This new report reveals how property speculation and deals are being used to rip profits out of the UK care sector.
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This report from the Centre for International Corporate Tax Accountability and Research (CICTAR) shows how financilisation and property speculation is undermining the UK care system.
The report outlines how sale and leaseback arrangements, including within the same corporate groups, are leading to £1.3bn of rent per year being paid to private landlords, with profit margins as high as 80%.
These sorts of financial technqiues are used by corporate executives and owners to extract large profits - often into offshore havens. They can also place financial strain on care homes, reducing the funding available for care provision and undermining the ability for frontline workers to bargain for fairer wages.
PSI General Secretary Rosa Pavanelli said:
"It's now brutally clear that the privatised model of care has failed, putting our loved ones in danger and forcing frontline workers to endure needlessly brutal conditions - all so a few can profit.
This latest report adds to other damning examples from across the world - such as Orpea in France, now under criminal investigation for mistreatment of elderly patients, whose own CEO admits its business model has been based on "personal enrichment and property dealing," just as this report demonstrates in the UK context.
We can no longer leave this sector to corporate executives who are more interested in speculation and short term profits than looking after our elderly. It's time to ditch the profit motive in this sector so our loved ones can access the care they need and workers are valued and rewarded properly."
Financialisation of the care sector - and an increasing emphasis on property speculation - has contributed to numerous high profile failures across the world, such as the French-headquartered ORPEA group. The French government recently filed criminal complaints against ORPEA for mistreatment of elderly patients. A previous CICTAR report outlined how ORPEA uses subsidiares in the tax haven of Luxembourg to fuel its European property empire.
The report examines how specific reforms could recover an estimated £1billon fro the UK Care sector per year to fund adequate staffing levels and better pay.
The UK has one of the most privatised social care sectors in the world -with countless high profile failings and collapses such as Southern Cross.
The report examines the profits made from real estate development by Care UK, one of the UK’s largest care home operators. The quality of care is not being questioned in this case study, but the example reveals the high levels of profit (around 39%) generated through real estate in a sector that is considered grossly underfunded.
Vivek Kotecha, the report’s author, said:
‘The approach being used by Care UK is not unusual and creates a long-term risk for the whole sector, in a similar way to the PFI deals used to finance public infrastructure through the 1990’s and early 2000’s. The reliance on private care home landlords, charging ever increasing rental payments, pushes up costs in the long term but may also concentrate new care home development where property prices have increased rather than areas with greatest need.’
The report recommends reforms to require greater transparency on real estate costs in care homes. This would represent a first step towards ensuring that public spending and residents’ fees are directed to providing better quality care over excessive profits for real estate investors. It also recommends lifting restrictions on local authority (or public) development and ownership of care homes.
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