Two health boards ‘financially unstainable’, auditors warn

Two of Scotland’s health boards are “financially unsustainable” and required loans to break even last year, the public spending watchdog has said.

NHS Grampian requires a “significant design” of its services if it is to balance its booked in the future, the Audit Scotland report concluded.

Meanwhile, NHS Ayrshire and Arran is facing “unprecedented” challenges to its finances.

Auditor general Stephen Boyle said: “These two health boards are not alone in finding it difficult to achieve financial balance, but their situations are currently the most pressing. 

“In the case of NHS Grampian, it won’t be possible for the board to return to financial balance without a significant redesign of its health and social care system. 

“The severity of the financial challenge facing NHS Ayrshire and Arran is unprecedented, and the board is relying on an overly optimistic savings plans that may not be achievable. 

“For both health boards, effective leadership and close working with the Scottish Government and other partners will be vital to improving their financial sustainability and the delivery of services.”

The two health boards are the subject of section 22 reports, which are written when specific concerns have been raised in the regular auditing process.

NHS Grampian has been on special measures since May owing to concerns about its finances, leadership and governance.

It was given a loan of £65.2m in 2024/25 and is projecting a £68m overspend in 2025/26.

The health board said at the time that its overspend was due to increasing staffing and running costs, and the ageing population in the region, but had taken steps to address this.

The Audit Scotland report says that while it did make savings in 2024/25, this did not reduce the in-year overspend. This was, it added, largely because over overspend across local integrated joint boards totalling £22.4m.

External auditors from KPMG published a review of the health board last month, recommending a review of staffing levels. It also identified where potential savings could be made.

But the Audit Scotland report says it will “not be possible” for the board to reach financial balance “without a significant redesign of its health and social care system and/or obtain fundamental changes in the funding model”.

Laura Skaife-Knight, who became NHS Grampian's chief executive earlier this year, described the report as an “opportunity for learning” and pointed to an improvement plan being in development. 

She added: “This improvement plan will come to our public board meeting in December 2025 for approval, for transparency, and regular progress updates will be shared with our community, partners and staff.”

NHS Ayrshire and Arran has outstanding loans totalling £129.9m, the highest amount across the NHS in Scotland, after it required a further £51.4m in 2024/25 to make ends meet. It is forecasting a deficit of £33.1m in 2025/26 and “does not have a clear plan for achieving financial sustainability”, auditors said.

The report highlights the savings made by the board are non-recurring and it continues to rely on temporary staffing, which costs most. It also says its future savings plan is “overly optimistic”.

NHS Ayrshire and Arran chief executive Gordon James said the report was a “valuable opportunity to reflect and improve”. He added: “We welcome this support and are fully committed to the parliamentary review process. NHS Ayrshire & Arran acknowledges the challenges we face but remain committed to delivering a plan to make improvements in our financial performance.”

Health Secretary Neil Gray said: “We note the reports from Audit Scotland and continue to work closely with NHS Grampian and NHS Ayrshire & Arran to drive improvements across all services, not just in finance.

“We have provided additional funding and support to both boards aimed at improving financial sustainability. We continue to monitor the financial position for both boards through regular engagement with the NHS Scotland Financial Delivery Unit and meetings with their finance teams.”

Scottish Conservative health spokesperson Dr Sandesh Gulhane said: “It’s appalling that health boards have been driven into crippling debt and are reliant on huge bailouts just to stay afloat. Grampian and Ayrshire and Arran are just the most extreme examples of a crisis facing all our health boards.”