The boss of Britain’s biggest care home operator has warned that the industry faces an existential crisis after George Osborne failed to address a funding black hole in the autumn statement.
Care homes across the UK are being squeezed by a fall in the fees that councils pay towards residents and a rise in costs, which will be exacerbated by the introduction of the national living wage next April.
Ian Smith, the chairman of Four Seasons Health Care, said the company was closing homes and not investing in upgrading existing sites because of the financial pressures on the business.
However, Smith denied that the quality of care was declining in Four Seasons homes, despite 12 of its sites being under embargo – which means they cannot take new residents – more than double the number two years ago.
Four Seasons faces additional problems – more than one in seven of its beds are empty and it is sitting on £500m of debt, which is costing it £50m a year in interest.
In the autumn statement, the Chancellor announced a string of measures designed to support social care. They included allowing councils to increase council tax by up to 2% to fund adult social care – which could raise up to £2bn a year by 2020 – and handing an extra £1.5bn to the Better Care Fund, an organisation designed to encourage local authorities and the NHS to cooperate.
However, Smith said this was not enough. “Britain should be looking after its elderly people better,” he said.
The Four Seasons chairman criticised the Better Care Fund but also claimed that local councils would not be able to raise enough money from council tax to fund social care and that the government should be helping to finance the introduction of the national living wage.
He said: “The Better Care Fund is what irritates me. Not one pound is getting through to elderly and frail people in our homes ... It needs to get through to people who need it.”
On the council tax precept, he added: “In northern constituencies they just won’t be able to raise the money, these are impoverished places like Knowsley or Birkenhead, where I am from. They don’t have as much money as Basingstoke. We are letting them down so badly.
“We are really trying to engage with government to get this right. They are failing our elderly people, and it is putting huge pressure on the NHS.”
Smith said that care homes needed an increase of 6% to 10% in funding from councils “just to stand still”.
When asked whether care homes faced an existential crisis as a result of the funding problems, he said: “I think the sector does, yes. I think it is existential, absolutely.”
Four Seasons said it was on course to sell 19 homes this year, which will result in their closure, and finance director Ben Taberner warned there would be a “wider spread” next year, but declined to state exactly how many could close. Four Seasons has already announced it will close seven homes in Northern Ireland that it claims are not viable.
However, Smith insisted that the quality of care in Four Seasons homes was not being affected.
While the 12 Four Seasons homes under embargo represents an increase from five two years ago, Smith said the number of embargoes was now at its lowest level in two years, after spiking at 28. The Four Seasons chairman said the increase in embargoes stemmed from the “instability” of regional managers leaving after Four Seasons was bought by the private equity firm Terra Firma, but added that he was “very comfortable” with the current number.
“We will never compromise the quality of care. There is no question about that,” he said. “But you can’t invest in new care homes or invest in upgrading care homes.
“We are facing a big crisis, and this is a crisis that is going to rebound on the NHS.
“We are closing homes that are losing cash, it’s not just us, it’s sector wide. Nobody is building new local authority care homes.”
Despite the funding crisis, Smith and Taberner insisted that Four Seasons would make a £26m interest payment due in December.
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