Profit in social care is back in the political spotlight. The Prime Minister’s July speech, the Co-operative Party’s report, The Power of Co-operation in Care, and the Casey Commission’s Big Conversation on Care have all renewed debate about who should own and finance care.
Concern about excessive returns from poor care, unfair employment or fragile financial structures is legitimate. But too much of the debate treats private capital as a single category and ownership as a reliable guide to quality. Neither is a sound basis for policy.
The Homecare Association is agnostic about ownership. We represent providers of every size and type, for-profit and not-for-profit alike. Our tests are the same: quality and outcomes, fair treatment of the workforce, financial resilience, willingness to improve and how any return or surplus is generated and used.
‘Private capital’ can mean founder and family equity, bank lending, private equity, property investment, pension and insurance funds or growth capital for technology. They behave differently, earn returns in different ways and operate over different time horizons. Likewise, ‘profit’ can mean dividends, rent, interest, management fees or capital gains. Lumping them together obscures the real questions.
Nor is social care dominated by private equity. It remains a highly fragmented market. Skills for Care reports that 84% of adult social care organisations have fewer than 50 employees and 37% have only one to four. LaingBuisson’s broad ‘private equity’ classification – which includes some listed property investors that are not private-equity funds in the strict sense – accounts for about 12-14% of revenue across the main care markets.
Ownership alone is also an insufficient guide to quality. Research identifies differences between ownership groups on some measures, but the more actionable determinants are leadership, staffing, culture, governance, commissioning, funding and financial resilience.
A recent reminder came from Brushwood House in Liverpool: after the council took the ‘inadequate’-rated home into direct operation, the Care Quality Commission’s (CQC’s) first assessment under council ownership still rated it inadequate. One case proves little about ownership models, but it illustrates why changing the label does not, by itself, change the conditions that produce good care.
Another confusion is the assumption that any reported profit is money taken out of care. Every provider needs financial headroom: recurrent income to cover safe care and fair employment, liquidity and reserves to absorb shocks and access to capital to invest. In homecare, where almost a third of councils pay below the direct employment costs of a careworker at the National Living Wage, asking providers to absorb structural losses while remaining resilient is unsustainable.
The sector also needs substantial investment. LaingBuisson values the older people’s care home estate at £27.3bn and estimates that 43% of capacity is not purpose built. Homecare is less capital intensive, but providers still need investment in working capital, systems, technology and growth. If Government discourages one source of capital, it needs a credible answer to what will replace it.
A better approach is responsible capital. Government should ask whether investment adds capacity or improves services; whether debt, rent and other commitments are sustainable; whether ownership and related-party transactions are transparent; whether care and employment outcomes are good; and whether enough is retained for resilience and reinvestment. Returns should reflect genuine exposure to risk, not transfer the consequences of failure to people drawing on care, workers or the public.
If we want better care and better jobs, we need to focus on the factors that drive them: leadership, culture, governance, funding, commissioning and regulation. We should welcome responsible investment in care, whatever its source, and be much tougher on irresponsible behaviour, whatever the ownership label.
Dr Jane Townson OBE is Chief Executive Officer at the Homecare Association. Email: [email protected] Linkedin: @Homecare-Association