Ministers could impose profit caps on private social care providers in a bid to keep care home costs down, The i Paper understands.
Andy Burnham, the Local Government Secretary Angela Rayner and the adult social care tsar Baroness Louise Casey have all condemned “profiteering” in the care sector in recent weeks.
The Government recently gave itself the power to cap the profits of private providers of children’s homes and fostering agencies in England, and this could be extended to the adult sector under Burnham’s plans to overhaul social care.
Announcing his intention to drive forward social care reform last week, the Prime Minister accused some providers of creaming off excess profits.
He said: “We do have to be sure that there isn’t profiteering in the system. I think that is where we absolutely draw the line.
“There are good organisations in all sectors, but what we cannot accept is money being taken out, and we do actually see that happening – not just in adult social care, we see it in children’s social care too – and I think we do need to make some changes there.”
Burnham also appeared to suggest that excess profits were getting in the way of high quality care.
Asked whether the Government could transform social care without raising taxes, he said: “Care is variable across different organisations.
“There’s good in all sectors, I said that at the start, but there’s profiteering in this sector as well, and there is unnecessary and dangerous cost cutting at times on the backs of vulnerable people, and that is fundamentally unacceptable.”
He added: “I think more is possible from within existing resources.”
Councils ‘held to ransom’ by private care companies
Baroness Casey, who is leading a review into Britain’s care crisis and how to fix it, has also accused some private providers of “extracting maximum profit from the public’s purse”.
In a speech in March, she said that some local authorities had become vulnerable to pressure from large private care providers, who could exploit councils’ dependence on them for essential services.
“There are councils that feel held to ransom by powerful, sometimes private-equity owned providers, who can pull a contract or team up together and hold them over a barrel,” she said.
In an interview last week, she said there was “room for a mixed market” in the sector, but added: “I don’t like the idea of profiteering out of human misery and human life, I object to that.
“I’d object to it, whether it was homelessness you were asking me about, or whether it was anything else I’ve been responsible for.”
Rayner, who was reappointed Local Government Secretary by Burnham in his Cabinet reshuffle, has meanwhile criticised excess profits in children’s social care.
In a speech just weeks before returning to government, she accused private equity-backed providers of turning “vulnerable children into profit centres”.
“We have the absurd situation of taxpayers’ cash going to investors who don’t themselves pay tax,” she said. “We have the power to cap the profits of these companies, and we should use it.”
‘Extracting maximum profit from the public purse’
Phil Holmes, the president of the Association of Directors of Adult Social Services (ADASS), which represents local authority social care directors, welcomed efforts to rein in profiteering and indicated that a profit cap could plan a role in achieving this.
He told The i Paper: “ADASS agrees with the way that Baroness Casey has already described adult social care providers. Many are operating with tiny margins and profiteering could not be further from their minds. But some do appear to be extracting maximum profit from the public purse.
“We welcome the government’s commitment to tackle private profiteering which cannot be right in a public service like adult social care. Applying a cap on profits is far from a simple exercise though and we would want to advise and support government on implementation.
“Tackling profiteering is just one way that local and national government need to come together on social care to support both care and economies in cities, towns and villages up and down the country”.
A law passed earlier this year, the Children’s Wellbeing and Schools Act, gave ministers powers to cap profits on providers of children’s residential care and fostering services, although the powers have yet to be activated.
The government is also pursuing broader reforms aimed at reducing councils’ dependence on private providers.
Wider questions over funding social care
Care home fees vary, but the average cost for a place in a care home is around £949 a week, according to Age UK. Local authorities often pick up the cost of care, but those with savings above £23,250 have to pay themselves. Those with savings under this amount may still have to make a contribution depending on income.
Local authorities will often have a total amount they will pay, leaving an option for family to ‘top up’ if they want a more expensive place.
Profit controls already exist in some areas of government contracting. In asylum accommodation contracts, for example, providers are often subject to profit-sharing arrangements that allow the Home Office to claw back returns above agreed thresholds.
Burnham is facing wider questions of how he will fund a national care service, with the Prime Minister admitting that “difficult decisions” will be needed.
A profit cap would be unlikely to avoid the need for additional expenditure on social care, however, and Reform UK have accused Burnham of plotting a “death tax” to pay for his reforms.
This refers to comments he made before he was Prime Minister in which he suggested a 10 per cent inheritance tax on an estate’s assets.
A poll by BMG Research for The i Paper of 1,559 adults in Britain found that 40 per cent supported replacing inheritance tax with a dedicated social care levy to fund a national care service, with 20 per cent opposed.
A Government spokesperson said there were “no plans” for a cap on social care profits.
The spokesperson said: “Baroness Casey’s Independent Commission will look at the whole spectrum of adult social care, including the role of markets and providers, but there are no plans to impose a cap on profits.
“The Prime Minister has been clear that people can see everything they have worked for wiped out by the cost of care, and that is not something any government should accept. Providers must act responsibly to support quality provision and continuity of care in the best interests of those they are caring for.”
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