Tuesday, 4 October 2011

Guest Blog from John Papworth: Adult residential homes - is a social enterprise the answer?

Guest Blog from John Papworth CPEA Senior Associate

Recently browsing the news headlines around adult social care, brought to light some depressing and yet all too familiar sound bites - “Council to shed 300 jobs in adult social care”; “Council to shut residential care homes”. All this is painted by the media as a consequence of the financial cutbacks. This ignores:

• The potentially runaway spending driven by the ageing population.
• Falling productivity of the public sector v independent sector, and accompanied by higher unit costs for services run by councils themselves.
• Increased demands for a better quality “product” from the public sector.
• Personalisation of budgets so older people determine their own care package, not the professionals or the provider organisation.
• The need for stronger preventative interventions to avoid crisis driven demand for acute services.
• Protection of vulnerable adults.
• Some independent care providers (eg Southern Cross) having unsustainable financial models that have underpinned their activities.

The fiscal crisis facing local councils and NHS community services is thus overshadowing all these other factors. So is there an alternative way of providing the service, at the same time as reducing costs, whilst increasing effectiveness and quality?

One answer may to be set up a social enterprise or mutual to take over the running of a council’s care homes. Social enterprises are businesses driven by a social purpose in which any profits are re-invested to meet that objective. The former Labour Government and the current Coalition Government was/is keen to see these develop as part of its agenda to encourage citizens take more control of their own lives, and as a way communities or neighbourhoods can help each other out.

Evidence to date in the ‘support at home’ market suggests that social enterprises or mutuals are highly effective in delivering these services (usually at a much lower cost compared with those run by councils - e.g. up to 50% per unit). They attract a committed and professional workforce with low turnover rates – something that is valued in home care. As a bonus the customers are happier too. Examples include CASA who now run adult home care services in Newcastle, North Tyneside, Calderdale, Manchester, Knowsley and more recently Leeds.

A council running its own residential care homes has to face the very same issues as home care, particularly getting its own unit costs down. This is likely to involve an element of reducing running and staff costs, and will not be popular and/or acceptable at the moment in the light of the Southern Cross affair and public sector cutbacks and redundancies. It will also have to maintain and improve the quality of its homes - which will involve refurbishment costs – and at moment the money simply is not there. So what could a council do?

A council could establish one of its care homes as a social enterprise or co-operative, support its early development, and once it is running and has been tested out as a way forward, then transfer its other homes to the new organisation. Or else it could transfer them all at once which might give the new enterprise some local market “clout” and share, and give some assets that could be deployed effectively to raise new money (e.g. a bank loan from the co-operative banks like Triodos or the Co-Op, or a joint venture with a registered social landlord that could provide sheltered residential dwellings on any surplus land). There are a number of issues that would need to be faced not the least of which is current council staff terms and conditions. And yet, as a new social enterprise, has lower overheads and is free from council staff terms and conditions, staff can be rewarded by other ways (e.g. a share of any surpluses, or else given free care when they need it when they have retired – the Joseph Rowntree Housing Trust have elements of such a financial model).

Is it worth a try? After all unless something new is done by councils, all that will happen is slow degradation of service, and ultimately many council care homes will have to be closed as the pressures they face are simply too great to ensure long term viability.

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