Briefing ahead of Debate: Welsh Government Draft Budget 2025-26
Key points
Along with the rest of the public sector, the health and care system is facing multiple challenges. Heightened pressures are a result of inflation, the elective care backlog, recruitment and retention of the health and care workforce, the rising cost-of-living and high demand on NHS and social care services, alongside high public expectations.
The NHS requires clear and more focused priorities, underpinned by a long-term vision for the system. While the long-term aim is to shift money towards preventative and community-based services, demand on frontline services remains extremely high.
As highlighted in our written and oral evidence to the Finance Committee, NHS leaders recommended the following areas should be prioritised:
Introduce longer-term funding cycles to ensure financial certainty: The UK and Welsh Governments must move away from short-term thinking to give sectors some long-term financial certainty.
Capital: Develop a ten-year investment plan for service change to reshape NHS estates and infrastructure and look at how fiscal rules might be amended to allow recycling of capital.
Workforce: Support the development of an overarching long-term workforce plan and sustainably increase investment in the NHS workforce.
Social care: Increase funding for local authorities to ensure the sustainability of the social care sector. Ring-fenced funding should have clearly defined outcomes to ensure spend drives the change needed.
Tackling inequalities through prevention and health in all policies: Shift funding to better resource the wider determinants of health and publish a delivery plan outlining the resources, funding, priorities, and actions taken across all government departments to tackle inequalities.
Digital investment: Adequately invest in digital infrastructure to underpin ambitions to maximise the potential of digital advancements in the NHS.
NHS and the economy: Consider health as part of wider budget setting and its contribution to the economy, both nationally and locally.
Introduction
This briefing is for Members of the Senedd (MSs) in preparation for the debate on the Welsh Government Draft Budget 2025-26, on Tuesday 4 February 2025.
Current Challenges and Opportunities
NHS leaders welcome the increase to the health budget at a time where public finances across the UK are extremely challenging. The additional funding has supported the NHS to respond to increasing demand on services, however members are concerned by the rising demand on, and costs of delivering, healthcare services. Also, the lack of financial certainty presents significant challenges to effective planning and delivery of quality services. Decisions made now by the Welsh Government and NHS leaders will significantly impact the long-term health and wellbeing of the population.
Creating a sustainable system for healthier and more prosperous communities in Wales requires a cross-sector, coordinated effort across all government departments. This involves prioritising services that improve public health and reduce inequalities, ensuring all policy and spending decisions maximise positive community impact. By working together, Wales can address the unfair health gap and build an economy and society focused on health, wellbeing, and equality, creating opportunities for a stronger future.
Priorities for the NHS
Introduce longer-term funding cycles
Despite welcomed funding increases, the Welsh NHS, like other UK public services, has faced significant challenges due to various external pressures. These pressures have created increased financial uncertainty and deficits. Six of the seven health boards submitted deficit plans for the 2024-25 financial year. Furthermore, while core inflation is forecasted to improve for the next financial year, there is increasing concern over the impact the Employer’s National Insurance increase on suppliers to the NHS, specifically primary care and social care. These sectors are heavily dependent on staff, and the costs of National Insurance increases will inevitably be passed onto the NHS.
The UK and Welsh Government must shift from short-term thinking to longer-term funding cycles to allow health and care leaders to plan for, and invest in, projected long-term demand and service improvement.
Capital (including digital infrastructure)
The NHS is faced with an ageing estate, including digital infrastructure, which was not designed with current demands and risks in mind. While NHS leaders share the government’s commitment to boost NHS productivity and are doing all they can to tackle the elective care backlog, the lack of capital funding is a major barrier.
The NHS needs a ten-year capital plan which invests in the entire NHS and social care infrastructure, including buildings, equipment and digital infrastructure; but also leveraging technological and research advancements including genomics and AI.
Workforce
The NHS workforce needs to adapt over the next few years to recruit and retain its staff and effectively respond to the demand for healthcare in Wales. The Welsh Government’s 2024-25 investment in education and training of the NHS workforce was maintained at the same level as the previous financial year. Whilst this meant the number of commissioned places was maintained, it was around £20m lower than the recommended levels in the Health Education and Improvement Wales (HEIW) Education and Training Plan 2024-25 submitted to Welsh Government.
The Welsh Government must prioritise a long-term workforce plan which prioritises education and training. This investment is crucial to support recruitment, improve retention and develop new workforce roles to support service transformation.
Social Care
The NHS and social care are intrinsically linked. Social care services play a crucial role in care pathways by keeping people well at home, preventing hospital admissions, and enabling faster, safer discharges home. As highlighted by the Welsh Local Government Association, councils are calling for urgent investment in social care in the upcoming Welsh Government Budget to help meet huge funding pressures facing the sector. A WLGA survey of council budgets has identified £106m of in-year pressures in social services (2024-25). An additional £223m pressure is anticipated next year, representing 40% of the overall pressure for local government (£559m) just to stand still.
To enable the transformation of the social care sector, ring-fenced social care funding is required to address system-wide challenges, meet population needs and stabilise the social care system. Within this, workforce pay and conditions, access to publicly funded care and transparency and consistency around the collection and reporting of social care data must be considered.
Tackling Inequalities
Currently, the intense pressure on health and care services makes investing in preventative measures a significant challenge. Analysis by the Future Generations Commissioner of the draft budget highlighted that about 15% of the budget is focused on actions with a preventative dimension, with less than 10% going towards actions that provide enough evidence to contribute to primary prevention, the highest level of prevention. This disparity between overall preventative spending and spending on evidence-based primary prevention highlights a pressing need to improve resource allocation to maximise the long-term health and wellbeing of the population.
We need a cross-government strategy to improve health and wellbeing and reduce inequalities. This will shift the focus from simply treating illness to promoting health and wellbeing, reducing inequalities, and tackling the wider determinants of health, boosting economic growth, and supporting people to be active partners in their own health and wellbeing.
Digital Investment
By investing in digital and technology, there is an opportunity to help transform care and enable people to access information and treatment in a way that meets their needs and supports them to stay well. However, the current gap in funding digital programmes, with uncertainty surrounding the Digital Priorities Investment Fund, could disrupt progress on key digital programmes.
We need robust investment in digital infrastructure to fully leverage the potential of digital technologies within the NHS. Such investment will strengthen digital functionality throughout patient pathways, enabling effective data to be captured for informed decision-making and provide the tools necessary for improved care delivery and greater efficiency.
NHS and the economy
As stated in our briefing, ‘Investing in the NHS: Priorities for future government budgets’, the Covid-19 pandemic and the past few years has shown the NHS to be a significant economic force and the NHS in Wales should be considered an ‘anchor institution’. The NHS is well-positioned to use its spending power and resources to address adverse social, economic, and environmental factors that widen inequalities and contribute to poor health. Moreover, research by the NHS Confederation demonstrates that for every £1 invested in the NHS, the economy gets £4 back in gross value added (GVA). Furthermore, for every £1 spent on primary and community care, there could be increased economic output (GVA) by £14.
When allocating budgets, the Welsh Government must acknowledge the NHS's significant contribution to economic activity and employment. As major employers, purchasers, and holders of capital assets, NHS organisations can leverage their spending power and resources to tackle the detrimental social, economic, and environmental factors that exacerbate inequalities and contribute to poor health.
Conclusion
NHS Wales organisations do not underestimate the significant challenges of public service budget-setting in the face of unprecedented challenges because of rising demand, inflationary pressures, elective care backlog and the cost-of-living crisis. However, NHS leaders, while understanding the government's current budgetary constraints, believe collaborative efforts with the government, all political parties, and public sector leaders are essential. This collaboration should focus on developing innovative solutions within a streamlined set of priorities that effectively balance immediate needs with a long-term vision.
Building a sustainable system requires a cross-sector approach to creating healthier and more prosperous communities, ultimately reducing future demand. Therefore, population health must be a central consideration in all government department budgets. It is vital to remember that this is not just about budgets, targets, and deficits; it's about people's lives, who will ultimately bear the brunt of this impact, as will the dedicated staff who strive to care for them daily.
Further information
For further information, please read our detailed response to the Finance Committee consultation on the draft budget.
If you would like further information on any of the issues raised in the briefing, please contact Haleema Khan on Haleema.khan@welshconfed.org.
The Welsh NHS Confederation represents the seven Local Health Boards, three NHS Trusts (Velindre University NHS Trust, Welsh Ambulance Services University NHS Trust and Public Health Wales NHS Trust), and two Special Health Authorities (Digital Health and Care Wales and Health Education and Improvement Wales). The twelve organisations make up our members. We also host NHS Wales Employers.
