Social care cap 'to be set at £75,000'

[Cyclone]

I read articles like this:

 

'...Anthony Cork of Accountants Wilkins Kennedy said, "The biggest problem for many care home groups was their eagerness to sell their properties and lease them back at ever increasing rents

 

Care homes that used 'sale and leaseback' are now faced with rent increases that are far above market rates. This has led to a major cashflow squeeze when local authority funding starts to decline. Southern Cross is one example of how this could be fatal."

(Quoted from the Guardian, 14th Nov. 2011)

 

Indeed, that was a mistake they made.

 

But that makes it clear that they aren't massively cash rich, or charging so much that they have money to spare to pay for increased rent.

 

So how is it that you have determined that they are overcharging?

[Anna B]

But this doesn't support your argument that care home fees are inflated. It argues that the companies who own some care home premises are inflating their rents (which is precisely why Southern Cross collapsed). These companies have no role in fee setting, and most care homes in this position can't risk putting themselves in the top up bracket so can't meet rents via fees.

 

Of course they do. If the mother company is inflating rents well above market rates, how else is the care home to find the money for the rent but by increasing charges to customers?

 

This is a historical issue that goes back to before the crash in 2008 when property values were increasing rapidly. Greedy care home owners would sell their property to big property companies to release cash to expand their empire, knowing that the rise in property prices would cancel out much of the debt (just like a lot of silly people did with their own houses.) They then paid rent to the mother company, knowing it would be part subsidised by local authority grants.

 

Then suddenly the crash happened, property started losing value and banks started calling in loans. The mother company had to increase the rents to cover their loans to the banks, which meant the care home had to find extra money to pay the increasing rent. At the same time local authorities put a cap on what they would pay, so the only way to go was increase care home fees to ridiculous levels and make the suckers at the bottom of the chain pay.

[truman]

Of course they do. If the mother company is inflating rents well above market rates, how else is the care home to find the money for the rent but by increasing charges to customers?

 

This is a historical issue that goes back to before the crash in 2008 when property values were increasing rapidly. Greedy care home owners would sell their property to big property companies to release cash to expand their empire, knowing that the rise in property prices would cancel out much of the debt (just like a lot of silly people did with their own houses.) They then paid rent to the mother company, knowing it would be part subsidised by local authority grants.

 

Then suddenly the crash happened, property started losing value and banks started calling in loans. The mother company had to increase the rents to cover their loans to the banks, which meant the care home had to find extra money to pay the increasing rent. At the same time local authorities put a cap on what they would pay, so the only way to go was increase care home fees to ridiculous levels and make the suckers at the bottom of the chain pay.

 

A little bit OT here but..I get the feeling from reading your posts that you think profit is a dirty word...would you like to limit the amount of profit a comapny can make? If so to how much?

[Anna B]

Indeed, that was a mistake they made.

 

But that makes it clear that they aren't massively cash rich, or charging so much that they have money to spare to pay for increased rent.

 

So how is it that you have determined that they are overcharging?

 

Please see post 62 above.

 

As with pretty much everything in this banking crisis, the buck stops with the little guy at the bottom who can't fight back.

[Cyclone]

The mother company?

 

I think your making unsupported assumptions about the ownership structure of the companies, the properties they rent and so on.

 

---------- Post added 19-02-2013 at 14:43 ----------

 

 

Then suddenly the crash happened, property started losing value and banks started calling in loans. The mother company had to increase the rents to cover their loans to the banks, which meant the care home had to find extra money to pay the increasing rent. At the same time local authorities put a cap on what they would pay, so the only way to go was increase care home fees to ridiculous levels and make the suckers at the bottom of the chain pay.

 

Is there any evidence that this actually happened?

 

As evidence I'll accept any increase of 50% or more in the care home fee's being charged for equivalent products between 2008 and 2012.

[libuse]

Of course they do. If the mother company is inflating rents well above market rates, how else is the care home to find the money for the rent but by increasing charges to customers?

 

This is a historical issue that goes back to before the crash in 2008 when property values were increasing rapidly. Greedy care home owners would sell their property to big property companies to release cash to expand their empire, knowing that the rise in property prices would cancel out much of the debt (just like a lot of silly people did with their own houses.) They then paid rent to the mother company, knowing it would be part subsidised by local authority grants.

 

Then suddenly the crash happened, property started losing value and banks started calling in loans. The mother company had to increase the rents to cover their loans to the banks, which meant the care home had to find extra money to pay the increasing rent. At the same time local authorities put a cap on what they would pay, so the only way to go was increase care home fees to ridiculous levels and make the suckers at the bottom of the chain pay.

 

Read the article again that you referenced, then have a look at the numbers of homes that charge fees at the LA rate (clue: it's the majority). Yes the money does have to come from somewhere but it isn't, as you seem to believe, usually added to fees. If it was then the majority of services would be in the top up category and that, demonstrably, isn't the case.

 

Can I ask, are you involved in the industry?

[tinfoilhat]

The mother company?

 

I think your making unsupported assumptions about the ownership structure of the companies, the properties they rent and so on.

 

---------- Post added 19-02-2013 at 14:43 ----------

 

 

Is there any evidence that this actually happened?

 

As evidence I'll accept any increase of 50% or more in the care home fee's being charged for equivalent products between 2008 and 2012.

 

There aren't that many care home chains, alot, certainly of the more expensive ones, are run on their own or maybe part of a group of two or three.

[Anna B]

A little bit OT here but..I get the feeling from reading your posts that you think profit is a dirty word...would you like to limit the amount of profit a comapny can make? If so to how much?

 

No, I don't think profit is a dirty word at all.

 

I do however think obscene wealth is (a dirty word)

 

No problem with wealth - good luck to people who have made good and enjoy a properous lifestyle.

 

But there comes a point at which exploiting people to make more money than the Gdp of a small country is morally wrong. I think these people have a duty to put something back - be it paying their workers a decent wage, or properly paying the due tax.

[truman]

No, I don't think profit is a dirty word at all.

 

I do however think obscene wealth is.

 

No problem with wealth - good luck to people who have made good and enjoy a properous lifestyle.

 

.

 

You seem to be contardictiong yourself here..unless I've misunderstood...you have no problem with wealth but you'd like to put a limit on it?

[Anna B]

You seem to be contardictiong yourself here..unless I've misunderstood...you have no problem with wealth but you'd like to put a limit on it?

 

I'd like to put a limit on obscene wealth, or at least see them paying all their tax and a decent wage to their workers.