Southern Cross scandal, raises the question should care homes be profit making companies?

In the wake of the Southern Cross care home scandal, commentators have been asking if care homes can be profit-making companies.  

The Daily Mail reports that there is anger and outrage that so many lives have been thrown into turmoil through the actions of City venture capitalists.
The U.S. private equity firm Blackstone, led by Stephen Schwarzman, bought Southern Cross in 2004 for £162million and sold it three years later. It is believed to have quadrupled its investment, the report says. But to achieve this it sold off the company's homes, robbing Southern Cross of its capital and forcing it to lease the properties back from another company.

"Downing Street announced yesterday that the Government will use public money to ensure those in the 750 affected homes can stay - amid warnings that moving them would lead to the deaths of the most vulnerable."

Writing in the Telegraph back in February, David Cameron talks of publishing an open public services white paper which would "create a new presumption ... that public services should be open to a range of providers competing to offer a better service".

However, the scandal shows just what happens when financiers are free to make a profit out of the most vulnerable, reports the Guardian. Polly Toynbee says: "...as with the banks, privatised services that are too essential to fail make profits while relying on the state to pick up the pieces if they run into trouble, without paying the taxpayer for that hidden insurance. How will the public view predators circling many more services - especially in the NHS - now they see how Blackstone separated property value from the riskier running of the care business?"

Sarah Wollaston, Tory MP and GP, says in the Guardian : "It can't be right to make a fast buck and leave the taxpayer with the bill", and adds: "The idea competition drives up standards in care isn't necessarily the case."

Blogger Janet Dean says: "The debate about health and social care cannot just be about how we afford the future, but about what kind of future society we want to be. It is at the core of our humanity, surely, to care for the most vulnerable amongst us. We cannot allow a system which enables a few to profit at the expense of those who most need our protection - can we?

The BBC covers some of the main points in the broadsheets. It says that in the Independent Sean O'Grady uses Southern Cross's problems to argue there are some social activities which are inherently uneconomic and the risks and rewards to the taxpayer need to be rebalanced:

"As with the banks, so with care homes: some private enterprises are just too important to fail. Gordon Brown had to promise bank depositors their money was safe; now David Cameron has to make a similar promise to the residents of Southern Cross. Profits to shareholders in the good times; losses sent to the taxpayer in bad. The parallels are powerful.

"There could be many more Southern Crosses. The firm's troubles are a timely reminder, as the Coalition Government plans to push private finance initiatives and outsourcing deeper and deeper into core public services - schools, housing and heath. Reforms to the NHS will shift the private sector's frontier ever closer to clinical care. Southern Cross highlights what happens if things go wrong."
Source http://www.mindfulmoney.co.uk/