Local authorities could have to take over care home companies, claims UNISON

Local authorities may be forced to take over failing care home companies to protect residents “but at a huge and unplanned cost to the taxpayer”, Unison has claimed in a report.

The union said the difficulties faced by Southern Cross may not be a one-off, with a number of other companies in the sector “on the brink”.

Southern Cross announced today that it would be cutting 3,000 jobs from a workforce of 44,000. The company had already revealed plans to defer 30% of its rents payable to landlords. It has also reported half-year losses of £311m.

Unison claimed that its research showed that the privatisation of the care industry was an experiment “that has gone seriously wrong”.

The union highlighted data showing that in 1990, nearly 200,000 of the 500,000 people in residential care were cared for in homes owned and run by local authorities and the NHS. That figure is now 31,000.

“Councils have lost much of their grant funding from central Government, leading to further cut backs in social care services,” it said. “The growing elderly population is fuelling demand for services but, unless drastic steps are taken to tackle the problem, vulnerable people could be left without essential care.”

Unison also argued that the quality and continuity of care had fallen dramatically since privatisation, “as inexperienced companies bid to run these services”.

“The cost and risk has also risen, as companies borrow too heavily, with their financial performance too weak to repay borrowings on agreed terms,” it added.

General Secretary Dave Prentis said: “The home and day care market is worth about £4bn a year, making it attractive to private companies eager to make profits. But the looming catastrophe in the sector shows that gambling with people’s care is irresponsible and too risky.

“We are seriously concerned that plans to push through the NHS reforms will lead to a similar crisis in the health service. Private equity and other private sector operators are hovering over the NHS, eager to make a quick profit - at the long term cost of care quality and continuity of service.”

Prentis added: “Typically these private equity firms buy companies cheaply, merge with rivals and then sell them on as quickly as possible. Short-term asset holding means that people and services are passed from pillar to post, with no continuity of care.

“Taxpayers have already had to bail out banks that loaned too much to private equity speculators to privatise public sector assets that were over-valued. Now taxpayers will have to pay the price again, as they will be forced to pick up the bill for collapsing companies. We need to halt the privatisation of any more public services, before more people are made to suffer in the name of profits.”

The Department of Health has insisted that the financial issues faced by one provider
do not undermine the principle of independent care provision.