May 31, 2011 9:03 pm

Southern Cross affair erupts

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

When the emir of Qatar met the Queen at Windsor last October, the regal visitor was confronted by protesters from the GMB union, furious at the Gulf state’s role in the growing crisis at Southern Cross.

The Qatar Investment Authority is one of several landlords of the care home operator that have benefited from a lease system under which rents rise sharply every year.

The GMB has been warning for months that this arcane financial engineering is unsustainable and threatens the welfare of thousands of vulnerable elderly people.

Rumbling union anger at the company has erupted into a full-blown political row ahead of a meeting between Southern Cross and its landlords today.

Sir Peter Bottomley, a backbench Tory MP, said the situation was an issue of enormous public concern. “It’s bad enough when a small home closes and people find themselves on the streets. I hope that doesn’t happen with a big firm or even group of firms,” he told the Financial Times.

Sir Peter sponsored a recent early day motion, signed by 24 MPs, expressing concern about Southern Cross’s financial problems. The motion called on the government to be ready to take control of the homes and transfer their management to local authorities.

Sir Peter criticised the “clever operators” that had taken unacceptable risks by engaging in “financial engineering” in the sector. “To have unsustainable risk and unsustainable debt is, to sum it up in one word, unsustainable.”

Sarah Wollaston, a GP and backbench Tory MP, warned that, as companies struggled under huge debt problems, there would be an impact on care. “If they do become insolvent, and if people have to move care homes, there are concerns because we know that when elderly people are moved their health suffers,” she said.

Labour called on the government to clarify whether it had drawn up contingency plans in the event of a collapse.

Ministers have failed to spell out what would happen if the negotiations founder, according to Emily Thornberry, shadow health minister. “Are they expecting local authorities to pick it up? Many councils have no experience of running old people’s homes,” she warned.

In recent years there have been instances of councils taking on the running of care homes after the failure of private companies, but this has tended to be a temporary measure.

Ms Thornberry added: “The idea of taxpayers’ money being paid by local authorities to look after the most vulnerable, and then going to private landlords including the Qatari royal family, is something that leaves a bad taste in the mouth and the model is now clearly unsustainable.”

Southern Cross is responsible for no fewer than 750 care homes, and the various parties – the health department, the Local Government Association and the industry – are entering uncharted waters.

Peter Hay, chairman of the Association of Directors of Adult Social Services, said landlords would either have to reach an agreement with Southern Cross or find an alternative operator to run the business. Only if this process failed would councils intervene.

“Most councils don’t run an awful lot of care homes. But we do have experience, not on a large scale like this, but we have stepped up in the event of failure in the market,” said Mr Hay. “In these situations councils have stepped in and run the homes for a temporary period.”

But he signalled discomfort about a government bail-out of the sector. “I’d be fairly nervous as the taxpayer,” he said, “with money changing hands on the back of the properties.”

Paul Kenny, general secretary of the GMB, criticised private equity companies for treating care homes like “factories”.

He said: “This is yet another case of where the private sector has already made huge profits from the public funds and now expects the taxpayer to pay to clear up the mess now that it is all going wrong.”

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments
Enter job search