Careless Finance—Operational and economic fragility in adult social care | CUSP Working Paper

Report by Christine Corlet Walker, Angela Druckman and Tim Jackson
CUSP Working Paper Series | No 26

Summary

Adult social care across the OECD is in crisis. Covid-19 has exposed deep fragilities which have combined to place unprecedented strain on social care organisations. Principal amongst these is the process of marketisation and financialisation of the social care sector. In this paper, we take a critical perspective on this process.

We argue that adult social care is ill-suited to being operated as a market, for four specific reasons. First, it has limited scope for labour productivity growth. Second, local authorities have the power to set prices unsustainably low. Third, there is an inherent lack of consumer access to information about price. Fourth, consumers have scant ability to express preference and exercise choice about providers.

These factors place social care in acute danger of predatory financial practices. In fact, we use primary data from the financial accounts of the five largest UK care home chains to show how debt-leveraged buyouts, intra-group loans, offshore ownership and sale and leaseback arrangements have combined to create a clear moral hazard that is having a devastating effect on the most vulnerable in society.

Financial engineering represents an explicit strategy to shift costs, socialise risks and privatise the benefits of investing in social care. In the process, marketisation has facilitated the conditions for both financial fragility and operational failure.

We argue that post-pandemic recovery represents a once-in-a-generation opportunity to overhaul these conditions and transform adult social care.