Scottish Government backs NHS Orkney by offering transitional funding that gives us a clear path to financial balance and de-escalation

Thanks to the efforts of staff across the organisation, NHS Orkney is one of few Boards in Scotland to achieve our Financial Plan, Savings Plan (record savings of £4m) and 3% recurring savings requirement for 2024/25. This is an incredible achievement and one which gives us a solid foundation on which to build so that we can move NHS Orkney back to a sustainable financial position in the years to come.

Consistent with other Health Boards, NHS Orkney has received feedback from Scottish Government following submission of our 3-year financial plan.

Scottish Government has written to us to recognise the scale of what we have achieved to date and to confirm their confidence in the Board’s leadership and approach to continuous improvement.

In return, Scottish Government have offered NHS Orkney a transitional funding package which gives the organisation a clear path to de-escalation (and moving from level 3 to level 2 by no later than April 2027) and to reaching financial balance by the end of 2028/29 - therefore giving the organisation much hope for our future.

Our Board discussed this in full last week and has decided to accept the transitional funding offer, which we have since confirmed with Scottish Government.

We have updated our staff on what this means for NHS Orkney and wanted to ensure our community and partners also received a full update recognising the strategic significance of this decision.

It will see NHS Orkney accepting £5m of transitional funding over a 4-year period, on a non-repayable basis, which is conditional on the year-on-year delivery of some clear actions. Building on our progress to date, this gives us a path to follow which will return NHS Orkney to financial balance and sustainability. However, it requires the organisation’s continued focus on delivering our Financial Plan and delivering the transformational changes now needed to redesign NHS Orkney so we are an organisation that is viable and fit for the future.

The £5m will be received by NHS Orkney annually (starting with £2m in 2025/26) subject to a set of conditions which will be monitored internally by our new Financial Escalation Board (monthly) and Scottish Government via our quarterly financial performance review meetings.

The conditions that come with the offer NHS Orkney have accepted are:

1. Achieving our annual savings requirements, starting with £3.5m in 2025/26, consistent with our submitted plan
2. On top of this (linked to the above), delivering £300K more savings a year to achieve an outturn of under 1% deficit against core Revenue Resource Limit (RRL) in 2025/26
3. Removing all external support from the organisation by no later than 2027/28 – so we can stand on our own two feet which we are on track to do
4. Reducing, in a planned way, our headcount and reviewing bandings (where opportunities present themselves and predominantly in corporate posts) to bring NHS Orkney back in line with other Island Boards and mainland Health Boards – there are no plans for redundancies or for reducing bandings of existing staff. Opportunities for headcount reduction and reviewing bandings will be assessed as posts become vacant
5. Implementing opportunities identified from the recommendations that come from our Clinical Services Review that is underway to transform our clinical services and which will conclude early Summer 2025
6. Improving our productivity and efficiency, including increasing Near Me virtual appointments by at least 10% and increase our theatre utilisation
7. Addressing our substantive medical recruitment gaps by reducing our long-standing reliance on locum spend which is another driver of our deficit position. We are currently out to advert for 6 substantive Consultants and have plans to replicate the great work we have done over the last year to reduce our Nurse agency spend.

Our Board have agreed to this offer, knowing the conditions that come with them are challenging yet achievable and will enable us to deliver a sustainable future for our patients and community which is at the heart of our recently-published Year 2 (2025/26) Corporate Strategy.

Laura Skaife-Knight, Chief Executive at NHS Orkney said: “This £5m isn’t additional spending money – rather it is quite the opposite. We cannot invest this money in new service developments and it is primarily to ensure our deficit remains within 1% of our RRL limit, whilst we reduce our cost base and achieve all we have committed to delivering in the next 3 years via our Financial Plan (and in the case of our savings plan go a little further). We must transform our services so they are sustainable and affordable moving forward and this £5m gives us the opportunity of implementing those changes required and gives the organisation a path to balance and de-escalation, with the full support of Scottish Government and recognition of our strong progress to date, on which we must now build.”