Southern Cross: How capitalism abuses the elderly
The inability of the largest
care home monopoly in the country, Southern Cross, to pay the rent on all the
premises it uses, throwing into question the future of both the company and the
31,000 vulnerable elderly people under its care, raises issues way beyond the
crass errors of one board of directors, the speculative greed of one gang of
equity capitalists or a single lapse in the performance of the regulators. The
scandal goes to the heart of capitalist Britain.
Once there was an extensive network of care homes
owned and run by the state. Whilst by no means perfect, they had the advantage
of a degree of local accountability. However with the spread of privatisation,
many homes previously run by the state now entered private ownership. As such,
they now became first and foremost business propositions rather than social
resources, presenting a prime target for capital investment.
They combined two great sources of
revenue: rents underwritten by tax payers and vast quantities of real estate.
True, the rents brought with them a duty of care in regard to the elderly
inhabitants, but by cutting corners on staff training and keeping wages low
this unfortunate drain on profits could be minimised. More troublesome was the
chain which bound the operational side (running the homes and farming the
inmates’ rents) to the property side (the profits to be derived from the
buildings and land through their sale, rental or employment as collateral). It
was this chain which the US equity capital group Blackstone successfully broke
after it took ownership of Southern Cross in 2003. So successful was its
exercise in escapology that in 2006 Blackstone was able to sell Southern Cross
on at four times the original value, banking a billion pounds in the process.
In order to go on milking upward of £500 a
week from each of the homes’ 31,000 inhabitants (subsidised by the tax payer
when personal savings dwindle below a given threshold), there had to be a roof
over their heads. Blackstone’s billion pound brainwave then struck: why bother
owning the property when you can sell it at a profit and then rent it back?
That way, you could swell your coffers with sales revenues and still get to use
the premises for selling cheap care at expensive prices.
During those last-ditch
boom years, as tottering credit mountains and inflated share values still
dominated the landscape, a wheeze like this seemed like a cast-iron licence to
print money. The small print on the deal which raised the rent Southern Cross
would have to pay to its new landlord by 2.5% every year seemed a trifling
matter when stacked up against the vast sums to be had up front from property
sales. Indeed, the fixed rise of 2.5% looked like a real bargain, given that
the boom-time retail price index stood at 5%. Anyway, if all else failed,
demographic trends would surely guarantee an endless supply of old people whose
rents, driven up by the intensifying competition for places, would be backed up
by state subsidy. Meanwhile the company could concentrate on expanding its
empire, borrowing to make new acquisitions rather than spending to raise the
standards of care. Indeed its capital expenditure fell from 8.3 per cent of
revenue in 2006 to 3.7 per cent in 2010.
When 2008 came along, all these calculations went
awry. Property values and the retail price index both declined, but the rent
demands continued to rise relentlessly by 2.5% every year, costing the company
something approaching £250 million a year, a quarter of its turnover.
Meanwhile, whilst the aging population has continued to swell as predicted, the
welfare state upon which privatised health and care providers have so
profitably battened over the years is preparing to shut up shop. Competition
for places does indeed drive up the profits to be made from residents’ fees,
but only if the elderly can afford to pay. With local councils of all
political stripes wielding the austerity axe, the age of guaranteed state
subsidy for rack-renting landlords is passing, whether in the field of housing
benefit or care provision. Southern Cross says that local authority admissions
have fallen by 15% in the last six months and councils are unwilling to spend
as much as before. According to Graham Ruddick in the Telegraph, “With
the Government trying to cut costs, a report by Age UK has claimed private care
homes are receiving fees £500m below the cost of care.” (5 June 2011, ‘Is
there still life in Southern Cross?’ 5 June 2011)
Southern Cross ended up with the worst of both
worlds. Having set a time bomb ticking by committing to the sale-and-leaseback
scam on Blackstone’s watch, it had then gone on to buy up a load more care
homes (on borrowed money) with a view to repeating the process – just as the
property market went pear shaped. The property magnates and landlords who had
hitherto been eager to snap up dilapidated properties at fancy prices, and the
lenders who had facilitated this by cheap loans, abruptly lost interest. The
result is that the company is now stuck with hundreds of homes up north and in Scotland, areas which have been hit harder and sooner by the crisis than have London and the
south-east.
When we hear that Southern Cross’s homes in
Sunderland have only 80% occupancy, we can safely assume that this is because
the fees cannot be afforded, not because there are fewer old people in need of
such care than there are in Surrey. As company chief Jamie Buchan sensitively
expresses it, “It’s because we have homes that we should never have had
and homes concentrated in areas that have had particular problems.” As
the Telegraph notes, “In a reflection of the shrinking state, there
will also be more self-funders, with care homes, therefore, requiring a larger
presence in the affluent South East and more sophisticated sales and marketing
techniques”, going on to quote Buchan’s view that “Care homes in
the future will be much more on a tariff basis”. (ibid)
So capitalism’s plan for dealing with the elderly
is for those with independent means to fund their own care whilst increasingly
the rest must make shift the best they can. Precisely at the moment that home
support and day care services are being wound down, making it harder for the
elderly to remain in their own homes, the growing reluctance of councils to
meet fees in full raises the bar on access to care homes. For thousands the
choice will be either to rely increasingly for support upon close relatives,
already under pressure themselves, or live out their final years staring at
four walls and driven into a cycle of “self-neglect” – or more accurately,
robbed by capitalism of their human dignity after a lifetime of exploitation.
Each of the key players in the Southern Cross
debacle, equity capitalists, landlords and care home tycoons, blames the others
for the outcome. Yet the equity capitalists and asset-strippers of the City
simply did what any self-respecting monopoly capitalist does when
overproduction closes down profitable avenues of productive investment: they
sought to maximise their profits through market manipulation and speculative
investment. For the rack-renting landlords who vilify their bourgeois brethren
in the care home industry – the Telegraph quotes one piously affirming “My
sense of responsibility is that I do not want old people to be looked after by
this lot. I want an operator to run the homes properly. We are not going to be
showing older people on to the street. We are going to find other
operators” – the immediate future may not be too bleak either. Even
if a deal cannot be struck with Southern Cross and it goes bankrupt, Bupa or
some other bunch of cowboys can probably be persuaded to cough up the rent with
a bit of help from the state. Meanwhile the directors of Southern Cross could
reasonably argue that, were it not for the collapse of first the property
market and then the welfare state, their strategy would have remained
profitable.
All of which special pleading however simply
reduces to this statement of the obvious: if the crisis had not reared up to
bite capitalism in the backside in 2008, all the key players would have kept
the game spinning merrily on, with the only losers being the elderly residents.
Because Southern Cross was left holding the parcel
when the music stopped, it is under the spotlight right now. Yet it is not the
“one bad apple” in an otherwise well-organised care sector. Just how
extensively care of the elderly, mentally ill, disabled and others has been hit
by privatisation in crisis is documented in a recent investigation by the Financial
Times.
In the course of articles covering several pages of
the 31st May issue, written by Sarah O’Connor and Cynthia O’Murchu, we are told
that “analysis of the regulator’s quality ratings from April 2010 showed
that companies subject to risky deals and private equity ownership often provided
a poorer quality of care… A care home’s biggest expense is its staff, so care
home operators often spread staff thinly to reduce costs. ‘We quite often would
have 24 residents [and] two members of staff,’ said one care home worker
of her previous job at a privately run home. ‘You’ve got meals to give out,
medication to give out, you’ve got visitors to see, you’ve got doctors’ visits
… then you’ve got one resident trying to hit another one.’ Many of the
residents in her home had dementia and could be violent. Once a resident backed
her against a wall and started punching her in the face. ‘I reached out and
touched the emergency buzzer and heard nothing … [it] hadn’t
been tested,’ she said. Sometimes she and other workers would drug residents
who were hard to handle. She was never offered training on how to deal with
dementia. ‘You’ve worked an extra two hours because no one turned up … and
then the director turns up in a Bentley with a fur coat and an Armani suit and
you just think, “Oh my god, that two hours’ work I’ve just given you has gone
straight in your bank account”.’ Regarding the pressures upon the managers of
privately owned care homes, they note that “even good managers struggle when
their employers try to cut costs. One care home manager, who works for a large
private operator, said she was under increasing pressure. ‘We’ve always had a
budget [but] now the emphasis is very much: this is your budget, but on
that budget you need to save 20 per cent on food or 20 per cent on staff, or
you’ve got this to spend on equipment but we want you to underspend that by 10
per cent every month’.”
Despite the postures of outrage and astonishment
struck across the capitalist media, it is hardly news that privatisation serves
the needs of capital accumulation, not the needs of society. Since the railways
were privatised, public expenditure on the industry has been greater than it
was in the days of nationalisation. Nobody who has been awake through this
period can be in any doubt about the way in which the capitalist state directly
serves the monopoly capitalist interest, subordinating everything to the
maximisation of profit, not least the safety of the travelling public. Why
would it surprise anyone that the privatisation of the care home industry, and
increasingly of the NHS itself, should be following the self-same pattern?
Indeed the phenomenon of sale-and-leaseback, or PFI, has long since been exposed
as a costly disaster for patients, staff and taxpayers, and a cornucopia of
glittering profits for City financiers. Southern Cross’s sale-and-leaseback
scam operates essentially on the same basis, is as much of a disaster for
residents, staff and taxpayers, and constitutes a no less glittering prize for
the City. The question arises: why then does the FT, not usually a friend of
the common man, now find it necessary to commission a survey on the failings of
the privatised care home system? Why does the Telegraph, no less, find itself
bemoaning the “comm-oditisation of frail, elderly people”? (‘Is there
still life in Southern Cross?’ 5 June 2011)
The explanation for this uncharacteristic outbreak
of humanitarian concern must surely be the dawning awareness that, all these
years on into this privatising frenzy, though the winning players have profited
mightily, the capitalist system as a whole is in direr straits than ever, with
no let-up in sight. Despite consigning ever more of the welfare functions of
the state to the tender mercies of monopoly capitalism, the system continues to
plunge deeper into crisis, requiring ever sharper attacks upon the standard of
life of the mass of the population. The danger for capitalism in all this is
that it will not only spur workers into resistance but that it will also make
conscious enemies out of those upon whom it counts as allies. As the
relentless downward pressure pushes the relatively privileged, the petty
bourgeoisie and the better-off workers, down towards the “lower depths” of the
proletariat, capitalism worries that simple repetition of the bland assurance
that “we are all middle class now”, all equal under canvas in the Big Society
tent, will lose its power to mesmerise. If seeing your pension postponed and
discounted and your children effectively barred from Higher Education is not
enough to inspire disaffection, try telling everyone that their grandparents
are now surplus to requirements and cost too much to look after.
Whilst some of the tabloid fury has been directed
at the obscenely wealthy ex-directors of Southern Cross who jumped ship in time
and are now hunkered down in their fabulously expensive rural retreats, these
targets are for the most part untouchable. The whipping boys of choice now therefore
are the hapless bureaucrats at the hopeless Care Quality Commission. Already
in the pillory for their failure to act upon concerns raised by the
whistle-blowing employee at the infamous Winterbourne View special needs
hospital in Bristol, where the routine and gross abuse of vulnerable residents
was recently revealed in an undercover Panorama investigation, CQC is now in
the frame over the Southern Cross debacle.
Yet as Polly Toynbee reminded readers in the Guardian
on 3 June (“Southern Cross and Winterbourne View have tested public tolerance
to the limit”), “CQC’s budget is 30% less than the regulators it replaced.
In the past year it cut its inspections by 70%, taking a minimum of 120 days to
register new homes. Its 900 inspectors are expected to cover more than 8,000 GP
practices as well as 400 NHS trusts, 9,000 dental practices and 18,000 care
homes. It has been told to recoup all its costs by raising the fees it charges
all these providers – which limits its income.”
The consequences of making the regulator
economically dependent upon the regulated are too obvious to require statement,
and express in a nutshell the whole relationship between social need and
private profit: he who pays the piper calls the tune. This has always been the
bottom line under capitalism, long before privatisation reared its head to
disturb the fragile social harmony established by the old welfare state. But
now, with care homes no longer run with even nominally accountable local
council ownership and control, instead subject only to periodic inspection by
box-ticking regulators whose funding is geared to the prosperity of the very
businesses they are tasked to regulate, the triumph of greed over need is now
written a mile high in letters of fire which even social democracy cannot hide.
Calls for a few dispensable heads to roll at the Commission, for cuts to their
funding to be mitigated and their regulatory powers beefed up will not succeed
in drawing the curtain back across the inhumane and mercenary attitude towards
the care of the elderly now on full display.
It is capitalism itself which is to blame, and only
its overthrow can end the sick tyranny of private interest over social need.
In socialist societies, the elderly are seen not as a burden but as valued and
respected members of the community.
For example, Cuba is blessed with many elderly
comrades, thanks to the way the revolution has raised the standard of living of
working people. In an article posted on Inter Press Service News (IPS) on 5
March 2010 (‘A Good Old Age in Old Havana’), Patricia Grogg talked about Cuba’s continuing efforts to improve her provision for the elderly. One old lady of 77,
spending her day in a day centre, tells Grogg, “When I came here, I was sad
and downhearted. But that’s all in the past, now I feel fine, and I’m useful.
The older adults themselves elected me their president.” It turns out that
she used to be a teacher, and now uses her experience to help organise the
other 600 daily visitors.
Grogg continues: “On a day like any other, IPS
visited the Day Centre and found groups playing animated games of dominoes,
which is very popular in Cuba, while two or three women were busy making
pyjamas for the sick, and others were helping Magali Hernández, who cares for
150 bed-ridden elderly patients in their own homes.
“Hernández, a retired nurse and a volunteer,
shoulders the responsibility for sick people in the neighbourhood, with the
support of 26 helpers from the Day Centre. ‘We visit them and provide them with
the food, clothes and medicines they need, especially if they have no family
and live alone,’ Hernández said.
“Elderly men and women in better health come to
the Day Centre, and start their day with a refreshing exercise session in the
small square in front of the building. After a period of ‘reflection,’
discussing current affairs and topics of interest to them, they join activities
in various workshops.
“The range of workshop options includes visual
arts, computers, leather working, knitting, papier mâché, theatre, music and dance.
‘Taking part in these activities changes their lives because they themselves
have the starring role. They help distribute donations, or they visit the sick,
and they help each other,’ said Esther Ruiz, a nurse.
“As for housing, one of Cuba’s most pressing problems, there is a system of homes for older people without any
particular infirmities but who were living in precarious conditions. So far,
four such homes have been built, housing 54 people including a number of
married couples.
“The apartments are fully equipped to suit their
needs, including safety rails, grab bars in bath tubs and shower chairs. In
emergencies, they can press either of two buttons to alert management. ‘As you
see, we lack for nothing to live with peace of mind,’ said 68-year-old Victoria
López.
López works as a cleaner in the old city. Her
husband, 73-year-old Emilio Medino, is already retired, but he likes to make
himself useful and is a volunteer in charge of plumbing and maintenance in
their 12-apartment building. ‘Coming here was a radical change. My wife weighed
only 70 pounds (under 32 kilos) back then,’ he said.
“Residents in these units pay no rent, keep
their retirement pensions, and get extra help with food and medicines. A state
employee does their laundry and cleans the common areas… The Day Centre has a
physiotherapy room, a pharmacy, and ophthalmology and optometry services.
During tropical storms and hurricanes, it is used as a shelter for vulnerable
sectors of the population like the elderly, or people living in the areas of
greatest risk. It also cooperates with the care of children with disabilities.
“Experts point out that rapid ageing of the
population in any country implies structural changes that require appropriate
responses, by means of public spending programmes that anticipate future needs
in terms of housing, transport, and infrastructure generally.
“‘From the point of view of urban planning,
appropriate facilities and services must be created, incorporating the latest
architectural and functional design concepts,’ wrote architect Miguel Coyula in
an article published in Temas, the leading Cuban magazine in the social
sciences.”
In short, the social needs and responsibilities of
the elderly, so far from being viewed as a burdensome distraction from the main
business of accumulating capital, are located right in the mainstream of social
development. In the Soviet Union, such an approach to the welfare of all
workers was routinely implemented on such a vast scale and to such good effect
that the example being set to workers under the capitalist yoke became a
serious concern to imperialism. That is why capitalist Britain tried after World War II to ape these achievements with the creation of a flawed
and temporary “welfare state”, funded by a fraction of the super-profits
derived from the loot of resources and the sweating of the world’s oppressed
masses.
Now, as the overproduction crisis
deepens, the capitalist state is as unwilling and unable to stump up the rent
on the welfare state as is Southern Cross to clear its own rent arrears. The
bourgeoisie is justifiably nervous when contemplating future confrontations
with a working class which will learn that all the safety nets are down and
revolution is the only way out of the hole (hence the current wobble over the
Lansley plans to demolish the NHS). But as the Communist Manifesto reminds
us, capitalism just cannot keep itself from producing the grave-diggers of its
own system. Bring it on.