Tuesday, 22 December 2015

Another care home in crisis! Should spivs and speculators be running care homes?

Guy Hands owner of Four Season care homes

The announced closure of seven care homes in Northern Ireland by Britain's biggest care provider 'Four Seasons', has once again raised the question about the suitability of capitalist spivs and speculators to provide essential social services and health care for the elderly.

For some months now, Four Seasons have been warning the government that the care sector is in difficulty as care fees fall and staff costs rise. However, it is also known that Four Seasons, controlled by 'Terra Firma' a private equity company owned by Guy Hands (pictured) is paying more than £50m a year in interest on debts of £500m. Four Seasons say that the seven homes facing closure are "not viable".

Only four years ago, Southern Cross, another care home provider, was also calling on the government to step in after the company claimed that they had insufficient funds to stay in business. At that time, Southern Cross had 750 homes and 31,000 residents. It was claimed at the time that cuts in fees that local authorities were paying towards the cost of some elderly people in care, had led to the company sustaining losses of £311m in 2010. Yet, a major cause of the company's inherent financial problems lay in the decision by the U.S. owned private equity group, Blackstone, who owned Southern Cross, to sell off all the freeholds to their properties to raise cash. This move, made Blackstone Chief, Stephen Schwarzman, almost £500m when the company sold its interest in Southern Cross in 2006. However, it also meant that Southern Cross had to rent back their properties from 80 different landlords. 

Guernsey based, Guy Hands, fomerly of the Japanese bank Nomura, is a legendary dealmaker. Along with the financier Hugh Osmond, Hands is considered one of the main architects of the debt-fuelled pub boom which saddled pub companies with high levels of debt in the years running up to the credit crunch. Both of them bought the large tenanted pub estates of the major brewers, using borrowed money, and then hiked up the rents and the beer prices paid by the tenants. As a result of the increased income which they generated, they were able to remortgage the pubs, extracting tens of millions of pounds of profit for themselves, after they sold out. Many of the tenanted estates ended up as Enterprise Inns and Puch Taverns. When the credit crunch hit in 2008, many publicans went bankrupt. Terra Firma is also known for its disasterous take over of EMI Records, that embroiled the company in litigation on both sides of the Atlantic.

Relatives of the resident in the care homes in Northern Ireland, have called on Guy Hands to discuss with them the human costs of his speculative deals and shenanigans. However, Hands prefers the seclusion of life in the tax haven of Guernsey, where he has lived for the last six years. Hands insists that living in Guernsey has nothing to do with money and is more about lifestyle.

Since the privatisation of care for the elderly under Thatcher, we have seen one crises after another when it comes to the running of elderly care homes. With monotonous regularity, the people running these care homes have asked the government to bail them out or to intervene to help them. Likewise, people continue to ask whether it is right and proper that profit should be put before people and that care homes should be owned by speculators like Hands and Schwarzman.

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