Asked by
To ask Her Majesty’s Government what assessment they have made of
the impact of private equity on the social care sector.
(Lab)
My Lords, I beg leave to ask the Question standing in my name on
the Order Paper and draw attention to my interests in the
register, which states that I am an unpaid adviser to Tax Justice
Network.
The Parliamentary Under-Secretary of State, Department of Health
and Social Care () (Con)
Under the Care Act 2014, it is the responsibility of local
authorities to shape their local markets, which are largely made
up of privately owned and third sector services. No assessment of
the impact of private equity on the sector has been made, but, as
of December 2021, 84% of care providers are rated “Good” or
“Outstanding”. The market oversight scheme mitigates the risk of
a sudden failure of potentially difficult to replace care
providers.
(Lab)
My Lords, I thank the Minister for that reply, which is really
unsatisfactory because private equity is a disaster for the care
home sector. To take one example, HC-One, which is the largest
care home operator, is siphoning off 20% of its revenues to
offshore affiliates through intra-group transactions, leaving
very little for front-line services. Since 2011, it has declared
a loss every year except one and paid no corporation tax but paid
dividends of £48.5 million. Can the Minister explain why the
Government tolerate such abuses? When will there be an
independent inquiry?
(Con)
We value the role of independent and third sector care homes. It
is important that we have that right mix. Some private companies
will include private equity, and it is important not to tar all
private equity with the same brush. Private equity plays a role
in many companies in turning them around and retaining jobs. The
important thing for us is that, if any companies are potentially
in financial trouble, we have the market oversight scheme to
ensure that, if they go bust, there is an ability to transfer
patients elsewhere.
(Lab)
My Lords, front-line carers often get paid around £9 or £10 an
hour, and it is hard to survive on that. Yet last year,
Barchester Healthcare’s CEO collected 120 times more than his
care staff. What proposals does the Minister have to ensure that
public moneys paid to private care homes are used to improve care
and staff welfare and not siphoned off to fat cat executives?
(Con)
The CQC has a role in making sure that the care provided to care
home residents is of satisfactory quality. As I said, 84% of care
providers are rated good or outstanding. The market oversight
scheme examines companies that could potentially be in trouble
and keeps a close eye on them. There are six stages in the market
oversight scheme to make sure that we manage that.
(Con)
My Lords, I am sure that the noble Lord, , is aware of the major benefits
to our economy and the provision of social care contributed by
the UK’s successful private equity sector. Private capital is
driving the development of the UK’s world-leading technology
sector and powers the growth of the UK’s dynamic new businesses.
I have been chairman of the EIS Association for some 10 years.
EIS has been a significant source of risk finance for new and
small businesses. Is the noble Lord, , aware that 32,965 companies
have received £24 billion of EIS funds since EIS was introduced?
(Con)
I correct my noble friend: his question should be directed
towards me. I am not sure whether the procedure allows me to
delegate the noble Lord, , to answer the question—I will
have to find out.
The private sector, the third sector and private equity play an
important role. The most important thing is the quality of care
that patients get and making sure that we have a market oversight
scheme, so that if any companies are potentially in trouble, we
can manage that, if they go under.
The Lord Privy Seal () (Con)
My Lords, the noble Baroness, Lady Brinton, wishes to speak
virtually, and I think that this is a convenient point to call
her.
(LD) [V]
My Lords, typically, private equity-backed providers spend about
16% of the bed fee on complex buy-out debt obligations. The
accounts of Care UK show that it paid £4.1 million in rent in
2019 to Silver Sea Holdings—a company registered in low-tax
Luxembourg—which is also owned by Care UK’s parent company,
Bridgepoint. Given that the ONS says that 63% of care home
residents are paid for from the public purse, does the Minister
not think that private equity providers should be subject to a
financial code of conduct?
(Con)
What is important is to make sure that we have continuous and
high-quality care for patients. Therefore, where there are
concerns about the financial stability of any company, whether it
is funded by private equity or otherwise privately owned, it is
important that we have a system to make sure that we manage that.
If a company goes under, there is the ability to transfer
patients to high-quality care. The important thing for us is the
quality of care for patients—it is important that we put patients
first.
(Lab)
My Lords, last year, during the pandemic, the business that my
noble friend has referred to, HC-One, paid 10%—nearly £5 million,
tax free—of those dividends to its financial controllers, who are
holed up in the Cayman Islands. At the same time, it was given
almost £20 million from the Government’s infection control fund
to help it through the pandemic. Clearly, people’s pockets are
getting picked here. If ever anything called for an independent
inquiry, it is this behaviour by private equity businesses. Such
behaviour is concerning the Bank of England: the Financial
Stability Report shows that the level of leveraged debt that
these businesses have is a threat to our economy.
(Con)
The noble Lord makes an important point about the level of debt,
but I am sure he is aware that a number of private companies
operate with levels of debt. As we saw in the financial crisis,
the issue is whether that debt is sustainable. The noble Lord,
, who is an accounting standards
expert, understands all of the issues around IFRS 9 and all of
the downsides to that when sufficient provision is not made for
debt.
(Lab)
My Lords, the Minister’s predecessor in this role repeatedly told
the House that there was nothing wrong with the business model
for the care home sector, despite record numbers of
closures—particularly of small, independent homes, which are the
backbone of residential care—and the dire financial problems that
they face, with councils unable to pay going rates for staff pay
and residents’ fees. This is all compounded by the pandemic. The
Centre for Health and the Public Interest estimates that around
£1.5 billion leaks out of the health system each year, listed as
“dividend payments, net interest payments out, directors’ fees,
and profits”.
Should this not all be going to front-line patient care?
(Con)
We believe that the quality of care that patients receive is
really important—
Noble Lords
Oh!
(Con)
I am sorry if people do not agree with that, but the quality of
care that patients receive is the most important thing. As of
November 2021, 84% of all social care settings were rated good or
outstanding by the CQC. For most people, the experience of adult
social care has been positive, but, clearly, the pandemic came.
To mitigate the risk posed by debt and other financial pressures
in the sector, the Care Quality Commission operates the market
oversight scheme, which monitors the financial stability and
sustainability of the largest and potentially most difficult to
replace providers in the adult social care sector.
(Lab)
My Lords, of course the quality of care is very important, but,
at the moment, it is being provided at the expense of the
exploitation of workers, who are paid £9 to £10 an hour. How many
noble Lords in this House would have been happy to live on that
for the whole of their lives?
(Con)
The noble Baroness raises an important point about the pay of
staff. One of the things that we are looking to do with social
care staff is to make sure that it is an attractive career and to
persuade all providers to try to pay their staff a more
sustainable wage. That is why we invested money into social care.
We also must make sure that we get away from the situation where
some private providers effectively subsidise state-funded
providers, and make sure that they receive a suitable return.
(GP)
My Lords, on a number of occasions, the Minister has referred to
the fact that, if these complex financial arrangements go wrong,
we have the ability to transfer patients. Would he acknowledge
that, when patients are forced to be transferred, the shock is
too much for some of them and they die or suffer significant
health damage?
(Con)
I will look into that. I thank the noble Baroness for raising
that important point. As I have said a number of times—noble
Lords are probably bored of hearing me say it—we take the quality
of care seriously. We know that the social care sector has been,
frankly, abandoned for far too long, which is one of the reasons
that we have brought forward the Health and Care Bill, to make
sure that we have integration across the whole of people’s life
path and that they are not just forgotten towards the end of
their lives.
(LD)
My Lords, is the social care sector not one in which mutuals and
charities are more appropriate providers than private equity
companies? My family has benefited enormously from an excellent
charity running a number of care homes, but I am conscious that
some charities have moved out of the sector. Would the Government
not like actively to encourage non-profits to be involved more
widely in this sector?
(Con)
The noble Lord makes a very important point about mutuals: they
play an incredible role. Indeed, at the founding of the NHS, one
of the sad things was that the state pushed out many mutuals. The
number of friendly societies and mutuals went down. It is
important that we make sure that we have enough mutuals in the
economy.
