Southern Cross: Government tries to reassure residents

The government has pledged to ensure “effective protection” is in place for residents of UK’s biggest care home provider, Southern Cross.

Fears have been growing for the future of the loss-making company, which said this week it would have to reduce the rent it pays its landlords.

The government said it was closely monitoring efforts to resolve the company’s financial problems.

But Labour said it should outline “a plan B” to reassure worried families.

The Prime Minister’s spokesman said the government was monitoring the situation carefully and said the Department of Health had been in discussions with Southern Cross for some time.

And Care Services Minister Paul Burstow said: “It is for Southern Cross, its landlords and those with a stake in the business to put in place a plan to put the company on a firm footing. That is what they are doing.”

But shadow health minister Emily Thornberry said the situation was “very serious” and should not be left to local authorities and the regulator, the Care Quality Commission.

“We are talking about the most vulnerable, and the government has a responsibility to ensure that there is a plan B if Southern Cross can’t look after itself,” she said.

A care providers’ association said there was a good chance that Southern Cross, which cares for 31,000 people, could be restructured and there was no need for mass closures.

“Underneath the current difficulties, because councils are continuing to buy care from Southern Cross, there’s a viable business that can in some way be structured,” said president of the Association of Directors of Adult Social Services, Peter Hay.

His members are directors of social services at local authorities in England and include those who buy care from Southern Cross.

Mr Hay said there was “no need” to talk about the mass closure of care homes.

He told the BBC Radio 4 Today programme: “We will work with all parties – landlords, Southern Cross and others – to try and build a sustainable, viable business from this for the future.”

‘High and dry’

Darlington-based Southern Cross recently reported half-year losses of £311m.

The company, which operates 750 homes, warned then that it was in “critical financial condition”.

There has been mounting concern over the situation among the elderly residents and their carers and relatives.

“It’s a mixture of anguish and concern and panic,” said Judy Downey, from the Relatives and Residents Association charity.

“The whole business of closure of care homes is something the Relatives and Residents Association has been really concerned about for some time.

“Homes close on a regular basis for one reason or another, and we’re very concerned that they have the same status in law as a corner shop that gives up, and people are left high and dry.”

Roy Lilley, a health policy analyst and former NHS Trust chairman, said Southern Cross was in a difficult position.

“The problem is, in a normal business if you run into trading difficulties you can circle the wagons, close some branches that are not profitable, get rid of staff and just generally cut the overheads,” he said.

“But here you can’t do that, you’ve got 30,000 of the country’s most vulnerable people who depend on this company for a service.

“You can’t shove them around, you can’t decant them because clearly some of them are very frail and very vulnerable.”

But despite those concerns, Health Select Committee chairman Stephen Dorrell MP said the government should not consider a banks-style bail-out of the company.

“It doesn’t seem to me that it’s the taxpayers’ job to fund the losses that have been suffered by the people who have invested in Southern Cross. That was their risk and it’s their loss,” Mr Dorrell told the BBC.

‘Critical mass’

Southern Cross said on Tuesday that it would defer 30% of its rent for four months while it tried to resolve its financial difficulties.

It also reiterated its belief that a longer-term solution to its troubles would be “forthcoming”.

The firm said it was confident “a critical mass of landlords” would support the move. However, there has been no official agreement.

The rent deferral runs from 1 June to 30 September. Southern Cross said it would issue an update in July.

Company chairman Christopher Fisher said: “We believe that all of the key stakeholders in Southern Cross want this restructuring to succeed.

“We are in dialogue with the Department of Health, our lenders and our landlords and they continue to support the process.

“The objective will be to emerge with a stable and sustainable business model for the continuing care of our residents.”

But financial consultant Paul Saper, who has analysed the private care sector, told the BBC: “They can make a decision themselves not to pay the rent, but their landlords don’t have to turn round and say: ‘We accept that’.

“That’s not going to happen, because these landlords also have responsibility to their shareholders.

“I anticipate, over the next week or two, landlords will start to take back their homes. And why should they not do so?”