TWO health boards serving almost 700,000 people are facing “significant financial challenges” with no clear end in sight, the country’s spending watchdog has warned.

In a pair of damning reports, the Auditor General said NHS Ayrshire & Arran and NHS Highland were heavily in debt and struggling to make savings and balance their books.

Problems at NHS Ayrshire & Arran, which serves around 370,000 people, were the most acute.

The health board spent £859m last year and needed £23m in loan funding - known as brokerage - from the government, and is expected to need a further £22.4m this year.

It has no plans to repay the loans, and it is very unlikely to balance its budget by 2020/21.

The main factors were an unscheduled need to keep 100 care beds open, increased emergency admissions and a high level of delayed discharge patients.

The Auditor General said the board faced an “extremely challenging financial position”.

Even its projected £22.4m deficit this year was based on finding £26.1m of savings, and £9.7m of these had yet to be identified or were “high risk”, so the deficit could be higher.

The number of non-financial standards, such as waiting and treatment times, deemed “below acceptable standards” also rose from seven to ten out of 20 last year.

NHS Highland spent £750m last year and needed £15m of brokerage.

Although it saved £35m of savings last year, only £10m were “recurring”, meaning the rest were one-offs - something the watchdog said was unsustainable.

NHS Highland intends to save another £30m this year, but will still require brokerage of between £19m and £22m in top of that.

The Auditor General said there was a “significant risk” it would not make these savings, and it was “difficult to see the board achieving a break even” position in three years, as planned.

Auditor General Caroline Gardner said: "Both NHS boards face significant financial challenges, and I have serious reservations about their ability to make the changes that are needed to achieve financial balance in future.”

Scottish LibDem MSP Alex Cole-Hamilton said: "Time and again the Scottish Government has been warned NHS services are so strained eventually their budgets will crack and here is the confirmation in black and white.

“Our hardworking health professionals battle on despite a backdrop of diminished pay, workforce planning failings and limitations on community social care, which stop patients leaving hospital on time. Scottish Liberal Democrats demand better.

“The resources are running out. The Health Secretary can’t afford to look the other way.”

John Burns, Chief Executive of NHS Ayrshire & Arran , said: “Financial sustainability has been an increasing challenge over recent years.

"This has been due to increasing unscheduled care demand, which has required extra hospital beds to be opened, as well as cost pressures, including new drugs and agency medical costs to sustain services.

"However, 2017/2018 was the first year that we received financial brokerage.

"In recent years we have needed to achieve higher levels of cash releasing efficiency savings.

"These savings have been difficult to achieve and 40 per cent of the £24.8 million savings made in 2017/18 were non-recurring.

"NHS Ayrshire & Arran established a transformational change programme two years ago to co-ordinate service redesign proposals.

"Many of these redesigns take several years before the benefit is seen in terms of operating costs. 

"Success requires reform and redesign across all our health and social care services. We are also working closely with colleagues in Scottish Government who are supporting us through the change process."

A spokesperson for NHS Highland said: “NHS Highland’s financial challenges have been widely reported and we continue to work closely with the Scottish Government as we develop plans to return to financial balance.”