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.