EDM | Southern Cross And Private Equity

Posted on: 15th June 2011

Andrew George MP has signed EDM number 1904 in 2010-11, proposed by Michael Meacher on 13/06/2011.

The motion reads,

That this House notes that when Southern Cross, Britain’s largest provider of care homes for the elderly, was floated on the stock market by private equity firm Blackstone in 2006, it was pursuing a business model of rapidly buying up nursing homes, then selling the freehold properties to landlords and leasing them back, relying on the fees its nursing homes generated to pay its rents; further notes that Blackstone sold the main landlord NHP which it still owned in March 2006 for 1.1 billion, thus doubling its original investment, and then floated Southern Cross four months later at another large profit; further notes that a combination of falling fees, higher operating costs and rising rents then broke this business model, thus putting at risk the security and even survival of 31,000 elderly and frail residents at its 750 homes; takes into account that as a result of this business model Southern Cross care homes suffered years of under-investment leading to breaches of Care Quality Commission standards at 164 homes equal to a quarter of its English estate while staff, many of them on the minimum wage, were stretched to breaking point; and calls on the Government to secure the protection of all the residents if the company collapses, and to set up a public inquiry into the impact of private equity financial engineering in social care, including consideration of whether private equity should be prohibited from operating in areas of health and social services.