What's the best way to end the neglect of our care homes?

The sheer scale of the tragedy in our care homes may crystalise political will © Getty

(Image credit: Care worker and patient © Karwai Tang/Getty Images)

published 16 May 2020

Why have care homes been so badly hit?

It is partly due to the nature of Covid-19 and the vulnerability of aged residents, and partly due to policy failures by the government. But it is also, argues The Economist, a reflection of the sector’s chronic status as the unloved poor relation of the NHS. There are roughly 11,300 care homes in Britain that look after the elderly, with some 410,000 residents, as of April. But while the government poured resources into the NHS in the early stages of the pandemic, care homes “are mostly small private businesses and have been left to deal with the crisis themselves”. This on top of years of neglect – and more than two decades of politicians refusing to face up to a growing funding crisis.

There are 12 million people in the UK aged 65 and over. This is projected to grow by 40% (another five million) by 2040; the over-80s by 72%. Over 40 years, the number of people over 75 will double to almost 11 million. Experts estimate that between 1.2 million and 1.5 million elderly people go without the care they need, and an extra 580,000 care workers are needed just to fill existing staff vacancies and meet current demand. Total spending on adult social care by local authorities in 2018-2019 was £22.2bn, still below where it was in 2010 (in real terms) before years of funding cuts. Anita Charlesworth, the Health Foundation’s chief economist, says that an extra £12.2bn a year would be needed by 2023-2024 to meet demand, increase care workers’ wages beyond the bare minimum, and return access to services – and their quality – to 2010-2011 levels.

Over the past 22 years, the question of how to improve and fund social care has been explored in 12 “white” or “green” papers, four independent reviews or commissions and a plethora of parliamentary inquiries and think tank reviews. The Conservatives have been promising a new green paper since 2017, but none has appeared. In his first speech as PM last summer, Boris Johnson promised a “clear plan” for dealing with the crisis. None has been forthcoming. Instead, in March, the health secretary Matt Hancock asked MPs and peers to send him their ideas for reform of the social-care system and said that “structured” cross-party talks would being in May (an ambition presumably derailed for now).

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Because the whole issue is politically toxic. In 2010, Labour was battered for planning a “death tax” (deferring costs and claiming them back from estates). In 2017, Theresa May’s election campaign was holed below the waterline by accusations that she planned a “dementia tax”. In fact, she had proposed a sort of state-sponsored equity-release scheme that protected assets up to £100,000 – more than four times more generous than the current level. Reforming social care is a complex, multi-generational issue which gets weaponised for partisan gain. But these are not questions that can be legislated for without broad consensus. In a nutshell: what is the fairest balance between the contributions made by individuals and the state? And how do we share the costs of funding fairly across the generations?

Individuals will have to pay more, but the question is whether this is through paying more tax, some form of hypothecated tax, or some form of compulsory social insurance that pools risks. Hancock has previously argued for a system akin to auto-enrolment in workplace pensions, under which people have their future contributions capped. Two successful models of social insurance are Germany, which adopted the system in 1995, when its care system looked about as frayed as ours does now, and Japan, which in 2000 adopted a national care tax paid by workers over 40.

In the wake of the Covid crisis, there are obvious grounds for pessimism: the UK is going to be fiscally stretched for years, and there is going to be no shortage of priorities on which to spend our (presumably much higher) taxes. But there are grounds for optimism, too. The sheer scale of the Covid tragedy in our care homes may now crystallise the political will to improve them. Both main parties now accept a state-backed solution and accept the need for a limit on an individual’s liability.

It will remain crucial, but profit expectations need to be reined in, says Gill Plimmer in the FT. Thirty years since private capital was brought in to improve services for the elderly, the whole model of outsourcing is under intense pressure. That’s partly due to ten years of funding squeezes. But it’s also due to the inherent financial instability involved in encouraging a wall of highly leveraged equity into the sector. Three of the UK’s biggest chains – HC-One, Four Seasons and Care UK – are currently in the hands of buyout groups. “What has happened is that care homes have become financialised,” says Nick Hood, analyst at Opus Restructuring & Insolvency, which has advised several care-home chains. “Their owners are playing with the debt and expecting returns of 12% or 14% and that is simply unsuitable for businesses with huge social responsibilities.”

Jon Moulton, the private-equity veteran who ran Four Seasons in the early 2000s, argues that regulators should require care-home chains to hold a certain amount of capital, much like the regulator requires of banks. “There is no easy answer, but I would not want my relations to be residents in something awash with debt and either going bust or skimping on care – whether that’s private equity or anyone,” he says. “Regulators should do more to ensure that operators have a stable financial base and prevent excessive profit extraction.”

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Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.