Health and Care Bill

Baroness Tyler of Enfield Excerpts

Committee stage
Friday 4th February 2022 Lords Chamber

[Baroness Brinton (LD) [V]]

My Lords, I support Amendments 237, 238 and 239 in the name of the noble Baroness, Lady Bennett of Manor Castle, which aim to ensure that private providers are regulated, especially those using obfuscatory financial structures, instruments with inter-company loans and large amounts of debt. They should be fully transparent about those arrangements. She was right to highlight the excellent reporting of the Financial Times on this, along with the financial editors and journalists of other papers.

The typical small business social care home owner does not fall into the category I have just described. The problem in the sector is the private equity providers who decided to start buying up care home groups because they felt that the assets could be milked to provide healthy-looking returns for them. This differs from those homes borrowing in order to, perhaps, buy new homes to enlarge their group; what is happening here is purely financial instruments to benefit the directors and investors. Typically, private equity-backed providers spend around 16% of the bed fee on complex buyout debt obligations. The accounts of Care UK show that it paid £4.1 million in rent in 2019 to Silver Sea Holdings—a company registered in low-tax Luxembourg, which is also owned by Care UK’s parent company, Bridgepoint.

These kinds of buyouts are also associated with an 18% increase in risk of bankruptcy for the target company. In the case of Four Seasons Health Care, heavy debt payments contributed to the company’s collapse into administration in 2019. Two of the other largest care home providers in the UK, HC-One and Care UK, have also undergone leveraged buyouts and, as a result, their corporate group structures remain saddled with significant debts. Some of these types of company are also struggling to provide the best possible care with their overall CQC scores—so it is affecting the lives of the most vulnerable patients.

The Office for National Statistics says that 63% of care home residents are paid for by the public purse. Surely the Government must have a duty towards the public purse. It is not acceptable for the public purse to pay for these complex financial arrangements that are intended to provide not care or capital for the growth of a care business but purely a larger return for directors and shareholders. These amendments would provide for transparency and accountability and an assurance that the public purse and the private payer are not being taken for a ride.

[Baroness Tyler of Enfield (LD)]

My Lords, I support these amendments from the noble Baroness, Lady Bennett. I thank her for putting them forward. The care sector is both complex and very little understood. Back in 2020, there were approximately 15,000 care homes in the UK, run by approximately 8,000 providers. Some were very small; others were providing very large networks of homes—it is a mixed economy. These figures are a couple of years old but, at that time, 84% of homes were run by the private sector, including by private equity firms, both British and offshore.

Funding is a complex mix of private funders, local authorities and the NHS. I was very grateful to the noble Baroness, Lady Bennett, for highlighting the work that the Financial Times has done, because I was first alerted to this issue by an investigation that the paper did back in 2019 which revealed how Britain’s four largest privately owned care home operators had racked up debts of £40,000 per bed, meaning that their annual interest charges absorbed eight weeks of average fees paid by local authorities on behalf of residents. Many have argued, and I absolutely agree, that this sort of debt-laden model, which demands an unsustainable level of return while shipping out profits of 12% to 16%, often to tax havens, is entirely inappropriate for social care.

I want to make it clear that I do not have an ideological problem with the private sector being involved in the care sector and providing care homes—provided that they are good quality—but I have a real problem with the financial models used. Most fair-minded people in this country, not least those whose loved ones are in care homes, would, frankly, be horrified if they knew how the money—either theirs, if they are self-funded residents, or indeed the money of hard-pressed local authorities—was being used and where it was being siphoned off to.

I greatly support amendments to increase transparency and reporting. Frankly, I would like to see the regulator being a lot tougher and a lot more proactive in this area, so I very much support the review in the amendment put forward by the noble Baroness.

[Baroness Altmann (Con)]

My Lords, I support the thrust of the amendments laid by the noble Baroness, Lady Bennett. I fully agree with her that there is a systemic problem in the care home sector.

In 1991, the community care Act reforms meant social care was transferred from a public sector function—or NHS function when it came to nursing homes—to what was called a mixed market. But, having observed the worsening care crisis, the financial engineering, the periodic failure of large care home operators and the inadequacy of regulation or oversight of their financial backing, I cannot help but urge my noble friends on the Front Bench to look urgently at the need for much greater controls. Southern Cross and Four Seasons Health Care have been in and out of insolvency or near bankruptcy for the past few years, but there are still inadequate controls on their ownership structure.