are these "panels" installed over drywall?
I would either remove the panels and patch the drywall (if present) or strip to bare studs and start fresh. Drywall is fairly inexpensive and baths are often the smallest room in the house...so you may not need that much.
In the ktichen are the cabinets installed on top? and are they being replaced?
Thanks for your advice. Kitchen cabinets are installed on previous walls so I will probably just remove the paneling it is such awful stuff