Social Care Sector: Private Equity

Lord Sikka Excerpts

Thursday 27th January 2022 Lords Chamber

Asked by

[Lord Sikka]

To ask Her Majesty’s Government what assessment they have made of the impact of private equity on the social care sector.

[Lord Sikka (Lab)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and draw attention to my interests in the register, which states that I am an unpaid adviser to Tax Justice Network.

[The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Kamall) (Con)]

Under the Care Act 2014, it is the responsibility of local authorities to shape their local markets, which are largely made up of privately owned and third sector services. No assessment of the impact of private equity on the sector has been made, but, as of December 2021, 84% of care providers are rated “Good” or “Outstanding”. The market oversight scheme mitigates the risk of a sudden failure of potentially difficult to replace care providers.

[Lord Sikka (Lab)]

My Lords, I thank the Minister for that reply, which is really unsatisfactory because private equity is a disaster for the care home sector. To take one example, HC-One, which is the largest care home operator, is siphoning off 20% of its revenues to offshore affiliates through intra-group transactions, leaving very little for front-line services. Since 2011, it has declared a loss every year except one and paid no corporation tax but paid dividends of £48.5 million. Can the Minister explain why the Government tolerate such abuses? When will there be an independent inquiry?

[Lord Kamall (Con)]

We value the role of independent and third sector care homes. It is important that we have that right mix. Some private companies will include private equity, and it is important not to tar all private equity with the same brush. Private equity plays a role in many companies in turning them around and retaining jobs. The important thing for us is that, if any companies are potentially in financial trouble, we have the market oversight scheme to ensure that, if they go bust, there is an ability to transfer patients elsewhere.

Medical Schools: Training Places

Lord Sikka Excerpts

Monday 13th December 2021 Lords Chamber

[Lord Kamall (Con)]

The focus and priority for the next three weeks is on omicron and making sure that people get their boosters as quickly as possible. It is not only doctors who are involved: nurses, pharmacists and, incredibly, a number of civil servants are now taking part in that programme. For the next three weeks, the focus is on getting more jabs into arms.

[Lord Sikka (Lab)]

My Lords, successive Governments have poached doctors from comparatively poor countries to meet the shortages here. As the Minister knows, it costs a vast amount of money to educate and train a doctor, so developing countries have been deprived of their talents. Will the Minister explain that, or give an undertaking that the Government will provide compensation to poorer countries for stealing their assets?

Health and Care Bill

Lord Sikka Excerpts

2nd reading
Tuesday 7th December 2021 Lords Chamber

[Lord Sikka (Lab)]

My Lords, the NHS was founded on the principle of not for profit and serving all people equally, with dignity and respect for patients and staff. This Bill violates those principles. It accelerates privatisation of the NHS. At my local hospital many services, such as physiotherapy, have already been privatised, and employees had to reapply for their jobs on inferior terms. The Bill neither protects employees nor prioritises patient care. It enables private companies to secure NHS contracts even though they do not deliver value for money. A typical cataract operation is 50% to 100% more costly in the private sector than on the NHS. It is the same story for knee and hip replacements.

Around 11% of the annual NHS budget goes to private companies, which have shareholders and overpaid executives to appease. Up to 25% of the amounts paid to the private sector disappear in dividends, interest payments, lease payments, rents and other intragroup transactions, often to an offshore affiliate. This leaves very little for front-line NHS services, and the waiting lists inevitably grow. The likes of Virgin healthcare have milked the system and pay little or no corporation tax. This Bill will facilitate even more of the same and rob the NHS.

The 42 independently run integrated care systems would be responsible for commissioning and delivering services to a group of people on a geographical basis. This heralds further fragmentation of the NHS and will create another postcode lottery.

The Minister, like many others, has mentioned integrating the health and care services, but the issue of merging the budgets is highly problematic. Take the NHS: it is free at the point of delivery, but social care is not—it is means tested. The Bill offers absolutely no clarity about how the budgets are to be merged, and there is nothing in it to prevent some NHS treatments or services being reclassified as social care and thus force people to pay more for the services. Social care budgets are fixed and capitated; overspends are not allowed. If the same was to be applied to the NHS, many people would simply not receive the treatment to which they are entitled. I hope that the Minister will clarify these issues.

Of course, we could eliminate lots of problems simply by accepting the principle that social care must be free at the point of delivery and paid for through taxation. However, I fear that a party or Government addicted to hurting the poor will somehow not accept that new policy, so we have a problem.

The Government have made some cosmetic adjustments to the Bill, but employees or personnel from private healthcare companies can still sit on the boards of the 42 ICSs and influence NHS commissioning decisions. This creates conflict of interest and must be absolutely banned. I do not recall any public marches or petitions urging the Government to ensure that individuals from Centene, UnitedHealth, Bupa, Spire and other private companies must somehow make NHS decisions. This is an ideological decision by the Government; there is no other explanation. I hope the Minister will explain the ideological basis of this meddling by the private sector.

It is also a matter of concern that the Bill gives the Secretary of State numerous powers and that he is accountable to nobody, least of all Parliament. There is no real public accountability. Should we really be trusting things to Ministers? We have already seen how they have abused their position in awarding lots of Covid-related contracts to cronies and party donors, without any public accountability. We are still awaiting details of those. What is there to prevent the Minister abusing his or her power in the future? There are absolutely no guarantees in this Bill.

Ageing: Science, Technology and Healthy Living (Science and Technology Committee Report)

Lord Sikka Excerpts

Wednesday 20th October 2021 Grand Committee

[Lord Sikka (Lab)]

My Lords, it is an honour to follow the noble Lord, Lord Winston. I wish him a speedy recovery. I congratulate the noble Lord, Lord Patel, and members of the Science and Technology Committee on producing this thorough report. I urge the Government to adopt all its recommendations.

Technology plays a great role in every walk of life. However, it must not be a substitute for caregivers or human interactions. We have already seen that face-to-face appointments to see GPs are becoming rare. In online appointments, patients are expected to describe their medical condition. This is impossible to do with any degree of certainty, especially when patients have not encountered a similar health problem before. Technology can be a boon but it can also damage your health; just ask anyone addicted to online gambling, for example, hence the need for regulation.

That said, people’s welfare requires that they must have access to digital technology. However, that access is constrained by institutionalised inequalities. About 1.5 million homes in the UK do not have internet access at the moment. Around 20% of children did not have any access to a device for online learning while schools were closed recently. Those without access to the internet are most likely to be people aged over 65 or households with low incomes or financial vulnerability. Free broadband was a radical Labour policy at the last general election and would have helped many to benefit from the digital revolution. The Government have already plagiarised many of Labour’s policies and revarnished them; I urge the Minister to do the same with the broadband policy.

The noble Baroness, Lady Young, and the noble Lord, Lord Browne, indicated that economic inequalities are a key determinant of healthy life expectancy, but the Government’s policies have accelerated those inequalities and denied millions of people good food, housing, education, internet and participation in democracy to inform policies that can improve their lives. Even before Covid, 14.5 million people were living in poverty. The poorest 50% of people in the UK have just 9% of its wealth and 42% of all disposable household income is in the hands of 20% of people, while only 7% of it goes to the lowest 20%. Some 18.4 million individuals have an income less than the income tax threshold of £12,570. Only 58% of the adult population pays income tax because the other 42% is too poor. Some 6.2 million people have an income of less than £8,844. With such an economic predicament, a large number of people cannot easily access technology and harness its benefits, yet the Government continue to neglect this challenge. Hopefully the Minister will explain why they are so committed to hurting the poorest and most vulnerable people in our society.

Income tax is payable on incomes above £12,570, but the new Johnson tax—a 1.25% hike in national insurance—applies to incomes above only £8,844. As has already been mentioned, universal credit has been cut, and the average state pension is only around £8,000—about 25% of average earnings—which is the lowest in the industrialised world. Some 2.1 million retirees live in poverty. It is estimated that around 3 million people in the UK are undernourished, and 1.3 million of them are retirees. Every year, around 25,000 of them will die because of the cold and related problems. Nearly 6 million people are awaiting hospital treatment in England and there is no relief in sight.

On top of that, the Government have adopted regressive taxation policies. Even before Covid, the poorest 10% of households paid 47.6% of their income in direct and indirect taxes, while the richest 10% paid only 33.5%. I hope that the Minister will be able to tell us how he is going to address that situation, because the redistribution of income and wealth is the key to unlocking the door to healthy life expectancy—but Ministers do not utter the “R” word. None of the Ministers at the annual Conservative Party conference mentioned it; hopefully the Minister will put that record right.

On several occasions, the Government have published impact assessments of their policies, but I am yet to see an assessment that explains the impact of their policies on women, senior citizens, children or other marginalised groups in our society. Nothing is said about the impact of matters such as the suspension of the triple lock, the cut in universal credit, the new Johnson tax, wage freezes and cuts in public services on inequalities or healthy life expectancy. Late last year, the 107-page Budget document said absolutely nothing about these things; indeed, the word “women” appeared in it only three times. Can the Minister give an undertaking that, from now on, all government policies will be accompanied by an assessment of their impact on women, senior citizens, children, marginalised groups, inequalities and healthy life expectancy?

Finally, I want to say a few words about the pharmaceutical industry. Two issues have a direct relevance to this debate. First, the pharmaceutical industry has been profiteering through drugs pricing, thereby depriving many people of vital medicines that affect the quality of their lives. Secondly, the pharmaceutical industry does not have the zeal of people like Edward Jenner to eradicate anything; it increasingly creates dependency. You can see that people are dependent on drugs for blood pressure, asthma, cholesterol and many other things because the industry wants more customers. Indeed, some of these drugs themselves have side-effects that affect quality of life, but it seems to me that the drugs industry is off the Government’s radar. Its business model must be examined.

Social Care in England

Lord Sikka Excerpts

Thursday 14th October 2021 Lords Chamber

[Lord Sikka (Lab)]

My Lords, it appears that the noble Baroness, Lady Greengross, is not here; I am next in the queue. I begin by thanking the noble Baroness, Lady Pitkeathley, for this debate.

I will talk about the elephant in the room, which so far has attracted very little discussion: the privatisation of social care and its consequences. The noble Baroness, Lady Donaghy, briefly touched on some of the issues. Privatisation is not really being challenged by the Government or many other people in your Lordships’ House, but it has really reduced the resources for front-line services, fuelled executive pay and given us low wages, which has been talked about.

Care home staff are dedicated but really poorly paid, because the corporate model is to squeeze workers as hard as possible to improve the bottom line. There are some 1.52 million care home employees in England working in 18,500 organisations, but around 24% are on zero-hours contracts. Almost 42% of the domiciliary care workforce is on zero-hours contracts. Care workers’ median real-terms pay last year was £8.50 an hour, less than the average pay for shop workers and cleaners.

Low wages, zero-hours contracts and almost 30% staff turnover mean that personalised care is almost impossible to offer. Visiting some relatives in care homes, we saw care assistants we had never seen before; every time we went, there was a different person. One can see the huge problem of trying to offer staff training, because they are simply not around long enough. I hope the Minister can explain what changes in employment law the Government would make to address this issue.

Meanwhile, executive pay in care homes has soared to around 120 times the pay of care assistants, and record dividends are being paid by care homes owned by corporations. Until the 1980s, around 90% of care beds were in local authority control. Now around 90% are offered by profit-making and non-profit-making organisations. Corporations view care homes as investments. What they are interested in is the return and the bottom line.

Many of the owners are registered outside the UK. These include private equity, real estate investment trusts and US hedge funds. The ultimate controllers of these entities have no contact with staff, patients or the citizens of this country; they live in an elevated world somewhere else altogether. The big 26 providers of care homes are part of large corporate groups that include 2,500 companies. This provides plenty of scope for intragroup transactions to extract returns in the form of rental payments, debt payments, royalty management and anything else you can think of. The Centre for Health and the Public Interest states that some 10.83% of the money is sucked out through internal transactions, which obviously means that less is available for front-line services.

Private equity is the worst culprit. The typical business model is to load the entity with debt—usually artificial debt from an offshore affiliate—charge interest on it and charge anything else they can to inflate the costs. It is estimated that some 16% of the income of private equity care homes disappears in debt repayments, which did not happen when these care homes were owned by local authorities. The five largest private equity owners of care homes have a debt of around £35,072 for each bed and extract interest charges of £102 per bed per week. This amounts to almost 16% of the weekly cost of a bed. Obviously, this is enriching a few people but doing nothing for the rest of us.

The financialisation of care homes has been disastrous. Southern Cross and Four Seasons were just some of the examples of corporate exploitation of care homes. In 2014 the Government responded by creating the Care Quality Commission, which has not been able to check financial engineering in this sector. Indeed, I doubt it has the know-how equivalent to that of the Prudential Regulation Authority for banks to even do the calculations.

I will briefly mention the levy and the finances. The 1.25% Johnson tax is utterly inadequate and does not really provide any basis for the long-term funding of social care. In my talk on Monday, I recommended that the Government think about raising the ceiling, abolishing the 2% rate of national insurance on incomes above £50,300 and charging the full 14% on everything to raise £14 billion, as well as taxing capital gains in the same way as earned income to raise £17 billion, plus £8 billion on national insurance. As a welcome to the new Minister, I invite him to answer why the Government do not wish to consider the financial alternatives I have just pointed out.

Social Care Funding: Intergenerational Impact

Lord Sikka Excerpts

Thursday 16th September 2021 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I thank the noble Baroness, Lady Greengross, for this debate. Nearly 50% of social care expenditure is on working-age adults in this country, and every one of us is just one event away from the need for social care—so it is an issue not just for the elderly but for the whole society. With 18.4 million individuals on an annual income of less than £12,500 and median gross household savings in this country of only £11,000, hypothecated taxes, a higher basic rate of national insurance for the masses or insurance for the benefit of the rich property owners is not really the answer.

The best legacy that we can give future generations is a system in which social care is free at the point of delivery. Governments have bailed out banks, provided £895 billion of quantitative easing to speculators, thrown billions at contracts for cronies and continue to give billions in subsidies to railway, gas, oil and other companies. The Government can surely find resources to improve people’s welfare, too.

If the Government want to think in old-fashioned ways of tax and spend, they still have plenty of options without increasing the basic rate of income tax or national insurance contributions for the masses. Redistribution, as earlier speakers mentioned, is the key. Here are some things that the Government could do.

By taxing capital gains at the same marginal rates of tax as earned income, some £17 billion in tax, plus another £8 billion in national insurance, can be raised. Taxing dividends as earned income can raise £5 billion plus nearly £600 million in national insurance. By abolishing the current regime of tax reliefs on pension contributions, which mainly benefits the 40% and 45% taxpayers, and instead giving all pension savers a flat rate of 20% relief, another £10 billion can be raised. Currently, 12% national insurance is levied on earned income below £50,284, and only 2% is levied above that—a highly regressive practice. An additional £14 billion a year can be raised by extending the 12% rate to all income. However, the Government do not wish to inconvenience their rich friends.

Those proposals redistribute income and wealth by removing anomalies and tax perks for the few. They do not impose higher taxes on the young or most workers. There are no shortages of resources for free universal social care; there is only a shortage of political will to improve social welfare.

[The Deputy Speaker (Lord Brougham and Vaux)]

The noble Baroness, Lady Brinton, is taking part remotely. I invite her to speak.

Elderly Social Care (Insurance) Bill [HL]

Lord Sikka Excerpts

2nd reading
Friday 16th July 2021 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I, too, would like to thank the noble Lord, Lord Lilley, for this debate, but I cannot support his Bill. The Bill does not really address the crisis in social care, which has been deepened by the Government. There has been a 38% real-terms cut in local authority funding since 2010; we have an expensive and unfair system of means testing and caps; and there is obsession with privatisation. The involvement of private equity and hedge funds has been disastrous. Some 11% of the income of private equity disappears into servicing contrived loans, leaving far less for front-line services. Also, the Care Quality Commission has been an ineffective regulator.

This Bill would create a divisive system to help a few rich people. Currently, around 50% of social care expenditure is on working-age adults, not the elderly. The Bill offers nothing to them. Its concentration on home owners also deepens social divisions. For example, only 20% of black African households own their home, so they would be abandoned by this Bill. Due to low incomes and high house prices, home ownership is declining, at 63% now compared to 71% in 2003. Many retirees are still paying their mortgages and do not have £16,000 just hanging around. The median household gross savings in the UK is around £11,000, and 25% of households have less than £1,800. Poor pensioners are already using equity release schemes to make ends meet, never mind finding an extra £16,000.

The only way forward is for us to have a free social care system funded by general taxation. This can be done without increasing the basic or the 40% marginal rate of income tax or national insurance contributions for the masses. For example, £14 billion a year can be raised by taxing capital gains in the same way as earned income, £10 billion can be raised by restricting tax relief on pension contributions to 20% for everybody, and a modest level of financial transaction tax and wealth tax can raise billions. Since 2010, HMRC has failed to collect around £350 billion of taxes due to avoidance, evasion and errors. A clamp-down on tax abuse, and investment in HMRC, can pay big dividends. There are resources, and they are available, to fund completely free, universal social care for everyone. The only barrier is the Government’s ideology.

Women’s Health Outcomes

Lord Sikka Excerpts

Thursday 8th July 2021 Lords Chamber

[Lord Sikka (Lab) [V]]

My Lords, I thank the noble Baroness, Lady Jenkin, for this debate.

The key to reversing poor health for women is ensuring that the Government provide a range of public services related to women’s health, child and family care, domestic violence and reproductive and sexual health, as well as a just redistribution of wealth and income. Fiscal and welfare policies have major consequences for women but government announcements are rarely accompanied by any gender impact assessment.

Wage freezes for public sector workers have hit women the hardest, as many occupy low-paid jobs, but there has been no gender impact assessment even though poverty levels are higher for female-headed households. By freezing personal allowances, the 2021 Budget will force poorly paid women to pay more in tax. The 107 pages of the Budget document uses to the word “women” just three times. Childcare was not even mentioned. Some 46% of mothers being made redundant say that lack of childcare is a major factor in their redundancy.

The Government are cutting universal credit by £1,040 a year. That is not accompanied by any assessment of the impact on women. Janet Mackay from Oxfordshire wrote to me. She stated:

“My disabled daughter can’t just get a job and this cut will lower her quality of life. It’s monstrous to do this to the disabled.”


Despite gender inequalities, the Government raised the state pension age to 66 and deprived millions of 1950s-born women of their state pension for six years. The impact assessment said little about the quality of life for women. It does not get any easier after retirement either. As a fraction of average earnings, the UK state pension is one of the lowest in the industrialised world. The charity Independent Age has reported that 2.1 million pensioners are living in poverty and 1.1 million in severe hardship. People aged over 85 are most affected, and women are worse affected than men.

I therefore ask the Minister to give a public undertaking that all fiscal and welfare policies will be accompanied by an impact assessment from women’s perspective.

Covid-19 Update

Lord Sikka Excerpts

Tuesday 18th May 2021 Lords Chamber

[Lord Bethell (Con)]

My Lords, I pay tribute to the vice-chancellors and to the universities and colleges of Britain for the way in which they have embraced campus testing. It has been a salutary lesson in what can be done, and it has helped to keep infection rates down on campuses where there has been a small number of returning students to date. That is done mainly through LFD testing. Positive tests then have a complementary PCR test, and the PCR test is automatically sequenced if it is positive. The combination of LFD, PCR and sequencing is the right one for keeping infection rates down, but we tweak the formula as and when best advice comes in.

[Lord Sikka (Lab) [V]]

My Lords, the pandemic has hit the low-paid and the poor the hardest. The Government need to commit to a road map to a better post-Covid society so I invite them to make two pledges. First, at the very least, they need to reduce the NHS waiting lists in England from the present 4.95 million to 2.5 million, which was the case in 2010. Will the Minister pledge to do exactly that by the end of this Parliament or even sooner? If not, why not? Secondly, the poorest 10% of households pay 47.6% of their income in direct and indirect taxes, compared with 33.5% for the richest 10% of households. This condemns millions of people to poor food, housing and health, which is a key reason for deaths during this pandemic. Will the Government pledge to eliminate that injustice by the end of this Parliament?

[Lord Bethell (Con)]

My Lords, I recognise some of the noble Lord’s insights. It is undoubtedly true that the low-paid and the poor have been hardest hit by Covid, both by the infection rates themselves and by the lockdown. That is a frustrating truth that is completely recognised and acknowledged by the Government. It is also true that the low-paid and the poor have health inequalities that have themselves made people more vulnerable to sickness, both from Covid and from the non-Covid diseases that have been exacerbated by limited access to some parts of the NHS. We are absolutely committed to reducing NHS waiting lists—that is an incredibly important part of the “build back better” mantra—but we need to do more to bring a degree of levelling up to all parts of society in order to address the symptoms that the noble Lord rightly describes.

Covid-19: Update

Lord Sikka Excerpts

Tuesday 20th April 2021 Lords Chamber

[Lord Bethell (Con)]

The right reverend Prelate hits the nail on the head. It is extremely sad, frustrating and hard to acknowledge the fact that those who live in deprivation are often those who are hardest hit by this awful disease. We have worked extremely hard to get the vaccine, and testing and tracing, into those communities and to support them with whatever education and community support we can. But the fact remains that this country has an unequal health outcome for too many families, and it is part of our levelling-up agenda that we try to address that. The obesity strategy is one way in which that we can do that, but there are a great many others that we need to look at.

[Lord Sikka (Lab) [V]]

My Lords, 4.7 million people in England are waiting for routine operations and procedures. Some 388,000 have been on waiting lists for more than a year. Even with the extra £7 billion a year, it is estimated that it will take five years to clear the backlog. Can I urge the Government to declare an NHS emergency, equivalent to that of Covid-19, provide additional resources to the NHS, and inform the House of the targets they will set for reducing the waiting list?

[Lord Bethell (Con)]

The noble Lord is right that the backlog is a grave issue, and we are fighting as hard as we can to address it. The big guns of the NHS are moving from Covid to addressing the backlog, but we should not overstate its threat either. Large parts of the NHS remained open all the way through Covid, and I pay tribute to those in the NHS who worked extremely hard to ensure that many elective procedures and much diagnosis continued. We do them and their reputations no favours if we imply that the NHS was in any way doing less than it should have done to work through Covid. But the noble Lord is right; this is a grave issue, and we take it extremely seriously.