Solving the care crisis means taking it out of private hands

Solving the care crisis means taking it out of private hands

Dmytro Zinkevych/

In his first speech as UK prime minister, Boris Johnson announced that he would “fix the crisis in social care once and for all”. But he has given little indication of how his government will be able to “solve” the crisis when serious reform has been repeatedly delayed for nearly a decade – and problems in the sector go back even further.

The 2011 recommendations of the Dilnot Inquiry, advocating a maximum lifetime spend on care of £100,000 were ignored – the latest Green Paper, commissioned in 2017, has been delayed six times. The past 20 years have seen royal inquiries, green papers, white papers and innumerable reports and policy papers. None have had any real impact, nor have they proposed anything even remotely approaching a “solution” to the crisis.

Why? Because none of them tackle the root of the problem: private for-profit provision. Anyone who, like me, has first-hand experience of the for-profit sector will understand that the drive for profits can only undermine the quality of care.

Various Conservative MPs, including members of Johnson’s cabinet, have made proposals on social care reform. Damian Green’s proposals for the Centre for Policy Studies, which amount to a system segregated by wealth, align with the view of the secretary of state for health and social care, Matt Hancock, who argues that social care ought to be funded through an insurance system.

Jacob Rees-Mogg, on the other hand, is a vocal supporter of proposals set out in a paper by the Policy Exchange think tank. Care, according to this argument, should be funded through general taxation supplemented with an annual payment of £5,000 from recipients, but should continue to be actually provided by private companies who will continue to draw profits.

More funding not enough

Despite their differences over where the money is to come from, all these proposals agree that there is a need for increased funding. In this they are correct: social care spending by local authorities has shrunk by £7 billion since 2010 (a decline in real terms of 13%), and there is a shortfall in funding of at least £200-300m. But these proposals are also incredibly one-sided – the lack of funds is indeed an important aspect of the crisis, but under the current setup increases in funds may not be end up improving or enlarging the provision of care. Instead, they risk being siphoned off by finance capital.

Consider this: the UK’s four largest providers, Four Seasons Health Care, HC-One, Barchester Health Care, and Care UK, are up for sale after being loaded up with unsustainable debts by their financier owners. They have accumulated debts of £2.2 billion between them, averaging £40,000 per bed. As a result, annual interest charges alone use up eight weeks of average fees paid by local authorities.

The owners, meanwhile, have continued to draw huge profits: Terra Firma, the private equity owner of Four Seasons, returned €339m to its shareholders in 2018. H/2 Capital Partners, another private equity firm, was the main beneficiary of Four Seasons debt payments.

The care provider HC-One, meanwhile, has declared a loss in every year except one since its creation in 2011. It has therefore never paid a penny of corporation tax and has received £6.5m in tax credits since 2014. Despite this, the company paid out dividends of £42.3m in 2017 and £6.2m in 2018, and its highest-paid senior director has received £2.5m since 2011. Court Cavendish, a management consultancy firm which is 90% owned by HC-One’s founder Chai Patel and 10% by his family trust, has received £25m of management fees.

Meanwhile, in the three years before 2017, investment by the financier owners of these four companies fell by an average of £43,000 per care home per year, making funds too low to cover basic maintenance and improvements.

Profit is the problem

In the UK, 83% of care home beds are provided by the for-profit private sector. There are inherent problems involved in the provision of care for profit. Because care is intimate and essentially labour-intensive work, it is not fertile ground for raising productivity through applying technology and therefore not attractive for productive investment by capital.

But due to guaranteed streams of income (around 65% of funds come from local authority funding), plus sizeable assets in the forms of property, it is fertile ground for finance capital to bleed the sector dry, as enormous blocks of uninvested finance capital are floundering around to find places to invest.

The 30 largest care home providers supply 30% of places – and we know that concentration of the sector into fewer larger companies is slowly increasing. Destabilising levels of debt are more pronounced in larger companies. While finance capital-driven concentration in the sector is relatively low compared to other sectors, all indications are that finance capital will continue to find the sector’s assets and captive income streams enticing.

As long as care is provided for profit, increasing funding could be like pouring water down a sink as it is siphoned off by finance capital. The only solution is for social care to be fully socialised – but no one in Johnson’s party or cabinet is even considering such a move.

Green says that nationalisation would be “ruinously expensive” and “antithetical to freedom of choice”. Rees-Mogg wants care recipients to be “treated more like consumers of a service and less like those who can only take what they are given by some beneficent state provider”. The likelihood is that Green’s proposals and those promoted by Rees-Mogg will simply be added to the towering pile of ignored documents on care. The only possible solution to the crisis, socialisation, is the one that none of these proposals will even consider.

The Conversation

James Pike does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.