On 10 June Southern Cross Healthcare, the largest provider of residential care in Britain, announced that it will ‘surrender control’ of 132 of its 754 care homes, handing over the homes and their residents to landlords to deal with as they see fit. The company’s financial crisis threaten the security of the company’s 31,000 vulnerable residents. It is the consequence of a trend which has seen care providers bought up by private equity companies seeking a quick profit. In it we can see what will happen if the ConDem Coalition succeed in breaking up the NHS.
Southern Cross’ business model has involved buying packages of existing care homes, selling the buildings on to landlords and then leasing them back on contracts which promise an automatic rent increase each year. This led to a rapid expansion of the company, netting a £1 billion profit for private equity firm Blackstone when it sold Southern Cross in 2007. With the onset of the economic crisis, and with growing reports of substandard care, the strategy began to fail and has now been brought to crisis by the cuts in local authority funding. This has meant that payments for residents have reduced while rents continue to rise.
Following a 15% fall in local authority-funded admissions in the six months up to 31 March 2011, Southern Cross made a loss of £311 million. In May the company appealed to private equity groups and US healthcare multinationals to provide a £100 million ‘equity injection’ in a bid to avoid total collapse. In the second week in June it announced that it will make 3,000 employees redundant over the next few months and has demanded that its landlords accept a 30% reduction in rents until September. Some homes have already shut, including Sefton Park Care Home in Lanarkshire, Scotland, where 35 residents have been given 12 weeks to find a new home.
Southern Cross is not the only care home provider in trouble. On 8 June Unison reported that the second largest provider, Four Seasons, is also facing severe financial problems. Some local authorities have reportedly drawn up contingency plans of how to respond if Southern Cross were to collapse, but after years of privatisation it is not clear who would have the capacity to re-house such numbers, with Southern Cross and Four Seasons housing a combined total of 50,000 people. ConDem coalition Business Secretary Vince Cable has ruled against any government bail-out. While vast funds were available to bail out the banks, the government is prepared to allow companies which provide care for tens of thousands of elderly and vulnerable people to go to the wall.
Quality of care has also been sacrificed in the drive for profits. The Care Quality Commission rates one in seven privately run homes as ‘poor’ or just ‘adequate’. On 31 May a BBC Panorama programme exposed shocking abuse routinely experienced by residents at the Winterbourne View care home in Bristol for people with learning disabilities and autism. Winterbourne View is run by Castlebeck, a company founded in 1987 which is the ‘sister company’ to Barchester Healthcare, another of the ‘big four’ residential care providers. Southern Cross has also been frequently criticised for the appalling conditions in which it keeps residents. A report by the Care Quality Commission in May this year found residents at one of its homes in Oxford left in pain without medication while others were not offered help to get out of bed. 25 of its homes are banned from taking NHS patients as they fail to meet minimum standards.
Capitalist state welfare and privatisation
The deterioration of adult social care in Britain is rooted in the crisis of profitability facing the capitalist system as a whole. This forces capital to seek new sources of profit, today in the provision of social and health care. Privatisation and cuts are part of the process with a transition to a managerial regime that views people as ‘service users’, individual consumers in a market for care services. In 1990 local authorities and the NHS provided 200,000 out of 500,000 residential places; today the state provides only 31,000 places. The less profitable areas are delegated to the voluntary sector. In this system, those with no money have little choice but to provide for themselves, with the largest part of this burden falling on working class women.
On 11 May this year a three-year review by the Law Commission proposed that ‘direct payments’ be extended to include residential care. ‘Direct payments’ were first introduced in some areas of care from the mid-1990s. Individuals replaced local authorities as purchasers and managers of care services in a market estimated by Unison to be worth £4bn per year. In 2006 the Labour government set out plans for sweeping changes under the banner of ‘personalisation’ of care, in a White Paper ‘Our health, our care, our say: a new direction for community services’. The Department of Health said that personalisation meant that ‘every person who receives support, whether provided by statutory services or funded by themselves, will have choice and control over the shape of that support in all care settings.’ In practice, it has meant a variety of mechanisms replacing socially-organised care with ‘individual budgets’ to be spent by individual users and carers as consumers. Between 2004-2005 and 2009-2010 the number of people receiving direct payments more than quadrupled to 107,000 people. Writing on the Community Care website on 7 December 2010, Vern Pitt explains how this has undermined funding for day centres and other services:
‘Income would have previously been guaranteed for in-house council centres or voluntary agencies funded by council block contracts…With personal budgets, this is left to individual choices, which may fluctuate, meaning a larger customer base is needed to ensure demand remains above the minimum needed to keep the service going.’
The individualisation of care has opened the way for further privatisation, as the state becomes just one competing provider for individuals’ consumption.
Privately provided care inevitably means higher costs as they have to include provision for shareholders’ dividends, marketing, duplication and waste between competing providers. The current crisis in residential care shows that for many people private provision also means poorer quality and less security, with the care of elderly and disabled people left to the anarchy of the market and the speculative activities of financiers. High quality, dignified and affordable care is a right that should be guaranteed by the state to all who need it. That the British state has not only failed to fulfil this demand but has been complicit in selling out the most vulnerable members of society for a quick profit is an indictment of British capitalism, demonstrating that the only genuine ‘welfare state’ is a socialist state.
Stop the privatisation of care!
Demand decent services as a right!
Update 16 June 2011:
On 15 June a meeting between representatives of Southern Cross and its landlords agreed to form a committee to ‘restructure’ the company over the next four months, with Southern Cross retaining control of 400 out of its 752 care homes, whilst the remainder will be taken over by other operators such as Bondcare and Four Seasons. The meeting was also attended by representatives of Lloyds Banking Group and Barclays, who between them are owed up to £50 million by Southern Cross, and the government, which is owed £20 million by Southern Cross in unpaid tax.
