, and there are two important figures to mention. There has been a reduction of 5.35 per cent in the overall Scottish Government capital budget since 2021-22, but the reduction in health and social care is significantly larger, at 22 per cent. The committee has taken evidence on some of the reasons behind the constraints in the capital budget that the Scottish Government has been dealing with, notably the ending of the financial transactions budget, which has curtailed some of the Scottish Government’s ambitions for capital projects.
I will return to the maintenance point in a moment, but on the question of what the situation has meant for the Scottish Government’s capital investment ambitions, I would just note that we set out in paragraph 36 of our report, and exhibit 7, some of the investment that is taking place. It includes the plans for a new Monklands hospital, investment in NHS Western Isles at Barra and Vatersay community campus, and the planned reprovision of the Princess Alexandra eye pavilion in NHS Lothian.
Bernie Milligan rightly mentioned the wider review of capital projects during 2026, which we expect will form part of the prioritisation exercise for the 2027-28 budget and financial plans. We expect that next week, alongside the budget, the Parliament will see some of the detail of the capital investment pipeline plans, setting out where investment will be happening.
Finally, before I pass over to colleagues, I should highlight exhibit 7, in which we set out the status of the national treatment centres, and note that, because of some of the capital constraints that were experienced after the plans were set out during the early stages of the pandemic, activity on four of the planned centres remains paused.
I will now bring in colleagues, who might wish to say a wee bit about the backlog maintenance, the risks and other points that you have asked about.
I also want to bring the question of PFIs and their maturity into the mix. When I read the PFI contract for Edinburgh royal infirmary, I found it quite a thriller. In that contract, and a few others that I have skimmed, there are potential commitments to making capital payments to terminate them. There are different options, some of which are quite complex. Has the Scottish Government factored that in? I think that it would have done so somewhere, but is that evident?
Our understanding is that that work is going on across Government, including with the NHS, and is being led by the Scottish Futures Trust. As you have rightly said, these are large, complex contracts, and they are not all the same when it comes to the obligations or opportunities that are conferred upon the public sector at their completion. There is expertise within those organisations to ensure that the public sector manages the opportunities and risks of each of the tranches returning to it.
Those returns will increase significantly over the next few years. I have mentioned Wishaw general hospital, University hospital Hairmyres, New Craigs hospital and the Larkfield unit as being the next to return, but there are other large projects, too. In Scotland’s school estate, for example, there are very significant projects returning to public sector ownership over the next few years. From our engagement with the Government and the Futures Trust, we are clear that those risks are being understood and managed.
Just to add to that, I would point out that, at the same time that capital expenditure is being reduced, the maintenance backlog is increasing across the NHS estate. In paragraph 35, we make it clear that the backlog totals £1.3 billion, which represents a 2 per cent real-terms increase since 2023. NHS boards have reported an increased risk to buildings, including buildings failing, infrastructure risks, and so on, as well as issues around “ageing and unproductive” equipment. That can have operational impacts on waiting lists, on bringing in new innovation and so on. We understand that the new programme that has been put in place is a response from Government to some of the issues that have been raised by boards, and it covers a wide range of projects that will be rolled out over the next couple of years to make the estate fit for purpose.
Are there any risks to patient safety from reductions in capital expenditure? You have highlighted one or two fairly critical issues.
There are a couple of issues. One is the immediate presenting risk, and the other is the longer-term risks of not investing in capital. That raises some productivity questions, and if the committee’s time allows, I will pass over to Leigh Johnston to say something about the productivity implications.
We make reference to some of the presenting risks in paragraph 35. The 2024 report on the state of the NHS estate identified a maintenance backlog of £1.3 billion, £59 million of which related to high-risk issues. In terms of the response to that, we set out in paragraph 37 some of the specific actions that health boards are taking to address some of those risks, including through investment. It is not always just about hospital equipment; we have highlighted, for example, the replacement of fire doors at the Queen Elizabeth university hospital in Glasgow. Those risks to patients have to be tackled across the piece. Aspects of that are captured in the budget, and much of the response will depend on what investment decisions the Parliament takes as it considers the budget over the next couple of weeks.
12:15The point about productivity is important, because productivity is complicated, and it speaks to some of the wider issues in the report. There has been more investment in the NHS, and there are more people are working in it, but those things are not yet directly translating into increases in activity or improvements in outcomes. Investment in ageing and unproductive diagnostic equipment is one of the factors that came through during our evidence taking for the audit.
Leigh Johnston might want to say a bit more about that.
It is right to say that Healthcare Improvement Scotland has identified that ageing infrastructure and buildings are impacting on patient safety, and, as the Auditor General has already pointed out, fire safety procedures are part of that. That has come out more in some of the inspections that have been carried out, as we have outlined in paragraphs 97 to 99 of the report.
As the Auditor General has also said, a lack of investment in infrastructure is having an impact on levels of activity and productivity in the health service. One of our recommendations in the report is that more needs to be done by the Scottish Government, working with NHS boards, to understand what is affecting productivity. It is a complex area, but we know that, even with more money and more staff, we are not seeing the levels of activity and productivity that we would like to see. We need to do more focused work to understand why that is the case. A range of things impacts on productivity, and capital—that is, the lack of investment in infrastructure and new equipment—is a major factor.
I will finish up with a quick question on medium and long-term spending projections. Paragraph 45 of the report says that
“Over the longer term”
the Scottish Fiscal Commission is projecting that
“health and care spending will rise from 40 per cent of devolved spending in 2029/30 to 55 per cent in 2074/75”.
Clearly, that is unsustainable. Given what the SFC has highlighted and the impact on the long-term health of the population, which is central to the sustainability of Scotland’s public finances, do you have any insight into the kind of reform that can realistically be expected to help slow the growth in health spending and ease the pressure on Scotland’s public finances?
That is the essence of part 3 of the report. The Scottish Government has set out its high-level ambitions to invest in preventative measures that will keep people healthier for longer outside of a hospital setting. That is one of the key planks of a sustainable model, because a healthier, more productive population can contribute more to society and the economy.
However, as we go on to say in part 3 of our report, some of those ambitions are not new—in fact, they have been around for many years—and as a result we recommend that detail be set out on the key stages of implementation for realising and delivering on them. It is also important to point out that these are not only Scottish Government ambitions; they are shared with COSLA, so they apply to local government, but they apply to wider spheres, too, including housing, education and the private sector.
We are clear that for the next three, six or 12 months, the focus should be on the detail of what is going to be done next to deliver on the ambitions. We think that the strategies are welcome, but such an approach will be key to addressing some of today’s challenges as well as some of the financial challenges that the Scottish Fiscal Commission has projected will happen in the decades to come.
I am aware of the time, so I will try to be as brief as possible. I will cover waiting times, and then I will ask about accident and emergency performance. During that section, I will also ask about ambulances.
I will start with waiting times, of which the report paints quite a bleak picture. I will quote from parts of the report before I come to my question. At paragraph 53, you say:
“NHS boards are only meeting three of the eight key waiting times standards that are currently reported. Five of the eight key waiting times standards have also seen a drop in performance from June 2024 to June 2025”.
You go on to say, at paragraph 54, that
“No board met the planned care targets for the new outpatient standard that people referred for a new outpatient appointment should be seen within 12 weeks, or the Treatment Time Guarantee that people should begin inpatient/day-case treatment within 12 weeks of the decision to treat.”
That does not sound to me like much of a guarantee.
At paragraph 58, you say that the Government’s
“Operational Improvement Plan … published in March 2025 … committed to eliminating long waits and ensuring that no one is waiting longer than a year for their new outpatient appointment or inpatient/day-case procedure by March”
this year. You go on to say:
“Current figures show that long waits remain high. It is unclear whether the target can be achieved in the stated timeframe.”
Before I ask you about that, I invite you to look at exhibit 10 in the report, on “Commitments and progress on long waiting times”, which is very relevant. There are some quite alarming statistics there. If we look at the previous targets on “Length of wait to be eradicated”—those commitments were made in 2022—we see that only one of them has been met, which is a target for out-patient waits. For waits of more than two years, the commitment was to eliminate those by 31 August 2022, and that target was met. However, a whole series of other targets have not been met.
The targets appear to have been refreshed, so we have a new date of March 2026 by which they should be met. However, the figure for out-patients on the waiting list for more than 18 months in September last year was 17,561, and for waits of more than a year, the total was 56,439. In the in-patient sector, 5,000 people were waiting for more than two years; 13,000 for more than 18 months; and 29,417 for more than a year.
I come to my question. The Government wants
“to eliminate waits of over a year by March”.
How realistic is that?
You may be familiar with the fact that Public Health Scotland is now publishing some of the updated information monthly. Since we published the report at the beginning of December, the new detail to November has come out, just in the past day or so. It shows that, overall, waiting lists and waits of more than a year are continuing to fall, but although we have seen that trajectory, the ability to deliver on the target to clear those longer-term waits by March remains really challenging.
I do not think that I have the detail for all the data that is included in exhibit 10, but I will draw out a couple of figures. For example, new out-patient waits of more than 52 weeks have now fallen for the fourth consecutive month and are down by 6,492 from October to 44,363 in November. I think that we have seen progress on addressing the ambition in the target and the work of the operational improvement plan, but whether the aim of eliminating all those longer-term waits can be met by March remains to be seen; it will undoubtedly be challenging.
It remains to be seen, but we are only weeks away, so the reality is that that aim is not going to be achieved.
It is not for me to say whether it will or will not be achieved. I do not think that that changes the judgment that we make in the report, which is that it will be really challenging to do so.
It is very challenging. It would be lovely if that was to come about, but I really cannot see it.
Significant additional funding has been provided to reduce waiting lists, but—as we have said—long waits remain high in many areas. Is there any evidence that that investment is delivering improvements for boards?
I think that there is some evidence to that effect. Again, Bernie Milligan might want to say a bit more about that. At paragraphs 61 and 62 of the report, we look at some of the detail of how that additional investment has been used. How is the £135 million for the current financial year, together with the £30 million that was part of the 2024-25 budget, being used?
We cite examples of areas where waits have been targeted, which include ophthalmology; orthopaedics; urology; cancer services; diagnostics; the expansion of imaging services; recruiting more staff; and waiting list initiatives, including additional weekend clinics. That points to some of the statistics that we have just discussed. Fewer people are waiting, and the longer-term waits are coming down, but there is a level of uncertainty as to whether the Government is actually going to deliver on the March 2026 target.
In the interests of time, I will move on and ask you about A and E, because that is really important to folk. At paragraph 80, you say:
“Headline indicators show that performance in emergency departments is still poor. Performance against the four-hour standard has remained at around 70 per cent nationally over the past year. The number of waits over 12 hours”—
over 12 hours; that is incredible—
“increased … in the year from August 2024 to July 2025”
to around 76,000, which was an increase of 3 per cent. Can you give us any further insight into why A and E targets are still being missed?
You are right—it is one of the key performance measures. I will come back to the paragraph that you mentioned in a moment, and I will bring in Leigh Johnston to say a bit more about some of the Scottish Government’s ambitions with regard to addressing, in total, the complexity of tackling people presenting with urgent care needs at A and E.
Again, it is also the case—as is borne out in exhibit 9—that this is not an entirely new set of circumstances. On A and E performance, we have drawn the trend from June 2019 to June this year, and it shows that only for a very short period—in the early stages of the Covid pandemic, as you may recall—was the target for 95 per cent of people who arrive at A and E to be admitted, discharged or transferred within four hours actually met.
There are some long-standing issues. Some of those are structural and do not apply only to the performance of A and E departments; they are about how the system is working and the flow of patients through hospitals. Depending on whether the people who are presenting are sicker, older or frail and whether there are care packages available, there may be delays in leaving a hospital environment.
As I mentioned earlier, the Accounts Commission and I, with Audit Scotland, have looked at some of the processes and challenges around delayed discharges. We will be publishing that work tomorrow, and there will be a chance for us to explore that with the committee in more detail. As we say at paragraph 82, however, the pressures are indicative of some of the wider pressures in the health and social care system.
You mentioned that you wanted to come back to the subject of ambulances. I will not cover that just now, but Leigh Johnston can say more about some of the factors in relation to A and E services.
12:30
A and E continues to struggle. I looked at the latest available data: by the end of November, the proportion of people who were being seen within four hours was about 66.7 per cent.
As the Auditor General hinted at, a range of factors are involved. The report on delayed discharge comes out tomorrow. The issue is to do with high occupancy levels in hospitals and the flow through hospitals. Often, when people come in to A and E, in order to be transferred or treated, they need to be given a bed. If those hospital beds are not available, A and E becomes backed up and overcrowded. The Healthcare Improvement Scotland inspections show that A and E departments are overcrowded and people are remaining in A and E for longer than they should.
A range of initiatives are being put in place to deal with the pressures on A and E. We have talked before about the flow navigation centres that divert people away from accident and emergency services. The recent evaluation showed that a range of areas still need improvement. For example, there needs to be a greater, more standardised range of places that people can be diverted to, in order to improve those flow navigation centres’ ability to divert them.
The other thing that was mentioned in the operational improvement plan was frailty units—having access to them and being able to divert particularly frail and vulnerable older people away from accident and emergency. Progress on those frailty units has not been as quick as was intended, due to money not being available and to an inability to recruit staff. That is adding to the pressures on A and E.
Is it the case that we have not been able to open enough of those units?
Yes. We need to give accident and emergency units access to frailty units or to advice from frailty specialists and the ability to divert people elsewhere through initiatives such as hospital at home.
What was the plan? How many of those units was it anticipated that there would be?
The intention was that, by last summer, all accident and emergency units would have access to frailty support.
How many of them actually have a frailty unit?
I do not have that information. I think that it will be covered in the delayed discharge report that is due to come out tomorrow. That will have much more detail on progress with the frailty units.
That is fine—I will look forward to that.
Before I close on the subject of ambulances, I will ask about flow navigation centres, which you mentioned. If we are trying to find solutions, that is a possible solution that diverts people away from A and E departments if they do not need to go there. That is the idea, and it looks as though there has been some success in that regard. In my patch, NHS Lanarkshire set up that system and, in its first 19 weeks—between April and November 2024—the flow navigation centre in Lanarkshire took more than 30,000 calls and nearly 5,000 patients were sent elsewhere, rather than to A and E. Is there the opportunity for such centres to be rolled out across the country?
Absolutely. Most areas have a flow navigation centre now, but their success varies. We have reported on flow navigation centres previously, and they have been hugely successful in diverting people. The volume of people in A and E is lower than it used to be, but, unfortunately, issues with flow through the hospital are still making people spend longer in A and E than they should be.
The recent evaluation of the reform of urgent care made some recommendations that could improve some of the flow navigation centres. For example, reducing the time for NHS 24 to answer calls was seen as an area that could be improved, because that is often how people access the flow navigation centres. Giving flow navigation centres a greater range of options—including hospital at home and frailty units, which we have talked about—and standardising them would divert people away from A and E.
There is a serious problem regarding ambulances. At paragraph 83, your report says:
“The long-term aim for handover of a patient conveyed to hospital by ambulance is 15 minutes.”
However, in August last year, people sat outside hospital for an hour on average. Ambulances getting stuck outside hospitals means that crews cannot get away to see to other emergencies. People waiting during those emergencies are waiting longer because ambulances are stuck outside hospitals, which increases the risk to people who are waiting for a new call. It is a vicious circle, is it not? One of the causes is overcrowding in A and E, which we have just discussed. What is the solution to all that?
It is the totality of what we have just discussed, is it not? The presenting symptom is that hospitals are unable to receive ambulances and people are not being handed over within 15 minutes. If ambulances are hovering for about an hour, it is because there is a backlog.
As you and Leigh Johnston discussed, flow navigation centres and frailty centres keep people out of A and E. The longer-term ambitions of reform are central to tackling some of today’s issues. That is why we are clear on the need for the Scottish Government and health boards to avoid some of the issues from years gone by in their new strategies and approaches. To shift the balance and keep people healthier and out of hospital, they must come up with the detail that is needed to underpin the strategies in the short and longer terms. We agree that the presenting issue of ambulances not being able to discharge patients is symptomatic of some of the wider pressures in the system that need to be addressed.
I look forward to reading the report on delayed discharges.
That is out at midnight tonight, Auditor General, is it not?
Yes.
You can stand by your fax machine and wait for it to come through.
I will try to keep my questions as tight as I can. A huge amount of work has been done relating to digital access for a number of years. In my personal interaction with the NHS, I use a portal to ask my GP for repeat prescriptions. Along with many people who are my age or older, I go online via Scotblood, which is a web-based system, to get an appointment to donate blood. If the NHS appointment for winter vaccination is not appropriate, I can go online to fix that. However, we have still not pulled all that together in an app, as is the case elsewhere in the United Kingdom.
Page 127 of your report highlights that the MyCare.scot app was to be rolled out in December, initially in Lanarkshire, and potentially then in the rest of Scotland by April. It would be good to hear whether that is still your understanding. On page 129, you highlight a concern that there has still not been a “full business case” or a budget attached to the roll-out. Is that concerning, or do you expect us to get all that next week?
It is for the Parliament to determine how resources will be allocated. It is important to recognise, through the service renewal framework, that digital services such as the MyCare.scot app will play a much more fundamental part in the delivery of health and social care services. We have talked about capital investment and the need to update equipment, as well as the ease with which patients and their families can access services in a way that is convenient to them. Pulling all that together will probably be an expensive project over a large timescale. As you mentioned, the business case for the MyCare app is still to be approved, and it will be for the Parliament to consider the funding allocation for it next week.
A couple of things might be relevant. We referenced the Accounts Commission’s report “Tackling digital exclusion”, which the committee considered. Digital will not be the route for everybody to access services, and there is a need to ensure that there is equity of service.
I am also reminded of some of the evidence that the committee took a number of months ago from GPs on the GP contract report. How all the systems work together will really matter. It will be important to have an app, but it is also important that the other end of that works well with GPs, as independent contractors, across the system. The level of investment will need to be sustained so that the whole system operates effectively.
I will pause to check in with colleagues about whether we have heard anything further about the roll-out in Lanarkshire.
As far as I am aware, we have not heard anything more about that. A small pilot was due to be rolled out in Lanarkshire, and there are plans for a wider roll-out later this year. We will keep an eye on that. There is no doubt that there will be an on-going process to make the app work and increase its capability so that it can do everything that we would like it to do.
You have covered the question that I was going to ask about digital exclusion.
Paragraph 128 notes that, although the app is quite limited just now, there is potential for it to do much more. To some extent, it goes back to the point that my colleague made about A and E departments being used appropriately. One of the big things that we have in our toolkit is the pharmacy first service, which has now been adopted in the rest of the UK following the launch in Scotland many years ago. In order for that service to be really effective, pharmacists need to be able to access people’s health data. Pharmacists are itching to be able to work to their max and take the pressure off the rest of the system. Will the app allow for that to happen?
We have not looked at that level of detail. Eventually, the app should be able to provide individuals with access to their health data, and they would have the option to share it with a pharmacist. We know that sharing health information through digital services has been a long-term ambition across health and social care in Scotland, but a number of hurdles still need to be overcome in relation to sharing data, so we are not quite there yet.
For completeness, I note that we will continue to factor that into our forward work programme as we think about the next iteration of our reports. Given how significant digital investment will be for the MyCare app and for other planks of the system, I expect that that will be part of our future reporting.
I will wrap up, because I know that time is tight. I had a few questions about the service renewal framework and the population health framework, which the NHS is taking forward in partnership with COSLA. That is really important. Are the frameworks going in the direction that we would hope, or are further changes and improvements needed?
I do not think that I would necessarily say that there is a need for any changes to the frameworks. We have welcomed the operational improvement plan, the service renewal framework and the population health framework. They set out the ambition to move to a prevention-based model and achieve better outcomes, and, as we touched on earlier in response to Mr Beattie’s questions, they set out the ambition to provide a financially sustainable approach for the future.
However, at the risk of repeating myself, I note that that approach is not new. As a country, we have stated many times that we want to take that approach, but we have not been able to deliver it. To give us the best chance of success, we need some of the underpinning architecture with detailed plans on how spending will change, how things will be measured and what our expected outcomes are. I would probably go as far as to say that I am cautiously optimistic, but those important steps need to be supported by detailed implementation.
There is no shortage of challenge. I am sure that the committee will consider whether we want to put some of those challenges to the Government’s representative, as the accountable officer, in future weeks.
For the purposes of today, I will draw the evidence session to a close by thanking Bernie Milligan, Leigh Johnston and the Auditor General for the evidence that they have presented to us. As I said, we will consider our next steps.
As agreed by the committee, I now move the meeting into private.
12:46 Meeting continued in private until 13:05.