Can Social Investors save us from Panorama’s Horror Stories?

Panorama reveals especially gruesome horror story in privately-run care home. The reaction is predictable:
– “More regulation!”
– “Different regulation!”
– “Private capital is sociopathic!”
– “We’ve been here before with state-run services”
– etc
As usual, all these reactions to a greater or lesser extent have some merit.
Yet they do not illuminate the heart of the problem. As so often, reactions look at the symptoms, not beyond, to the causes.

Private capital has a responsibility to maximise the financial returns to shareholders. In doing this, it will obey the law as breaking it is value-destructive.
The challenge for the management of the private care provider is how to maximise sales revenues whilst minimising costs. When minimising costs, the question that the management must ask is what the minimum provision is to avoid breaking the law, and the minimum provision that the ‘customer’ – the person paying the bill (rather than the resident) will tolerate. The higher of those two levels is the level at which care will be provided.
Private capital is not by-definition bad. Southern Cross, the owner of the home in question, was in a desperate position. It had been asset stripped and sold on by single-minded short-term owners. It was this that created the cultural conditions for what was seen on Panorama. Not all capital providers should be tarred with the same brush.

Yet for all financially driven investors, providing good care is not an objective, other than a means to the end of generating investment returns. And so a culture that results in the abuses seen on Panorama becomes a possible, if grotesque and extreme (primarily due to the particular recent financial history of Southern Cross), outcome.

And yet state-run services – with the well chronicled failings and sub-optimal track record – are not the solution either, with their parallel set of misdirected management considerations and organisational dysfunctions.

A new solution is emerging, one which seeks to blend the magnificent best of both private capital and state ownership, whilst leaving behind the worst.

Owned by social investors (so the theory, and increasingly the practice track-record goes), the clarity of purpose, accountability dynamics, transparency, enterprise coherence and focus of private capital can be spliced to the care-oriented, person-centric goals of the service. So the theory is that, owned by social investors under the right structure, the sorts of abuses seen in Panorama would become a thing of the past. Regulation has a role. But it is not the answer.

Maybe ownership is. True, responsibility taking, stewardship principled ownership could just hold the key. After all, as we discovered with Southern Cross, don’t those who pay the piper call the tune?

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