My Lords, I support Amendments 237, 238 and 239 in the name of the noble Baroness, Lady Bennett of Manor Castle, which aim to ensure that private providers are regulated, especially those using obfuscatory financial structures, instruments with inter-company loans and large amounts of debt. They should be fully transparent about those arrangements. She was right to highlight the excellent reporting of the Financial Times on this, along with the financial editors and journalists of other papers.
The typical small business social care home owner does not fall into the category I have just described. The problem in the sector is the private equity providers who decided to start buying up care home groups because they felt that the assets could be milked to provide healthy-looking returns for them. This differs from those homes borrowing in order to, perhaps, buy new homes to enlarge their group; what is happening here is purely financial instruments to benefit the directors and investors. Typically, private equity-backed providers spend around 16% of the bed fee on complex buyout debt obligations. The accounts of Care UK show that it paid £4.1 million in rent in 2019 to Silver Sea Holdings—a company registered in low-tax Luxembourg, which is also owned by Care UK’s parent company, Bridgepoint.
These kinds of buyouts are also associated with an 18% increase in risk of bankruptcy for the target company. In the case of Four Seasons Health Care, heavy debt payments contributed to the company’s collapse into administration in 2019. Two of the other largest care home providers in the UK, HC-One and Care UK, have also undergone leveraged buyouts and, as a result, their corporate group structures remain saddled with significant debts. Some of these types of company are also struggling to provide the best possible care with their overall CQC scores—so it is affecting the lives of the most vulnerable patients.
The Office for National Statistics says that 63% of care home residents are paid for by the public purse. Surely the Government must have a duty towards the public purse. It is not acceptable for the public purse to pay for these complex financial arrangements that
are intended to provide not care or capital for the growth of a care business but purely a larger return for directors and shareholders. These amendments would provide for transparency and accountability and an assurance that the public purse and the private payer are not being taken for a ride.