Social Care

Viscount Hanworth Excerpts

Thursday 1st December 2016 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, many of the providers of residential care are on the verge of bankruptcy. They are unable to meet their mounting expenses, while the budgets of local authorities, which are responsible for paying for care in many cases, have been savagely cut.

The failure of the Government to address this problem is in spite of numerous warnings. One such warning was the collapse of the Southern Cross Healthcare Group in 2011. The group was the largest provider of care homes and long-term care beds in the United Kingdom, operating 750 care homes, with over 37,000 beds and with a staff of around 41,000 employees. The company was founded in 1996. It grew rapidly through acquisitions that were financed predominantly by a sale-and-leaseback strategy, which placed its residential properties in the hands of investors in return for large capital sums and at the cost of payments of rent on those properties. Already by 2004, its acquisitions were subject to an investigation by the Office of Fair Trading. In 2011, the company was in crisis on account of its inability to meet its annual rent bill, and it was begging the Government for support. In the event, the Government did not have to intervene, for the reason that the ownership of many of the care homes was transferred to the landlords, some of whom had links to social care provision and many of whom did not. Before its collapse, the value of the shares of Southern Cross fell drastically, and its market value was reduced from £1.1 billion to £12 million.

Another Government of a different political persuasion might have seized the opportunity to acquire the assets of the conglomerate at fire-sale prices, thereby returning the provision of social care to the public domain, where it had resided preponderantly before the era of privatisation. The ownership of care homes is now in the hands of venture capitalists, whose interests are confined to the financial returns of their holdings. The current crisis points to a further round of divestment with an even greater consequence than the failure of Southern Cross. The failed conglomerate was founded on the supposition that a steady and a reliable income would be forthcoming from local authorities. The sure-fire returns would have allowed a high degree of financial leverage on the basis of which there could have been further acquisitions. The fallacy of this supposition has now been demonstrated conclusively with the consequence that very little private capital will be forthcoming in future to sustain the sector. However, there are signs of a pushback from the private owners of care homes, and some are even investing to improve their services significantly. By so doing, they should be able to attract rich patients whose wealth would preclude them from receiving support from local authorities. What is now in prospect is a two-tier care system for the elderly. For the rich, there will be comfortable residences. For the rest, there will be what should best be described as poor homes.

The crisis in social care will be solved only when adequate financial support is forthcoming, and it is important to attempt to envisage how this could be achieved. First, we should observe that the manner in which we end our days is the subject of a lottery, but it is a lottery that has no winners. Some people will take their leave suddenly and without much forewarning. Others will experience a lengthy senescence, which is often a miserable one. If the present inadequacies of the care system continue to worsen, then such people will be amongst the greatest losers.

The appropriate way in which to finance this lottery is by an insurance scheme. In common with the noble Lord, Lord Patel, I propose that every income earner should contribute to a fund in the proportion to which they pay income tax. The fund in question should be used for the sole purpose of social care. The tax to sustain it should be set to a level that is appropriate to the nation’s need for social care, and the determination of that level should be the responsibility of an independent commission.

There have been proposals in the past that Governments have chosen to ignore. Those of the Dilnot commission are still hanging over us. The commission proposed a limit to the amount that any individual should contribute to their care over their lifetime. It also suggested increasing the wealth that an individual might own before being asked to contribute to the cost of their care. Both of these suggestions have found favour with those who wish to preserve their wealth to pass it on to their inheritors. I declare that I am not greatly sympathetic to this motivation.

Be that as it may. I suggest that matters of inheritance should be rigorously separated from the question of how to achieve adequate financing of social care. Much of the difficulty that we face in connection with social care is a consequence of the pernicious confusion of two issues that should be dealt with quite separately.