Could this be the start of wholesale change in how the NHS and social care operate?

Rishi Sunak’s budget feels years, rather than weeks in the past. But one thing has remained constant since the chancellor delivered his first set piece—government commitment to provide the NHS with whatever funds it requires.

Having initially promised the health service “whatever it needs, whatever it costs” on 11^th March, the government made this official when Matt Hancock issued a ministerial direction allowing the Department of Health to “spend in excess of formal Departmental Expenditure Limits”—effectively providing a blank cheque.

But while the government’s actions are designed for the immediate crisis, they may be difficult to reverse once the peak of coronavirus has passed. Indeed, they could yet change how the health service operates on a permanent basis. It is worth investigating how.

One major announcement has been the government promise to forgive over £13bn of historic NHS debt. This was in fact money that NHS trusts—hospitals—owed to the Department of Health and Social Care. Cancelling these debts removes a headache for NHS finance staff, who no longer have to plan how they will pay interest to the department, but it is not an injection of new money. NHS trusts with debts will stop paying the department—but the DHSC was already recycling the money from the interest payments it received back to the NHS.

Nonetheless, it may signify a turning point. The real significance of forgiving the debt is that it abandons a central strategy of austerity—trying to force NHS trusts to become more efficient by cutting their income.

Trusts have to balance their running costs against their income from the activities they undertake—from performing surgeries to running diagnostic tests. The amount of government money they receive for each activity is determined by the “national tariff,” and the coalition and successive Conservative governments have repeatedly reduced the tariff in real terms since 2010.

Initially, trusts responded as the government expected, doing more for less by capping staff pay rises and becoming more productive. These strategies, however, ran out of road after 2015. At that point, trusts started selling off assets, delaying essential maintenance spending and taking out emergency loans to try to balance their books.

Up until last Thursday, the government expected trusts with debts to eventually balance their books and pay the department back—hoping that having to pay interest on the loans would spur them to do so quickly. Cancelling these debts suggests that the government accepts that its approach had become counter-productive.

The government has also temporarily shifted from paying hospitals for the activity they undertake to paying them by “block contract” from April to August—effectively dismantling the tariff system of payment-by-activity and the incentives for efficiency it was designed to create. That is a fundamental change which has occurred in the process of tackling coronavirus.

Nor is it the only one. Perhaps surprisingly, the biggest beneficiary of the Covid-19 response fund, a £5bn pot of money for public services forming part of the government’s overall emergency package, has been social care. Of this, the government has announced that £2.9bn will primarily be for local authorities, including £1.3bn “to enhance the NHS discharge process”—freeing up beds in hospitals by funding the costs of patients who need follow-up support from social care to return home safely.

It is revealing that the first slug of emergency money has gone to social care—which has been cut particularly sharply over the last ten years. Commentators have—rightly—spilt much ink over NHS efforts to reprioritise hospital beds and staff to treat Covid-19 patients, but much of this effort has taken place outside of hospitals.

Indeed, NHS England estimates that discharging hospital patients who have stayed for more than 21 days could free up 15,000 beds, which is more than it expects to free up from delaying non-urgent elective surgeries (12,000-15,000), or buying beds in independent hospitals (10,000).

Given the importance of a well-funded social care system for the NHS, the government’s talks to secure cross-party consensus on social care funding could rise up the political agenda once the peak of coronavirus has passed.

All these changes are designed to be temporary—but they may well stay in place after August, becoming permanent or influencing future policy.

Even post-coronavirus, the NHS and social care will still face pressures. The five-year NHS funding settlement announced by Theresa May in summer 2018—and enshrined in law by the Johnson government—was only just enough to allow the NHS to provide care to the rising number of patients who were expected to attend hospital for treatment before coronavirus hit.

After the crisis passes, hospitals will have large backlogs of elective surgeries—such as hip and knee replacements—to perform after delaying operations to free up beds. And despite Johnson’s promise to fix social care, the government has made little progress. Local authorities—which deliver social care—do not know how much money they will have after March 2021.

With rising demand and no clear public appetite for another round of spending restraint, it will be difficult for the government to try to stimulate efficiency by cutting payments for activity. When all this is over, what is currently a set of temporary changes could lead to a wholesale change in how the NHS and social care operate, with higher funding and different funding structures among the possible results.