Private providers have every reason to fight their corner

Posted on March 29th, by geoff in CT blog. 2 comments

By Caring Times editor Geoff Hodgson

In recent months private care providers have warned that many care homes which rely heavily on state-funded residents will soon have to close because of inadequate fee levels in the face of rising costs, in particular the effect of the National Living Wage. Last week’s budget did nothing to address this so we can only wait and see if the predicted meltdown occurs to any degree.

The underfunding argument has recently been challenged by the Centre for Research on Socio-Cultural Change (CRESC) which has argued that the big corporate providers are driving the underfunding narrative in a bid to persuade government to underwrite their profit margins.

The CRESC report raises pertinent questions but I don’t think it paints the full picture. Past and current governments have encouraged the devolution of social care to private providers and have adopted a very laissez faire approach to the sector’s ongoing evolution.

Many smaller providers are struggling to keep their businesses viable and private care provision has to compete with other sectors for development sites in response to a growing demand for care home beds. They are given few concessions in the way of tax relief and they face stiff competition for skilled labour. Compliance with regulatory requirements are more onerous and costly than in many other sectors.

Banks have been bitten by failures in the sector and have become very coy, now only backing the safest of ventures. The sector has had, perforce, to seek other sources of development funding, including private equity institutions, other institutional investors and crowd funding. Lots of businesses in lots of sectors do this so where’s the problem? The problem is that when a social care business fails there is an unpalatable social cost lurking in the wings.

Only the most cynical of businesses plan to fail and social care providers have more reason than most to try to succeed. Because of this, I cannot bring myself to condemn them for vociferously fighting their corner, looking at every possibility of reducing their costs, and seeking to charge whatever they believe the market, public or private, will bear.

  • The CT Blog is written in a personal capacity – comments and opinions expressed are not necessarily endorsed or supported by Caring Times.

2 responses to “Private providers have every reason to fight their corner”

  1. Bob Ferguson says:

    Big business behaving badly?

    The said report also exposes the tax avoidance practices of some industry giants. Call me an innocent abroad, but I was amazed by the revelations – so it’s not just the likes of Google and Starbucks. And then, when the mechanics and consequences of so-called “positioning for exit” are concerned, absolutely horrified. (That wheeze is so complicated – way above my pay grade. Probably best to read the report.) To be clear, as things stand, none of these practices is unlawful, but that doesn’t make them acceptable. They get ten out of ten for ingenuity; zero out of ten for integrity.

    Can there really be a justification for ignoring or tolerating these practices? It has been suggested elsewhere that anyone who finds them objectionable should just suck it up and get real; this is how capitalism works. They – indeed, all of us – should be grateful that these guys are risking their capital in residential care. I don’t think so.

    To state the obvious: ultimately, taxation is a zero-sum game; what is lost through avoidance must be replaced from other sources. That means us. So why can’t we have a piece of the action? Simple: the flexibilities aren’t available to us ordinary mortals; nor, for that matter, to the vast majority of care home owners. I don’t imagine they’ll be too thrilled to discover they are, in effect, subsidising the profits of their behemoth brethren. Not the best way to build sector unity.

    Is it enough to cluck one’s tongue disapprovingly, or should there be something more? What about the fit and proper person regulation? It has been designed to hold to account “the controlling mind” of the provider organisation; might that be an option? Could it be beefed up for this purpose? Is it even feasible?

    Eight years on from the financial crash, a few foot soldiers have been thrown to the wolves, but the “controlling minds” in the banking world are still as free as birds. Should we not ensure that there is no place for casino practices in the business models of care home operators? Can a “fit and proper” regulation have any real meaning if it doesn’t explicitly reject practices such as these?

  2. Dreamwaverider says:

    The proof of the reading will be in one year’s time.
    The CRESC report flies in the face of the RESPUBLICA report obviously funded by the large operators.
    CRESC will undoubtedly have government funds being channelled in through a maize of routes.
    CRESC seem hell bent on attacking Four Seasons with some sort of personal distaste clearly coming out.
    They miss the point that our sector clearly exhibits. One of self funded v government funded. The two methods have now clearly de coupled. If you run a number of government funded homes in poorer areas the business will be unsustainable.
    I am hoping some of the larger operators will continue to close doors as certain areas are totally unviable.
    Sadly, the big loser in this merry go round are the elderly and an increasing number in need of help and just not getting it.
    With the NLW and lousy LA fee increases yet again, Im sure standards will fall, homes will close and the most vulnerable government funded English elders will continue to be badly let down.
    Maybe this has always been the plan.
    Give the poor older people a damn good kicking for failing to deliver when they were younger. Hard to argue this angle. If you can’t afford proper support, then don’t rely on the government and LA’s to pick up the pieces. They have clearly thrown in the towel.
    Its a really dire sector just about to get far worse.

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