Southern Cross Care Homes

Lord Elystan-Morgan Excerpts

Tuesday 12th July 2011 Lords Chamber

[Earl Howe]

First of all, the CQC is an independent body; it is not under the jurisdiction of Ministers, and it must be free to organise itself as it sees fit. I cannot undertake on its behalf that it will perform random unannounced visits. It does, however, do that as a matter of course, and it generally does so on a risk-based basis so it would surprise me if, where the CQC saw that there was an enhanced risk to residents, it did not make it its business to perform inspections. Looking ahead into the medium term, should the Health and Social Care Bill pass through Parliament, as the Government propose, local HealthWatch will be in a position to enter and view care homes, as LINks are at the moment, but I believe that HealthWatch will be, in most areas at least, in a better position to undertake such inspections on a random basis.

The financial liability will of course not be the province of HealthWatch, but any concerns about the welfare of residents would be subject to the powers of HealthWatch to refer up to HealthWatch England, and in so doing, through HealthWatch England to the CQC. The financial viability of care homes is of course a live issue. I have commented on this in the past, and we are certainly considering whether Clause 57 of the Health and Social Care Bill could be used to extend the regulatory regime that we are proposing for the NHS to care homes. That is something that we will need to discuss because it would amount to a regulatory burden on care homes. Nevertheless, I do not belittle the issue. My ministerial colleagues in the Department for Business, Innovation and Skills are looking at the issue of private bodies that provide publicly funded services and whether there are implications in the sense that the noble Lord has indicated.

[Lord Elystan-Morgan]

My Lords, has the Minister considered the legal question of fraudulent trading, which seems to be apposite not only to the case of Southern Cross, but indeed—according to the comments made by the noble Baroness, Lady Thornton—to other care companies as well? Does the Minister recollect that exactly 50 years ago, in a case called Wellfield, this House, sitting in its judicial capacity, defined fraudulent trading as a situation where the directors of a company continue trading, knowing that there is a risk that debts will not be able to be cleared as they arise? Bearing in mind that as far as Southern Cross is concerned, many months ago, it announced that it would not be able to pay its tax liabilities, nor indeed to pay more than 70 per cent of the rents due to lessors, would it not seem that there was a clear breach of what is now Section 993 of the Companies Act 2006?

[Earl Howe]

My Lords, my advice is that Southern Cross is not insolvent in either sense of the word. Its assets, I am told, exceed its liabilities, and it is able to meet its commitments as they fall due, thanks to the agreement reached between the company, its landlords and its bankers. The process announced on 15 June is the key to this: the company’s restructuring committee is developing a plan to stabilise the ownership and operation of Southern Cross care homes. We expect, as I have said, that there will be an orderly process of reassigning homes to landlords and new operators. That process will take place between now and October, during which time continuity of care will be maintained. Nothing that I have said changes the outlook for the medium term, and I believe that we can say, and that the company can say, that insolvency is not an issue at present.