After the collapse of Southern Cross more than a year ago, the Government said it would act to ensure that the finances of care homes were more transparent. Not only has this not happened, but – as we report today – three of the top 10 companies, responsible for 800-plus homes, may face difficulty paying off their debts. The ninth largest, Bondcare, has called in receivers.
The post-mortem on Southern Cross blamed its risky financial model, with its assumptions about property values and leases not borne out in practice. But the finances of most major care-home owners still rely on very complex structures and loan arrangements, and many companies are based offshore. Even with the best will in the world, the local authorities that commission much of the care and families trying to find a suitable home for elderly relatives lack the necessary information to gauge the soundness of an owner's finances. While a home may look satisfactory and meet all statutory requirements, there is almost nothing to prevent the situation changing overnight, if the owner runs into difficulty.
The care sector as a whole leaves much to be desired – from low pay, sparse staffing and poor standards of care at one end, to high fees, the low threshold at which individuals have to pay for all their care, and the way these so-called self-funders subsidise care for those whose fees are paid by the local authority. The whole system needs an overhaul. But the idea that this will, or should, reduce the role of private providers is unrealistic.
A charitable view might be that the Government has been waiting to legislate, intending to incorporate new financial requirements into its response to the year-old Dilnot report. With no sign of any decision on Dilnot, however, and the prospect of comprehensive reform, alas, receding, there is a case for legislating on care-home finances separately. The situation we reveal today shows that stricter scrutiny is required as a matter of urgency.