Private sector care homes made staggering £250m profit – from just three regions

Private rent-seeking owners of care homes in just three regions of the UK have extracted over £250m in profit over the last three years. More than a third of that went to corporations in tax havens or private equity.

‘Profit rather than public good’

This was revealed in a report, which is part of a collaboration between the Centre for Local Economic Strategies (CLES), the Centre for Thriving Places (CTP), Co-operatives UK and the New Economics Foundation. It notes that:

Over the past few decades, care has been turned into something to profit from rather than a public good. Private equity firms, hedge funds and offshore billionaire owners now dominate the sector, using debt, rent, and complex ownership structures to pull money out — not just from the care system, but from our local economies too. While the services themselves struggle to stay afloat, these owners can pay directors huge salaries and hand out big dividends, while frontline staff work long hours for low pay and little security.

Anyone with more than £23,250 in savings or if they own their own home must pay for their own adult social care in the UK. Yet private corporations extracted £256m in profit in the North East, West Midlands and South Yorkshire from 2021-2024.

Instead, the government’s sovereign currency (and using progressive taxes to control any inflation) should fund care as a public service. This is especially true when, between 2011 to 2023, 98% (804 out of 816) of the adult care homes that the Care Quality Commission (CQC) closed were run for profit. Local authorities or charities ran the other 12 homes.

A co-author of that care closure research said that forced closures “often involve instances of severe neglect or abuse”. Ethos and motivations matter when you’re providing care, given the maximisation of profit extracts resources through dividends, often means low paid and low moral staff, as well as a further austere outlook when it comes to the overall quality of the service.

Issue currency, not debt

Another reason the government should use its sovereign currency, free from the bond market, to finance care is because of the level of debt firms are taking on. The collaborative report pointed out that residential care homes have borrowed £7bn. That means that 16% of the fees for the 26 largest care homes are going to debt interest.

Even if the government sold bonds (which it does not need to, it can simply issue currency) to help finance care home investment, public borrowing interest rates are cheaper than private. That’s because the government has the entire tax paying country as its security.

Sovereign currency financing would bring 16% a week in efficiency savings from just the lack of debt.

Ownership extraction

The report on profit extraction from care homes also found that 4 out of 5 of the largest adult care homes are:

either owned by private equity firms, US hedge funds or by billionaires based abroad.

Further, the research noted that of the care homes owned or backed by private equity, 80% had owners based in tax havens.

Yet again, privatisation of an essential service is a complete fail.

Featured image via the Canary