The case for health and care privatisation

Yesterday, the Health and Social Care Bill finished its passage through Parliament. Today is the budget speech.

Saturday’s Guardian had a piece entitled ‘What will the 2012 Budget mean for you?‘. It was not about the NHS, nor privatisation, just about how the budget affects the lives of ordinary people. But one of the ordinary people – acknowledgedly ‘the high earner’ – caught my attention, because he works in the field of social care. His name is Tony Stein.

According to the article,

Tony Stein is founder and director of Canterbury Care, which operates 11 care homes across the UK. Last year his earnings “just about touched” the £150,000 level…

Although Tony signed a letter in the Telegraph last month arguing that the 50p tax rate “puts wealth creators like us in an awkward position”, he is an ordinary guy:

It’s not as if I’m earning millions. Actually, what has me shouting at the telly is the executives of big banks who earn millions but aren’t putting their own money at risk.

Is Tony making out a persuasive case for private enterprise running social care, the case for privatisation? Let me make clear, I don’t know him personally, nor do I have any dealings with his company. Nor, frankly, have I done much by way of research, though I have done a little digging.

A little digging revealed that Canterbury Care is headquartered in Worcestershire, where a local Green Party member in 2010 criticized the Council’s Chief Executive for not taking a pay cut:

Mrs Haines is contracted on a salary band ranging from £167,977 to £183,725 a year.

Worcestershire County Council’s accounts suggest it is rather a larger affair than Canterbury Care with its 11 care homes; its Chief Executive gets paid more, but hardly in proportion to the size of the enterprise. Among the information I extracted from Worcestershire’s balance sheet are that it has long term assets of £1.695 billion and long term liabilities of £1.056 billion. I went looking for that figure to compare it with Tony Stein who says Canterbury Care has “£14 million in borrowing”.

I venture to suggest it is pretty plain that Tony Stein has a salary chasing that of the Council’s Chief Executive, for a far smaller venture. Measured by debt, the Council’s financial headache seems to be about seventy five times the size.

At this point, I start to speculate that it might be 75 times cheaper to have debt presided over by a local authority than a private enterprise, and that Tony Stein really hasn’t made out a persuasive case for privatisation of social care.

But, to be fair, it isn’t just the size of the financial headache that Tony relies on to convince us. It’s the fact that

…We employ 455 people, but we have £14m in borrowing, and a big mortgage on my home. At the end of the day I have my neck on the line. Yes, I earn £150,000 or so, but it’s me who has sleepless nights over the borrowings and operations of the business, and it’s me who works all weekend.

So he can shout at the bankers on the telly like the rest of us, because of the fact that his pay is justified because his own money is at risk in his enterprise. And he works all weekend – though I am presuming his residential care homes are staffed all weekend also.

I’m sorry, Mr Stein, but I’m afraid you have actually made out a case to be relieved of that risk and that income. I’m just not getting what is the benefit to the public of the liabilities and risks being borne by wealth creators like you instead of the taxpayer. If residential care were run by local authorities, no individual would have to have sleepless nights because of their personal investment and risk. No individual would therefore need to be paid £150,000 to preside over just 11 residential care homes. The tax payer wouldn’t need to worry about where the money came from and whether there might be a Southern Cross-like disaster. The case for privatisation is not made out.

And I haven’t even begun to explore the market arguments about quality, efficiency, competition and the like. This commentary is just about the apparently extraordinary cost of privatising capital and investment risk.

Did I mention, yesterday the Health and Social Care Bill cleared its passage through Parliament?

Allan Norman (@CelticKnotTweet) is a registered social worker and a solicitor at Celtic Knot – Solicitors and Social Workers.

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2 thoughts on “The case for health and care privatisation

  1. Inclined to agree with that assessment; and I’d like to challenge the use of the term ‘wealth creators’ with reference to such people: for whom do they create wealth other than themselves? How many of his employees are on wealth-level wages, I wonder? Very few, I suspect; in fact I’d hazard a guess that most are on the absolute minimum that he thinks he can get away with: care workers are notoriously poorly paid, often on barely above the minimum wage.

    That’s not wealth creation: that’s creaming it. Of course I could be wrong: Mr Stein could be one of those rare philanthropists who pays his staff a genuine living wage and rewards their labours appropriately; like you, I haven’t done any research beyond my personal knowledge of typical care worker wages. If I am wrong, then I salute you, Mr Stein, and apologise unreservedly for any slight.

  2. The benefits to the public, Allan, of private care home provision are:

    private homes are on average 30% cheaper like-for-like than public sector ones;

    quality in private sector homes is generally higher despite the cost differential;

    a market in care provision gives the service user choice;

    public capital is not used to provide the infrastructure.

    The first two advantages have been found by study after study. The second two are matters of demonstrable fact.

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