Is It Wrong to Profit From Human Misery?

Is wrong to profit from human misery?

Over the last week or so there has been a huge amount of comments (I don't think it deserves to be called a debate) in The Guardian, community Care etc about the issue of outsourcing child protection and other child care services. The Government issued a consultation asking people what they thought about local authorities being able to outsource these services. Immediately a large number of people waded into the debate firing off comments about it being appalling that child protection was going to be hived off to Serco even though there was nothing in the consultation document to suggest that this was likely to happen. What was worse however, was the vitriolic stream of comments which emerged in the Guardian about the private sector and by implication anyone who is the social care business. One person who wrote a brief article in defence of outsourcing in Guardian Society was described as 'evil' by a commentator.
At this stage I want to make my personal views about privatisation known. I think that public sector bodies, while being far from perfect, usually offer coherent and consistent well managed services on areas like child protection. I think for a service like child protection, it is likely that any process of outsourcing is likely to lead to fragmentation and while there might be some examples of improved practice there will also be poorer practice and that is concerning in such a sensitive area. HOWEVER, I think it could in some cases offer professionals to form private practices who could work in innovative and fulfilling ways for those workers and these practices could be a beacon for the sector.
I have made a lot of comments on different places which probably would lead to people thinking I am a lot more in favour of outsourcing than I am but this is due to my natural tendency to want to give an airing to the side of the debate which nobody else seems to be willing to give a hearing to. I think it's also because I am appalled by the level of prejudice and vitriol being pumped out by people who claim to caring and morally superior to the Tories. From where I am standing some of them are like the left wing equivalent of Fox News viewers.
I want therefore to look at a few myths about outsourcing.

Myth 1. The private sector is social care is made up of rich money grabbing fat cats.
Actually the majority of providers on social care are people of,very modest means, some of who, are scraping together a pretty marginal existence. One of reasons that unemployment has not gone up significantly as a result of austerity is the huge rise on self employment. Many of these self employed are freelancers and consultants who are doing bits of training and consultancy work for local authorities following being made redundant. In fact at least one local authority which I know if encouraged all their day care workers who they were making redundant to set themselves up in business as providers. How there was going to be work for all of them when they couldn't continue as employees I don't know. I doubt of many of them are going to be joining the Fortune 500 anytime soon.
Another type of business in social care is the small family run care home. I delay with a number of such businesses over the years. One was a four bedded unit for teenagers with behavioural problems which looked like an ordinary family home. The owner worked in it together with his partner. Both had a really strong commitment to working with disturbed young people despite the fact that the woman of the couple had developed tinnitus following an assault by a young person. The male owner had invested an inheritance from his parents in this business. He could have put it into property but he developed this and some other social care services with the money. He made an honest profit and a reasonable livelyhood by offering a standard and style of care which wasn't available anywhere else in the area.
When I hear people describe people like that couple as profiteers it makes my blood  boil.
There are some profiteers in social care like the carpetbaggers behind the Southern Cross Scandal but they are very much the exception. There are not many big providers in social care. Many of the home care businesses in some areas are very small operations, sometimes run by former home helps who want to improve their standard of living and be entrepreneurial on a small scale.

Myth 2 Earning money from child care is moral when it's called a wage and immoral when it's called profit.
Okay so - is that always true? What if the wage is 150k and the profit is 0.5% which one is moral then?
Basically if you study to be a Doctor or Social Worker you expect a return on the investment of your your time and commitment on the form of an income. This is called a wage. If you take a risk and go into business for yourself then you will need to make a surplus. Out of this surplus you will have to pay interest to any bank or a dividend to anyone who lent you money to set up the business. Since investors are taking a risk and could potentially lose some or all of their money they will expect a bigger return that they would get from a bank account. After all that there might be some money left over for you to take put a wage.  This is of course provided you actually do make money and don't end up going bust. If you rely on the council to send you referrals and they don't send you any for a few months then nobody is going to bail you out. The surplus which a business makes is called a profit.
There are few differences between people who make wages and people who make profits. People who make wages get a funded pension, sick pay, holiday pay, maternity pay. People who work freelance or run their own business get none of these things. If they are too sick to work they get nothing. If business conditions deteriorate they could lose their home and everything they own. It sometimes amazes me why anybody actually does it.
So- Do you still think wages are moral and profits are immoral.

Myth 3 It is wrong to profit from human misery.
This is the suggestion that certain forms of activity such as protecting vulnerable children should never be a source of profit. This idea, strongly put forward in the Guardian suggests by implication that it might actually be more moral to earn money from something like cigarettes than work which improves people's lives.
I think Martin Narey nailed it on the head today. He said that he makes lots of money from human misery- It's called a wage ( see Myth 2 above).

Myth 4. It is the greed of capitalism which leads to poor wages in outsourced services.
This is untrue. Local authorities could in theory specify that the workers in outsourced businesses get paid a decent wage. Fair trade Coffee is an example of capitalism being used to improve workers conditions by making workers pay a marketable commodity for customers to sponsor. Home care contracts often specify such low rates that it would be impossible for the business to pay decent wages. Outsourcing is used as a politically expedient way of lowering pay. Local authorities could not get away with lowering wages for their own employees but by outsourcing the work they can also outsource the notoriety associated with poor pay and conditions. It is not true that private companies are making large profits by ripping off workers in outsourced contracts. Hourly rates and margins are cut to the bone.
This is not of course the fault of local authorities- they are experiencing austerity. However, it is not a direct consequence of capitalism either.

Myth 5. Social work practices will never be better than working for the council and they will never get off the ground.
Well whether this turns out to be myth or not will depend on the attitude of social workers and whether they seize the opportunities of being able to control their own destinies. Much is made in the literature of how social workers are suffering under managerialism, poor supervision, inadequate IT facilities etc. by taking charge of their own practices there is huge scope for change. More flexible working, less hierarchical management, a culture which is less driven by fear and defensive practice, better relationships with local communities which social workers serve, better use of media to publicise good practice, opportunities to put local residents and young people on steering committees to direct how the service is provided. Really the list of what could be achieved is only as limited as out imagination.

Myth 6. Change can happen easily and quickly.
As a social work academic I feel its my job to prepare students for change and prepare them for a long career which could take many forms over the next few years. It's not just to prepare them just for the job as it is now. However, the sector as a whole has been long used to thinking in terms only of a career in local government. It will be a challenge for social work academic its over the next few years to prepare their students for the challenges of working in different types of agencies from before.
Government too must offer help and support if existing social workers are to take advantage of new opportunities. There is also a role for employers with the help of Universities to prepare workers for change- if that is what is wanted.

Another PR Disaster for Social Work- Why We Need to Stop Blaming the Media and Stand up for an Open and Accountable profession.

A pregnant woman was sedated against her will and her baby removed by caesarean section and taken into care after instructions from social services, it has been claimed.

Social workers went to the High Court to get a court order which allowed them to take the child from the mother's womb, according to reports.

The above is the first two lines of an article on the Sky News website. It has been tweeted by about 580 people. The original story in the Sunday Telegraph has been tweeted by about 1000. Difficult to imagine that that many people are interested in social work.

The twitterverse is full of indignant social workers saying that this is terrible. Not what happened but that newsagencies have dared to publish what is perceived to be an unfair and one-sided version of events. Why people think it is unfair I don’t know –it does not seem unfair an unfair judgement in light of what has been actually been made public.

The charge that it is open-sided is however, a valid one. The reason that it is one sided can be found in the final paragraph of the Sky news item.   

Essex County Council told Sky News in a statement: "Essex County Council does not comment on the circumstances of on-going individual cases involving vulnerable people and children."

That’s it. The sum total of what they have to say.

 Not –‘We are very sorry – we realise that there is much public interest in this story but we reassure that we have at all times acted in the best interests and the interests of her baby’. Not- ‘We are very sorry but we have been forbidden by a court order from responding to questions. We wish we could say more but it might prejudice proceedings.’

Such alternative statements would not really hold a lot of water. The fact that the story is being reported in the way that it is- draws great deal of media attention  that simply would not be there if a fuller account of the story had been told. In fact, now an MP is going to raise it in Parliament so it is difficult to see how there could be any less of a spotlight on the story.  

So, a response like ‘We are sorry we can’t say anything’ would not have cut much ice. However it would be a vast improvement on what they did say. What the terse statement by Essex council is saying is ‘Sod off- we don’t have to tell you anything and its none of your business anyway’.

Well –I’m afraid in a democracy public servants are accountable to the public for what they do through democratic processes and the only way that the democratic process can work is if people have information. We would not tolerate the Police using sweeping powers like this without being expected to explain themselves.

If there is a genuine legal reason why the council can’t give details of the case then ought to say this and apologise to the public for the fact they can’t comment. Furthermore if such constraints are a general problem then social services directors ought to be campaigning for changes in the law so that they can make more information public.

The statement by Essex seems to suggest that they are simply not commenting because of a policy- allegedly to protect ‘vulnerable people’. Clearly it is okay to seriously interfere with the liberty and health of a vulnerable person but not okay to respond to reasonable public interest in what is being done to them.  This has echoes of a case a few months ago where social workers condemned a man with learning difficulties for putting a video on Youtube of his child being taken into care and he had to take social services to court to get  permission to make the world aware of his story. Rather than saying he needed support to be able to tell his side of things many social workers said he was making his children vulnerable by putting the video online.

Surely an important part of protecting vulnerable people ought to be making judgements taken on their behalf open to democratic scrutiny.  

Vulnerable should NOT equal No right to speak or have your story heard.

Many of my friends who would normally be supporters  of public services think this present situation is terrible. The only people who think this is a case of press victimisation are social workers. I think the profession has to take a long look in the mirror and think about how other people see us.Look at the Independents headline - It says that this is the 'stuff of nightmares'. Actually its the sort of stuff that can be a death blow to the credibility of a profession. It needs some good PR and damage limitation double quick. Not falling back on jobsworth -'Its not our policy to comment ......'

I have been in social work now since 1986 and all through this time I have been constantly angered by the attitude of my profession to the media. On one hand there is a paranoia the media is against the profession  and on the other hand an arrogance about ordinary people not being able to understand complex social work situations even if they were told the information. Over the years few people have given my view any credence.  They have all fallen back on the idea that these things have to kept private to protect ‘vulnerable people’.  I guess I have always been a curmudgeon. This is one of the many popularly held views I have never agreed with.

In the meantime the image of the profession has sunk lower and lower and people just blame the media rather than thinking about whether we need to think of another way of engaging with the public.

I would not trust another profession which operated in secret so why should I expect people to trust my own when it is doing this.

It is true that newspapers do tend to favour certain political viewpoints and groups over others. However, they will report both sides of a story if they get it-even if they do give one side more credence. And most people do give their side. Even the toxic waste disposal industry will respond to media criticisms. They will make a press release that says that toxic waste burning  creates jobs or that it is all quite safe really. That might not convince many people but it is at least a response and an attempt to change public opinion.

Social work wants to improve its image and it ought to be capable of doing better than the toxic waste business.

The Essex response says ‘Social Work doesn’t care what the public think and they don’t have a right to know or the ability to understand.’

That is the attitude we should be fighting – not the media.

Outsourcing Governance and Oversight in Social Services: Why CRB decision by Court of Appeal is a landmark decision for common sense.

Lord Dyson’s Court of Appeal decision this week on CRB checking is a landmark decision for common sense and proportionality.

When I qualified as a social worker CRB checks had not yet come in. Over the course of my career I have seen CRB checking become a vast industry consuming large amounts of time and money and in my opinion doing very little to protect vulnerable people.

Just to give a sense of how ridiculous the situation has become I will relay an anecdote from my own experience. A number of years ago I was teaching a social sciences subject at a University. This is not a job that requires a CRB check (not yet anyway) and students on the course do not automatically need to be police checked. One of my third year students was going to do a dissertation on respite care for a vulnerable client group. The participants in her study were going to be residents of a respite care facility where she already worked part time. As part of the condition of ethical approval for the study the University  (not my current employer) insisted that the student be Police checked even though she had already been Police checked to work in the respite care centre. Not only that, but because I would potentially have access to data about vulnerable people( though this was largely of the nature of whether they were enjoying respite) I would have to be Police checked too. This was despite the fact that I would never set foot in the respite centre or learn the real names of any of the participants on the study.

 At the time it did not worry me unduly because I have no history of any type of convictions or cautions. However, what if I had? Supposing I had committed some sort of indiscretion as a young man such as being drunk or disorderly or possessing cannabis? If this had been the case then I would have had the embarrassment of having this revealed to colleagues in my organisation- albeit that they would be expected to keep it confidential.

Over the last few years I have changed jobs several times and had to be Police checked every time, even though none of the PBS would involve me having direct, unsupervised contact with social work service users. If I had had a minor offence then I would have had the embarrassment of having to disclose it every time I applied for a on for the rest of my life and having to pray that people made sensible judgements about its significance.

I can't imagine what that feels like. The right to have a job is a very fundamental human right. Many will say that if you have nothing to hide you have nothing to fear. They also argue that most employers will make fair decisions about the significance of spent convictions. But what is a fair decision about an old conviction and how do employers make a fair decision. When Police checks were introduced they were only for workers who had substantial unsupervised access to children. This was based on strong evidence that offenders with a sexual interest in children were likely to reoffend and would seek jobs which would allow them to get access to children.  However, what is the evidence that people seek jobs working with adults to re-offend? Do reformed shoplifters look for jobs as personal assistants to rob the people they care for and if they do then how many cases are there of something like that actually happening? How many people are we actually protecting by the amount of time and resources which are put into Police checking. Would that money be better spent on supervision of staff or advocacy for service users?

Then there is the issue of how individual employers try to make sense of previous convictions. Nobody would put someone with a serious sex offence in a job in personal social services- but what about a fraud conviction from 10 years ago or a minor shoplifting case from 3 years ago? Is Anthony Worrell Thompson a danger to all vulnerable people because he stole something from Tescos a couple of years ago? Does this reveal a brief episode of psychological distress leading to a very bad decision or does it reveal a tendency towards other criminal behaviour. I don't know the answer to these questions because I am not a criminologist. I don't know the criminal profile of people who go on from minor offending to serious exploitation of others. Neither do HR staff in employers all over the country. They will try to come to common sense decisions but their decisions will also be based in part on their predisposition to giving others second chances, or on their prejudices about certain kinds of offenders. They will also be mindful of the fact that if one of their employees does commit an offence on the job or some sort of malpractice then the media may slate them for employing someone of ‘bad character’ even if what they have done is unrelated to the previous offence. There is therefore pressure in a rick aversive culture to not take chances on people.  

I really feel for young people who have or explain when they apply for a place on a social work course how they got into some scrape outside a pub after high jinks with their friends years ago and ended up getting arrested. They will have to go on explaining such an incident for the rest of their career.

There is also the issue that social work ought to be a profession in which we welcome people who have turned their life around. People who have been in care as young people are disproportionately likely to have convictions as children due to the fact that Police are often called to events at assessment centres in situations where they would not be called to a family home.

We also need to remember that the criminal justice system does not treat all types of people equally. There is evidence of women being sentenced more severely than men for the same types of offences. Institutional racism in Police forces is well documented in literature. There are also potential class differences in outcomes. Working class children may not realise that a caution will go on their record. Children from richer backgrounds may realise, or be advised, that the Police may decide not to prosecute a minor offense and that they are better off refusing a caution.

As social workers and social work educators we are aware of the imbalance in how people are treated in the criminal justice system though we judge information from the Police database as though no biases or prejudices exist.

Then there is of course the issue of what a Police check does not reveal. The person who got caught shoplifting  10 years ago may have learned their lesson and reformed or they may just have got better at stealing and not been caught again. Many people who are sexual predators go on offending for years without a single conviction. CRB information can give a false sense of security about a candidate for a job. It only reveals convictions. The usual response to this point is that people say that we need better Police checks and we need to include intelligence and suspicions which the authorities or employers had about people. A sort of Minority Report situation where we can spot the offenders in advance using Police data.

People point to the Ian Huntley case or Jimmy Saville as people who might have been stopped with better use of Police data. Actually there are much more efficient and simple ways of dealing with such situations which don't involve computers. Ian Huntley would not have been employed as a caretaker if his employer had taken the simple step of asking for a reference from his previous employer. As for Jimmy Saville we can ask why a Disc Jockey ( albeit one with a clean record) was given unlimited access to children's hospitals, psychiatric units and hospital morgues.

The real keys to keeping service users safe are proper supervision and oversight of staff, good whistle blowing procedures and advocacy for service users to ensure that their concerns and complaints are listened to and investigated properly.

I suspect that the real appeal of Police checking lies in people's faith in computers as a magical source of information and insight. Just as Willow, in a Buffy the Vampire Slayer who could google all sorts of arcane information about demons, many of us think that Police computers will issue forth all sorts of secret data on suspicious characters. It is actually a way of outsourcing responsibility for good selection processes and the ongoing safety of service users.

The real path to safe practice I feel lies in how we supervise staff while they are working. There is a role for CRB checks but the present level of Police checking is neither necessary nor sufficient to the role which most of the sector thinks it ought to play at present.

Selection and supervision of staff who work with sensitive clients is a complex and ongoing process. It cannot be outsourced to a police computer.

Let’s reform this process, get some sense of proportion and stop outsourcing our responsibilities.

Social Media and the Future of Higher Education

Social media are not going to enhance higher education- they are going to completely transform the relationship between student and teacher and shift the balance of power in the education system.
Social media such as Facebook have already changed many of the aspects of how we relate to other people, who we can form relationships with and the types of things we share with them. Many businesses are now using social media to interact with their customers in different ways and use them as brand ambassadors or answer their concerns and complaints in a much more direct way. Entertainers and writers are also using social media to interact with their public in more direct ways. The other day I got a direct tweet from an author whose books I read in repsonse to a tweet I made about the work of another author. That type of interaction would have been highly unlikely a few years ago.
The education industry ought to be at the forefront of embracing new technologies. Sadly this has not been the case and I think the reason for this is fear about how transformative and disruptive the technology is. However, HE institutions will have to use social media or suffer serious consequnces.
To illustrate why I think this will happen I will give the example of downloads and the music industry. In 1994 I participate in an amazing concert in London by the artist Todd Rundren. The concert tied in to his No World Order album, an interactive piece of music released on a computer disc and an interactive cd which aloowed the listener to make their own remixes of the material and control the mood tempo etc of the music. For those of you are, like me, social work professionals this could be looked at as a form of personalisation- the listener being in control rather the artist. Rundgren figured that new technology would completely change the balance of power and control between the producer and consumer and that neither artist nor publisher would be able to control how people experienced or distributed music. Rather than fight this, he embraced its potential. The concert itself was completely interactive with members of the audience being allowed on stage to dance and play instruments. At one of the shows in America he apparently decided to leave the stage for a while and be partof the audience while audience members ran the show- playing his songs.A little later before the emergence of Napster, he tried to interest record companies in releasing legal downloads. They refused point blank stating that it would interfere with their CD sales. Now of course there are no CD sales and most of these record companies are in bankrupcy or liquidation.
A similar fate faces many HE institutions if they do not start modernising now.
Two forces are currently facing HE in the UK. One is the threat of competition from the private sector who are going to be able to offer degrees. The other is a fall off of student numbers because of the high tuition fees which will be charged as a result of these fees being moved from a loan/taxpayer split to being completely financed by loans to the student. Social media can either offer a vehicle for the first threat or a way for Universities to stave off the second threat if they embrace it.
Currently higher edication is one of the few industries which operate in much the same way as it did in ancient Greece. Certainly, new technologies such as Blackboard have been introduced. However, they are always considered to be in support of traditional forms of learning rather than a replacement for them. Furthermore, the quality of the technology used in education is inferior to that which people enjoy in other areas of their lives. I know of lecturers who have successfully carried out much more lively debates with their students on Twitter than they have managed to in the discussuion forums on Blackboard. People are used to frictionless connectivity and so an interface which requires people to navigate through about 6 pages before finding that nobody is online is not going to be very popular.
Social media have the opportunity to connect educators instantly with their students and also connect them and their students to a wider body of authors, educators, students in other institutions and (for social workcourses) the wider public and people who use social services. They also have the ability to connect HE instituions with all of their former allumni and other partners such as employers, providers of placements etc. If a tool like Facebook or Twitter was offered to HE institutions for the first time they would proabably be willing to pay a lot of money for it. And yet these tools are available now and are completely free. Why are they not being taken advantage of?
The issue for many educators is the lack of control which they will have in these debates and discussions or what ultimately is done with the content if it is available to outside parties. However all of these outside parties are stakeholders of education and they have a legitimate right to take part in debates about good poractice without their participation being stagemanaged and controlled. Students also have the right to take advantage of the educational opportunities available to them through free interaction with others.
Certainly, there will be risks assocated with embracing new media. However, these risks are overwhelmingly trumped by the lost opportunities from not engaging with them.
For HE providers the greatest risk in the next 10 years will come from new private competitors. These competitors will not have the overheads which Universities currently have. They will be lean operations using high quality syndicated material delivered by podcasts and backed up with instant contact to tutors through mobiles and skype. Students will connect with and meet each other through social media. These institutions will focus their resources on aspects of the student experience which add value (flexibility, accessibility, interactivity) and ignore those aspects which are not perceived as adding value.
If you think this sounds far fetched then I suggest that you read the article 'Disrupting Higher Education' which appeared in Harvard Business Review July/August 2011 issue. It states: "State institutions are gradually being defunded by taxpayers. Liberal Arts Colleges are struggling for survival. Upstart for-profit colleges are, despite mis-steps on the rise." Essentially, the changes I am describing are already ocuring in the USA. Prestigious Ivy League Universities are able to retain their traditional approach but HE institutions which do not have their USPs are being overtaken by ditital-savvy alternatives. According to the article tuition fees are on a downward trajectory as these new hi- tech forms of education are much cheaper. I would suggest that the coalition Govt in the U.K. has deliberately transferred the burden of fees onto students so that they will drive prices down. This change is partnered with a liberalisation of who can actually provide HE. While fees remain high this will provide opportunities for private institutions to come in under existing market prices and still make profits.
Existing HE providers cannot afford to look on at social media and tut tut about loss of control,loss of privacy etc. Young people have already weighed up these issues and concluded that benefits outweigh the disadvantages. Consumers made a similar calculation in relation to music downloads and decided that they did not want their choice restricted, even though this often meant breaking the law before the advent of legal downloads.
It need not be a bad outcome, however, for our 'non-Ivy League' Universities. They do have real strengths in terms of their engagement with local communities and local industries, and in their reputation for social inclusion and expanding opportunities. However, they will need to build on these strengths by modernising how they do business, reducing costs, and embravcing technologoies which will enhance their students' experience of HE.
Social media will radically transform the relationship between lecturer and student. They will blur the boundary of where the classroom starts and finishes, who takes part in a student's educational experience and who holds the expertise and power. This is its stength and a challenge to engage with rather than something to fear.
I am very excited about this. I did, after all, go into education to help people to think for themselves and continue my own experience as a learner.
Every other aspect of our lives has changed radically as a result of technology-education just has some catching up to do-but the psychological changes and the change in power relationships will be more profound than the changes in technology.

Important Lesson From the Southern Cross care home crisis

The current crisis at Southern Cross is a cause for great concern and has been the subject of much debate. It has come at a time when there is huge concern about the health and social care sector being opened up to more competition,concern about the quality of care in residential care and hospitals and concern about NHS Hospital Trusts in financial crisis.
Unfortunately (though predictably) much of the debate about these important issues involves simplistic arguments about the unsuitability of applying the 'profit motive' to social care. These arguments ignore the fact that the majority of people involved in private sector social care (including most of the managers) are employees and never see any profit. Like their public sector counterparts they are likely to be motivated by wanting to provide a good service to the people they care for. Certainly, they could forced to cut corners by owners to save money- but this is equally true of people working for cash strapped public services.
There ARE reasons to be concerned about the private sector involvement in social care. However, to examine them requires a much more nuanced approach than that on display in some parts of the media.
The current problems with Southern Cross would appear to derive from the business model which the company has been saddled with since 2007.
Southern Cross was purchased in 2004 for £162 million by an American private equity firm called Blackstone. It was floated in 2007 on the stockmarket with a valuation of £423 million. The business model was called sale and leaseback. The company would sell off its valuable property assets, (ie the buildings which housed the care homes) to property investors. These investors apparently include the Qatar Investment Authority and other wealthy landlords who were guaranteed steeply rising returns. The careccompany would then lease back the properties from their rich landlords with 30 year leases which required them to pay ever increasing amounts of money in rent each year. This arrangement assumed that the demand for residential care would increase year on year and that local authorities would be willing to continue to pay increasing amounts of money for residential care.
The money that the company made from the property sales was used as finance for the purchase of additional care homes which were then in turn sold and leased back. As long as property values kept rising and there was the ongoing income from new residents the flow of money continued.
Blackstone made a 300% return on investment from this deal.Four executives at Southern Cross sold their entire holding of the company in December 2007 when the share price was £5.50 per share netting them personally a combined £35 million. The share price plunged just 6 months later and stood at £0.063 per share on 3rd June 2011.
Now the company cannot afford to go on paying the steep rents and local authorities are facing the prospect of having to rehome large numbers of vulnerable older in the event of a collapse.
The Southern Cross collapse was a result of high risk business strategy which had reaped huge profits for a small number of people and a private equity firm. The model was vulnerable to economic and political changes. In any case it would have been cheaper to have funded expansion from loans than from sale and leaseback of peperty.
The long term fallout from this is going to place a great deal of anxiety for vulnerable older people and their relatives, local authorities, council tax payers and current investors.
This is likely to be especially felt in the north east where the care home chain has a strong presence. So far central Govt has shown very little leadership. Their localism agenda seeming to allow them to bail out of any responsibility for anything which they consider to be a 'local' issue. But Southern Cross is not a local issue. It is a regional and a national issue. It requires a national solution and new strategies in dealing with issues of private sector involvement in public sector provision.
I believe the lessons from Southern Cross are as follows:
1. Private sector involvement is not a panacea for the high costs of providing decent health and social care.Research by the Financial Times (4th June 2011 p2)suggests that PFI intiatives are imposing unstainably high costs on a number of hospital trusts accross the country. PFI was once thought to be an easy way iof raising money for capital projects but it is now being realised that PFI schemes have huge long term cost implications.
There is currently thought being given to new methods of funding of services such as social impact bonds. The advocates of these funding mechanisms suggest that they will offer reduced risk to the public sector and benefits for investors. However, all of these funding models seem to work on the assumption that it is possible to simultaneously save public money and generate good returns for investors. How these two objectives can co-exist has never been explained to my satisfaction and I challenge anyone to explain how this can happen.
2. Greater regulation and oversight is needed of private involvement in health and social care. This is needed not just in oversight of the quality of care but also in the business models used by providers. The Govt is rightly seeking to reduce some of the pre-qualification checks required of small and medium entrprises in bidding for public sector work. These checks on financial solvency etc. are often far too onerous for people bidding for small pieces of short term work. However, for the long term commitment required of companies who are going to care for vulnerable people, a higher degree of scrutiny is needed. Central Govt needs to act so that the interests of the city for short term profit do not overide the needs of vulnerable people for high quality and secure care. The Southern Cross business model should not have been allowed to operate.
3. A greater understanding of business models and finance is needed for all people involved in social care from social workers to senior managers. As long as local and central Govt are responsible for care of older people they will have to keep a careful watch on who is providing care and how it is being provided. It is not good enough just assume that existing regulatory mechanisms are sufficient.
4. Providing services to the public sector is a high risk endeavour. Many local authority staff are being encouraged to set up social entrprises and co-ops at a time when public sector bodies are cash strapped. These workers should be aware of the risks of being in busiess and the hazards which political and economic change hold for suppliers to the public sector. The Southern Cross business model was built on assumptions about the continued flow of new customers and year on year rises in charges. These have turned out to be ill-founded assumptions.
5. The old adage about not investing in anything you don't understand should apply here. I doubt that so many investors would have put money into the Southern Cross flotation of they understood the business model or just how risky it was. It is likely that the investors included pension funds. British institutional investors seem to be asleep at the wheel a lot. The fact that the executives sold their entire holdings shortly after the flotation should have raised some eyebrows.
6. A greater degree of financial literacy is needed amongst academics and social care managers. As this blog has hopefully illustrated the issues behind the Southern Cross debacle are complex. The need for debate is not served by reducing the issues to the level of public sector=good vs private sector=bad. Involvement of the private sector in health and social care is undoubtedly here to stay. Arguments about the viability of desireability of individual situations needs to be based on their own merits and not on prejudice towards the business sector. Neither are the needs of vulnerable people well served by the view that the private sector is always more efficient or better value for money than public sector provision. Whatever benefits have been achieved in the past by using Southern Cross as a provider are likely to be outweighed by the costs of a bail-out or a disasterous bankrupcy situation.

Southern Cross, the problems associated with PFI and the fragile state of many social care providers in the current austerity period suggest that private sector involvement in social care involves high levels of risk for both Government and investors alike. It is certainly not a panacea or easy solution for covering the rising costs of social care. Critically, it can involve high risks for the most vulnerable people in our society.

Factual information for this post was obtained from articles by Simon Mundy, Sarah O'Conner, Sally Gainsbury, Nicholas Timmins, Sarah Gordon, Jim Pickard and Elizabeth Rigby in the Financial Times on 1st and 4th June 2011. Opinions are my own and do not necessarilly reflect those of any body whom I have worked for or been associated with now or in the past.