The Observer features the strike by care workers in Doncaster as its main story today.
I am delighted they have. This is a massive issue for the UK, for the people in question, for the poorest paid in this country, for the future of care services and the future direction of the NHS.
As the Observer notes the issues relate to Care UK, a regular bidder for privatised care contracts in the UK. It won the the supported living contract in Doncaster after telling officials that it could deliver it for £6.7m over three years. Yet the wage bill alone for the service was £7m.
The result was that it then demanded pay cuts of up to 35% from former NHS staff and has offered new staff a pay rate of £7.00 an hour, which is less than the living wage.
There are many facets to this story, and the Observer covers them well, including in an editorial and comment by Will Hutton. They also asked for comment from me:
Richard Murphy, a chartered accountant and anti-poverty campaigner who has analysed Care UK's business model for another union, Unite, said he recognised similarities with all the major private equity-backed care firms.
He said: "They often win contracts on the basis of making losses or small profits. At the same time they are putting in place what look to be tax-driven structures that are designed to mitigate taxes on profits. I believe that what a lot of these companies are trying to do is to undermine any chance that an NHS organisation can win contracts.
"Once they have squeezed out the state sector, and the third sector, we will then see prices rise; then we will see profits; then we will see these tax-efficient structures working."
This is the 'loss leader' model at work. The dogma of privatisation is not only destroying livelihoods and care now, it is designed to cost us more in the long term. Of course I declare my interests on this issue, having looked at the accounts of this company, as the Observer note, for Unite, but the point is one that anyone with an ounce of commercial sense should appreciate and is that the model of privatisation being used now, which delivers consistent losses for companies like Care UK and requires poverty wages for its staff, is not in any way sustainable. Something will give, and at the end of the day there will be a choice between care and price. When that happens we need to ensure that profit is one of the costs that need not be funded. Right now we are guaranteeing it is in the equation. And that has to be bad news for everyone who cares about care in the UK and those who supply it.
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This is vital and important work you do here, Richard, Due to Alice in Wonderland Economics, one of the most societally important jobs is treated as the most insignificant. It is clear that those at the top of the wealth tree generating this financialisation of everything don’t care because they won’t use these services themselves. The result is poorly trained, demoralised staff. I think I read of one care service whose training period was three days.
Our cultural race to the bottom has reached it’s goal with this. We are now ‘touching magma.’
Remember also that the cost of training doctors, nurses, physiotherapists, pathologists, EBME technologists (me!!) and all the other specialists is borne by the state and then plundered by the privateers. I believe if they had to pay the cost of training staff you would not see them for dust.
Most workers do not have time to consider the long-term ambitions of Neoliberalism, its vision spans decades; and will drive wages down with the aid of [former] Labour MPs. Private equity capitalism is part of the Neoliberal project.
“Care UK is a company in which Bridgepoint Capital, a private equity firm, has a majority shareholding.” [1] Blairite – Alan Milburn, former Labour Health Secretary, is the Chairman of their European Advisory Board. Look at the Board the same faces running UK plc and the country as politicians and newly elected Lords.
On page 32 of Bridgeport Capital’s 2013 Annual Report [2], Bridgeport describe their “Set of Values” are based on
i) Integrity;
ii) Judgement;
iii) Meritocracy;
iv) Open mindedness and
v) Teamwork
Bridgepoint Capital say:-
“Integrity: Not just what we believe but also how we act. The highest standards in both our professional and ethical conduct are fundamental.”
“Teamwork: Listen to the person next to you, respect their point of view and always put the interests of our investors and the Firm before those of the individual.”
And for the businesses they takeover they want “greatly enhanced long-term growth potential.”A stated ambition to wait until a profit can be made, wages can not go lower thus resulting in less service and higher costs.
Is there Integrity: To pay minimum wage, to assist in the impoverishment of families. Or to bring chaos by an environment of a constantly changing workforce. Our relatives who are in home based care are disturbed by constant changes of faces (carers) who too often are too rushed to talk and engage, spending 10 minutes on a “30 minute service call”; of course the poor carer has to drive between appointments.
Is Teamwork allowed for workers: Are employees encouraged to organize and have union representation.
Public funding requires public scrutiny, financial openness and accountability. Private equity is not the vehicle to deliver that where are the workers’ representatives on the Board or any position with command.
[1] http://www.theguardian.com/commentisfree/2014/aug/09/observer-editorial-observer-view-ob-care-workers-low-pay
[2] http://www.bridgepoint.eu/media/1968173/2013_ar_online.pdf
Value Six hypocrisy
I have posted this although I have no idea what it means
Sorry I read it as the private equity people claiming all these virtues but really they are window dressing. I read the Observer article and thought of all the poorly paid people who looked after my mother in her final days. i contrasted their work with the quick gains mentality we often see. I shall aim to be clearer.
Excellent, Richard
You put your finger on a very important point.
From the perspective of the service provider (ie staff) and the service user (us) profit – aka economic rent – is an unnecessary cost as are bloated management costs (another economic rent).
When the private sector talk about ‘productivity’ they mean ‘productive of economic rent’. When they talk about ‘wealth creation’ they actually mean ‘creation of claims over wealth.’
Where I differ from you, think, is that I do not see the future as State provision (I see the State’s role as as a facilitator and supervisor/quality controller/steward) , but rather the provision of services by co-operatives of service providers to co-operatives of service producers.
Historically that has been impossible because the necessary multi-stakeholder legal structures/protocols and financial instruments have not been available.
That is now changing.
Let us therefore turn the rhetoric of cost-cutting on its head, and commence cutting the REAL ‘something for nothing’ ie economic rent.
An interesting point:
” When the private sector talk about
‘productivity’ they mean ‘productive
of economic rent’. When they talk
about ‘wealth creation’ they actually
mean ‘creation of claims over
wealth.’ ”
I’m not sure that this applies to the entire private sector, but it’s a succinct statement of the rent-seeking capitalism that now dominates our economy and our elected representatives’ view of economic policy.
I would agree wholeheartedly with the assertion that this view applies to private-sector providers of public services.
At the risk of lowering the tone of the comments on this site, I would urge you to consider referring to productive investments that provide capital for making goods and providing services that add economic value as ‘Capitalism’, and refer to the purchase of rents as ‘feudalism’ or ‘neofeudalism’. We need steonger vocabulary for these issues.
Capital (says he, a good Marxist) does not ‘add economic value’. It is always and only Labour that does that. If architecture is ‘frozen music’, capital is frozen labour: the embodiment of a quantity of past labour.
Co-operatives are a good way forward. They have been successful in Spain (http://en.wikipedia.org/wiki/Mondragon_Corporation).
Richard Wolff proposes such solutions in his book Democracy at Work. Co-operatives can be a great antidote to ‘wealth syphoning’, rent seeking which has , not only no social value but militates against its very existence.
Let’s just keep the Good Rev. Flowers away!
There is always a bad flower in a bunch
There was nothing much co-operative about the co-op bank anyway!
This the alleged brilliance of private equity, reduce the wages and services and pay no tax.
This is what passes for innovation in the 21st century.
As this was the single most interesting headline this morning, l was intrigued to see how it would be discussed on the bbc’s Sunday paper round up. It obviously wasn’t worth mentioning, just some addled concern over Arab militants who are OK doing their stuff in Syria,but not in Iraq, prince Harry’s games for people blown to bits in illegal wars abroad and some guff about baroness warsi’s ‘motivations’ .
Brought home how little I have been missing since I stopped watching BBC news
The BBC news is beyond contempt with its condescension , lack of challenging interviewing and simpering sentimentality towards the Royal Family which is ultimately insulting to them as well as our integrity.
I’m not surprised this issue had no space.
Paul
For the modern day “entrepreneur” you got 3 of the top 5 bullet points;
reduce wages & conditions
condition the consumer to the absolute minimum
pay no tax
You missed 2 others;
where possible, acquire the business with its own money. [I heartily loathe Man Utd but the screams of its fans when the Glazers took over struck a chord nonetheless. In the old Co Act it used to be forbidden to do this, but the combination of complex group structures & easy credit seems to have made it the easiest thing in the world to do]
ban trade unions.
I also missed out:
6: Pay off politicians, they’re very cheap these days.
You will often hear people like, say, Digby Jones & others, often columnists for r-wing papers, say that Richard is anti-business, & negative towards wealth-creation etc.
I liked Miliband’s concept of “predatory capitalism” but you can expand that. Put simply, why should the state in any way encourage or incentivise that sort of behaviour which is unlikely to benefit anyone beyond the “entrepreneur” & his immediate family?
Almost everything that happens in the square mile benefits no-one beyond the perpetrators.
In the same way, I don’t imagine that the good effects of “419 fraud” trickle down far beyond a chosen few in Lagos.
Although at least the 419 fraudsters tend to choose more deserving victims than the UK’s “entrepreneurs”.
Ed Miliband, besides talking about ‘predatory capitalism’, also talks about ‘responsible capitalism’. Neither he nor his brother David learned anything from father Ralph, unfortunately, who must be spinning in his grave to hear his son talk such utter nonsense. There is, and can be, no such thing as ‘responsible capitalism’. It is an oxymoron, a contradicto in adjecto. It can only ever _be_ predatory, a sow feeding on her own litter.
Indeed-Ralph Miliband was highly critical of the timidity of the Attlee Government in changing the balance of power in this country. he would be utterly shocked at the kow-towing and vile fawning before neo-liberalism of the present Labour party.
Richard
I read the Observer article too.
The arguments for not contracting out care services are even stronger than for support services.(problems of trust and supervision)
But are you aware of the historical data that demonstrates whether the NHS has been able to obtain long term sustainable savings from contracting out support services?. The arguments about loss leaders would have applied in these areas as much as in care services.
Roger
Sustainable savings at what cost?
That was the question asked
You don’t need to make these ‘savings’ as the Government is not a household and doesn’t need to pay of what we erroneously call the ‘national debt’.
Furthermore, these ‘savings’ always create ‘externalities (vile term!) that cause costs to be incurred elsewhere.
When a country that has a sovereign currency tells you it hasn’t got the money it is simply lying in order to protect vested interests.
Thank you so much. Vital and important analysis. It is certainly the model which we suspect has been adopted in Wirral (Merseyside) by a company which has a large presence there and which is being investigated by members of the local NHS support group https://www.facebook.com/groups/defendournhs/ A full dossier will be available soon on request.
Will be curious to see it
Good luck