Union hits out at ‘scandalous’ care homes rent crisis

The crisis facing the country’s biggest care homes company was caused by “scandalous financial engineering”, a leading union has claimed.

The GMB published a 61-page dossier on the troubles at Southern Cross, which is responsible for looking after 31,000 elderly residents, and has announced that it will underpay its rent for the next four months as it struggles with a £230m annual rental bill.

An emergency debate at the union’s annual conference in Brighton ended with a call on the Government to appoint a cabinet minister to help secure the future of Southern Cross staff and residents .

The union said it was time for a “fresh start” and a different social care model for looking after the elderly and vulnerable.

The dossier said that major UK and US financial institutions were involved in buying into the sale and leaseback model for Southern Cross which had now “blown up”.

The union claimed that rents for the 750 Southern Cross care homes were £100m higher than they should be, which was at the heart of the current problems.

The dossier complained of a “lack of transparency” over who owns the care homes and the financial returns to “ultimate owners” of the properties.

“It gives GMB no pleasure to say that the machinations and dealings of the private equity industry, the banks and the bond market, which gave rise to the crisis in Southern Cross and the private care home industry, took place while there was a Labour government in office that was either blind to what was going on or was actually encouraging it.

“The kings of private equity, in secret, hidden from the press and the public, perpetrated ravages on the British economy and British jobs. Under current rules more is known about the mafia than about the antics of private equity,” said the report.

Helen Ewan, who works at a Southern Cross home in Mansfield, told the conference that employees were having to work longer hours by being “blackmailed” by managers to cover for staff shortages.

GMB official Justin Bowden said the fate of 31,000 residents was “hanging in the balance” because profit had been put before people.

Southern Cross Healthcare Group later issued a statement saying that it will give shareholders an update on its financial position at a meeting in London on July 12.