Four Seasons - son of Southern Cross

5 December 2011

GMB AGREE WITH PAC ON AVOIDING ANOTHER SOUTHERN CROSS CRISIS IN CARE HOMES AND WARN OF DANGERS AT DEBT SOAKED FOUR SEASONS

An ADASS report on Four Seasons said “Given the complex group structure and tax avoidance on the property portfolio, it is impossible to say that the care home operation could be extracted as a profitable standalone operation”

GMB, the union for workers in care homes, commented on the report from the House of Commons Public Accounts Committee (PAC) on the need to avoid a repeat of the Southern Cross homes crisis.

Justin Bowden GMB National Officer said “GMB agree with PAC that the Department of Health must get to grip with the very real risks to the social care market, if we are to avoid another Southern Cross.

GMB, in evidence to Department of Health discussion paper on “Oversight of the social care market” submitted last Friday warned of dangers that have been ignored up to now.

The lessons of Southern Cross must be learned. The existing framework has proved woefully inadequate. It does not meaningfully check the financial health of care providers, nor protect the care sector from financial predators.

GMB warned time and again that Southern Cross's financial model was unsustainable. Our primary concern now is for the viability of debt-soaked Four Seasons Healthcare, 40%-owned by RBS.

Care homes are not an ordinary business; elderly and vulnerable people are not packages to be bought, sold and moved about in some free-market way.

The Government really needs to get a grip of the care market before it sinks under the weight of its debts. Narrowing income streams from cash-strapped local authorities would not appear sufficient to sustain a set of over-leveraged providers. The Government should be developing alternative models of care provision as a matter of urgency. That's why GMB is calling for a root-and-branch review.

In the case of Four Seasons, whose ultimate parent company is registered in Guernsey, ADASS-commissioned analysis has found that: “Given the complex group structure and tax avoidance on the property portfolio, it is impossible to say that the care home operation could be extracted as a profitable standalone operation”. Such lack of clarity in the structure and viability of the largest care-home operator is simply unacceptable.

Operators like Four Seasons should be required to abandon their off-shore status, base themselves in this country, and open their books , if they wish to continue to play a role in the care sector. Frankly it is not acceptable for four Seasons to claim in the media that they have assets of £200m while the filed accounts at companies house show the opposite.

The Department needs a far more robust plan to avert financially-driven mass home closures. Public agencies are going have to be equipped and required to intervene.”

Notes:

Public Accounts Committee Report

Oversight of user choice and provider competition in care markets

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

“The Department of Health must get to grip with the very real risks to the social care market, if we are to avoid another Southern Cross.

“No one, government or local authorities, really knows what is going on locally or whether one provider is becoming too dominant. Southern Cross had a total market share of 9%, but this was concentrated in areas such as the North East where they were the dominant player with a market share of some 30%. Effective oversight of the care market, including market share of large providers at the local and regional level, is essential to protect social care users and taxpayers.

“Local authority budgets are shrinking and large-scale providers are racking up debt – Four Seasons Health Care, for instance, carries nearly £1 billion of debt - yet the Department is not monitoring their financial health. There is currently no early warning system for providers getting into difficulty.

“It is deeply worrying that the Department has not made clear what will happen when providers fail. This is crucial to protect frail and vulnerable users of care and to provide reassurance that the responsibilities of the failed providers will be transferred quickly and with minimum disruption to users.

“It is alarming that people are not getting the support they need to make sensible choices about their social care. The use of personal budgets to promote user choice has been supported by successive governments. They can work only if people get the right information when they need it. But there are wide variations in the information provided by local authorities. People should not be subject to a postcode lottery when deciding on their care. This is important for taxpayers as well as users.”

Margaret Hodge was speaking as the Committee published its 57th Report of this Session which, on the basis of evidence from the Department of Health (the Department), examined the current arrangements for the oversight of user choice and provider competition in care markets.

Successive governments have supported the move towards using personal budgets and markets to promote user choice and provider competition in social care. Currently, 340,000 people, or 30 % of eligible care users, have a personal budget, which enables the individual to choose their care provider. The Government wants all eligible users to control their personal budget by April 2013. Personal budgets currently cost the taxpayer £1.5 billion each year. Individuals who fund and therefore choose their own care spend about £6.3 billion annually. The total annual expenditure on care is around £23 billion.

The Department is responsible for setting the overall policy framework for social care in England, with funding mainly coming through DCLG from the local government formula grant, which is not ring fenced. Local authorities have statutory duties to provide or fund social care for those they deem eligible by use of means testing. The Care Quality Commission, which reports directly to the Department, is the independent regulator of health and adult social care in England.

Effective oversight of the care market is essential to protect the interests of both social care users and of taxpayers. Given its policy responsibility, we look to the Department to provide this oversight. There is growing consolidation in the social care market at a regional level. Yet the Department did not have a view on what level of market share represents a risk of provider dominance, nor arrangements to protect users should a large-scale provider fail. The Department told us that it has insufficient powers and information to identify or prevent providers becoming too dominant. This is particularly worrying given the recent experience of Southern Cross and the high levels of debt that some providers are carrying.

There are risks to the future functioning of the social care market from local authority budget reductions. Social care homes face inevitable increases in costs at the same time as local authorities inevitably reduce what they will pay to fund places. At present, 63% of funding of care homes comes from the public purse. Reducing this funding could destabilise the market or create problems for the NHS with elderly people blocking beds as local authorities no longer fund the social care places.

Most users hold personal budgets in high regard, and the early research shows that they like having choice and control. However, users need more support to obtain optimum value from their budgets. Some users are confused about what they can spend their budget on, and there are wide disparities in the level of information and support they receive across different authorities. Only around half of users find it easy to change their support, or get relevant information and advice, and around a third of users find the experience of employing personal assistants to provide their care daunting. Yet we found the procedures for users to complain or get redress when things go wrong to be inadequate. These issues must be addressed if personal budgets are to be successfully sustained.

The Department has to rely on local authorities to implement its policy of universal provision of personal budgets to eligible users by April 2013 but it cannot compel local authorities to act. In consequence there are a small number of local authorities which are dragging their feet in offering personal budgets to users. It is disappointing that the Department did not take advantage of the current Health and Social Care Bill to enshrine the right to personal budgets in legislation.

The Department will shortly issue a White Paper on reforming social care delivery. The changes the Department makes must address our concerns about giving users a real choice, overseeing the market to ensure competition and stability, and putting in place arrangements and contingencies to deal with major provider failure.

Notes:

This report can be accessed via the internet from around 11.00 am on the day of publication.

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