Vol. 75/No. 25      July 11, 2011

The company, Southern Cross, runs 750 homes that house 31,000 retired working people and employs 44,000 workers. In March the company announced losses of £311 million (US$500 million) for the previous six months. Its auditors warned the company could go under, raising the prospect of home closures and evictions. Residents first learned about this through the media.

Using what the Financial Times called “a failed business model,” Southern Cross rapidly expanded without spending money through a “sale and leaseback strategy.” It bought up other care home companies, then sold these properties for a high price to a third party on the agreement that Southern Cross, which would continue to run the care operations and manage the dwellings, would lease the buildings from the new owners for 30 years at high and ever-rising rent. The new landlords borrowed cheaply and salivated over the promised profits. This all worked well for both capitalist parties until the debt-fueled housing market boom came to an end in 2008.

Southern Cross can no longer meet its rental payments as occupancy rates dwindle. The combination of rising rents and deteriorating conditions are making the habitations increasingly unattractive, and local governments are refusing to pay ever higher care home subsidies as they tighten their budgets and impose austerity measures on working people.

Local governments are introducing “an average cut of 6 percent in social care budgets,” according to the Independent. In 1990, of 500,000 beds in residential care homes, 200,000 were provided either by local authorities or the National Health Service, according to Unison, the country’s biggest public workers’ union. That figure is 31,000 today and declining. A “restructuring” deal between Southern Cross and the 80 landlords it leases from includes laying off 3,000 workers, a move that will inevitably result in a further decline of conditions and care at the homes.

Meanwhile, the second biggest care home provider, Four Seasons, also faces serious financial problems. The now government-owned Royal Bank of Scotland owns 40 percent of the company as a result of a recent debt write-off.

A recent report illustrated a similar crisis in the “homecare” system, where retired people are looked after in their own homes. “Visits are sometimes so brief … that people have to choose between having a cooked meal or a wash,” the BBC noted.  
 
 
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