Social Care in England

Baroness Donaghy Excerpts

Thursday 14th October 2021 Lords Chamber

[Baroness Donaghy (Lab)]

I congratulate the Minister on his appointment—or should I say commiserate? I also congratulate my noble friend Lady Pitkeathley on introducing this timely debate in her usual comprehensive and extremely impressive way.

The Government certainly took the political initiative—it was a PR triumph. However, the kindest thing the newspaper financial columns could say about it was that it was a dog’s breakfast. My noble friend’s speech and that of my noble friend Lord Eatwell in Monday’s debate on the NIC increases provide the definitive analysis of why the Government’s PR stunt will not work. I do not feel that I can add much more to those speeches, so I will concentrate on why the financial models for care homes and social housing are unsustainable in their current form.

First, on the so-called model of care home funding, we have all heard how hedge funds use them as financial vehicles, but the majority of the sector is made up of small and medium-sized businesses. The Government want banks and lenders to show them flexibility, and the banks say that they are

“actively providing support for viable businesses”—

a quote from UK Finance. The question is: what does “viable” mean?

The reality on the ground is that a growing number of care homes—it is estimated at about 20%—are under pressure from their banks and are in financial difficulty. They dare not tell their local authority or the Care Quality Commission because they fear losing contracts or being taken into special measures. The infection control fund, a pot of £600 million to pay for PPE for social care firms, ended on 30 September. Local authorities in England spent £3.2 billion on adult social care during the first year of the pandemic, including PPE, but they received only £1.49 billion of extra Covid funding from government. This is not a sustainable system for social care.

Social housing for the most vulnerable in our society also sits on precarious foundations, which threatens the existence of some housing associations yet allows City firms to pay out millions in dividends: in the case of one firm alone, £103 million was paid out in dividends over a five-year period. The City is attracted to the £265 million annual housing benefit bill for specialised support housing in England. Some 176,000 vulnerable adults live in these properties. Private companies are piling in with investment, buying up properties and leasing them to housing associations, often locking them in to 25-year leases, which in some cases are unsustainable because housing associations have to pay rent on empty properties and are therefore carrying the risk, while the private company can promise investors a 5% yield.

The Regulator of Social Housing has expressed concern about the business model. Who picks up the pieces when things go wrong? I somehow do not think it will be the investors in Civitas Social Housing, which is listed on the London Stock Exchange. It owns more than 600 homes and accommodates 4,400 people with learning or physical disabilities and mental health problems. Since the near-collapse of First Priority Housing Association, the regulator has published damning evidence on the financial stability of 19 housing associations, declaring that they are non-compliant with its standards. Eight of the 19 are Civitas tenants. The regulator’s view is that the lease-based model is unsustainable in its present form. Why are housing associations taking these risks? It is because they are strapped for cash and are selling off precious properties to make ends meet, due to the shortfall in government funding.

Civitas bought a company called TLC Care Homes. It paid £25.5 million for nine care homes in Essex. Civitas split it into two companies, caring for the residents and owning the properties. The caring bit was then sold to a third company in—wait for it—the Isle of Man, with the idea that the operator would rent the buildings from the property company. These deals are well known in the property sector. They are called OpCo/PropCo. The Isle of Man business was partly owned by two Civitas directors, although this was not publicised. I am not claiming, as the Sunday Times implied, that properties were undersold, or that shareholders were disadvantaged, or that Civitas directors were doing anything illegal by not disclosing. In fact, my problem is that it is all lawful. My criticism is that these sharks and dodgy dealers should be kept a million miles from social accommodation for the vulnerable. This is not a sustainable model. What plans do the Government have for putting care homes and specialist housing on a sustainable financial basis which prioritises the protection and care of the vulnerable?