Ministers 'ignored warnings of difficulties at Southern Cross'

Ministers in the Department of Health were yesterday accused of ignoring warnings that Britain's largest care home group was facing severe financial difficulties.

Leaked letters appear to show that Paul Burstow, the Social Care minister, was repeatedly warned last year about the problems at Southern Cross before it went bankrupt but declined requests to meet the company's chief executive to discuss the matter.

In the letters, passed to the Financial Times, Jamie Buchan, Southern Cross's chief executive, told Mr Burstow that his company was facing acute pressures as a result of cutbacks to local authority social care budgets and asked for a meeting to discuss it further.But he was rebuffed by the department which said Mr Burstow was unable to meet him due to diary pressures.

Mr Buchan's first warning came on 3 August 2010, when he wrote: "I want to outline the potential financial pressures which reductions in government spending place on the Southern Cross business model," adding he was worried about the "the ongoing viability of our business".

He also said: "During the period 2003-2009 the company expanded rapidly via acquisition but latterly, over-extended itself. The next few years will be very difficult... Despite the increasing standards of care delivered in our homes, we still suffer from unfavourable legacy sentiment." Mr Buchan requested a meeting with Mr Burstow and sent another letter on 24 September, also asking to meet.

Mr Burstow gave no written reply until October 14. In that letter, the minister outlined the policies the Coalition Government was taking on social care but refused the request to meet, saying: "I am afraid that due to the pressures on my diary at the moment, I am unable to accept your invitation."

Southern Cross made further requests to meet Department of Health officials but these were again refused. The company announced in March that Government cuts and other factors meant that it was unable to meet its rent costs and, four months later, that it would shut down entirely. This left ministers trying to make sure its 31,000 residents would not be left homeless. The company is handing all of its 751 homes to new operators and will be wound up before the end of this year. But the Department of Health denied that they had been reluctant to meet the group. "There have been regular and constructive discussions between the Government and Southern Cross representatives from the moment it became clear that the company was in difficulty," they said in a statement.

"Ministers have taken this situation very seriously and have been kept fully informed. Numerous meetings were held between senior DH officials, the company and other representatives to formulate a solution that protected the health and well being of residents. On each occasion ministers were updated."

But critics said Mr Burstow's lack of contact with Southern Cross executives show he was keen to wash his hands of the issue. William Laing, chief executive of Laing & Buisson, the healthcare consultancy, said he found it "quite astonishing" that Mr Burstow had never met Mr Buchan. The warnings in Mr Buchan's letter about Southern Cross's financial situation "should have set alarm bells" ringing, he said. In a statement, Southern Cross said: "The contact with national and local government has been entirely constructive throughout the process."