By Christine Berry
December 22 2021
From funding to ownership
When social care has been in the headlines recently, the story has usually been about funding: the tax rises that are supposedly needed to patch up a system in crisis, and the planned changes to what we’ll be expected to pay towards our own care. These have significant implications for inequalities in individual asset ownership, of the kind I discussed in my first and third pieces. We are already heading towards a world where inheritance looks set to become one of the biggest influences on life chances. The design of the social care system will mediate how this plays out in the next generation, since it determines how far people’s assets are swallowed up in old age to pay for care. The King’s Fund, a health think tank, slammed the government’s most recent proposals, saying that “people with moderate assets living in poorer areas will still be forced to sell their home to pay for their care, while wealthier people from richer parts of the country will be protected from this”. In turn, this could amplify inequalities for today’s young people, whereby those with wealthier parents stand to inherit more assets than those without.
But that’s not what I want to focus on in this piece. There’s another side of the care debate that is completely neglected when we focus only on funding: ownership of the care sector itself. This matters for two reasons. First, the ownership models that now dominate this sector (and, increasingly, childcare as well) are incredibly extractive. A 2019 report estimated that about £1.5bn a year leaks out of the care home system in excessive profits, rents and debt repayments – around 10% of the sector’s entire income. When the government talks about raising taxes to pay for social care without talking about ownership, it is essentially asking ordinary working people to subsidise these excess profits. As another team of researchers from Manchester University concluded, “the issue is not simply how much money goes into adult care, but where the money goes.” Second, as writer Emily Kenway points out, when we restrict the conversation to funding, we neglect the most important thing: the experience of care itself, and how we can reorganise society to make it better. As we will see, ownership models have a very direct bearing on this question too.
In my last piece, I argued that understanding the many different faces of exploitation under modern financialised capitalism can help us to see more clearly what kind of solutions we need. The care sector is a good example of how labour exploitation and (other forms of) rent extraction intertwine, and how grasping this reality can help us build a democratic response. In recent years, both childcare and social care have become increasingly financialised – most notably with the emergence of large private equity owned chains. Nurseries and care home businesses are bought to be laden with debt and sold on at a higher value. What’s significant here is not just that care has been made a commodity to be bought and sold, but that the business of care has been made an asset to be leveraged and speculated with.
Large care chains tend to be part of a tangled web of related companies, many of them based in tax havens – making it easy to funnel profit out through a dizzying array of financial tricks. For instance, companies may take out loans from sister entities at eyewatering interest rates, effectively repaying this money to themselves. Or they may sell the buildings in which care takes place to related companies and then lease them back at above-market rents (known as an ‘op/prop’ strategy). All of this means that looking at chains’ operating profits gives a very misleading picture of the money they are creaming off the business – money that is being extracted at the direct expense of workers, taxpayers and people receiving care. Indeed, some leading companies even record paper losses – which conveniently means that they pay no corporation tax. It also allows them to go cap in hand to the government complaining that the sector is desperately underfunded and they are barely scraping by. The first part is true, of course; the second part is self-serving sophistry. In reality, as the Manchester researchers forcefully argue, “giving the financialised chains more money is like pouring water into a leaky bucket.”
How on earth did this happen? Care is not a sector that, on the face of it, offers outsize opportunities for profiteering. Operating margins are indeed extremely fine, not least because of chronic underfunding by the government, who remains the biggest ultimate ‘customer’. So what makes the sector so attractive for rapacious private equity investors? First, it offers a reliable, guaranteed stream of income, because care is an essential service – parents will always need childcare, and older people will always need social care. Second, the care usually takes place in buildings, and thus offers an opportunity to profit from the UK’s permanent property boom. As I found out when I joined a webinar on ‘day nursery market sentiment’, the language of the sector is riddled with phrases like ‘property play’ and ‘operational real estate’. In other words, the business model of these chains is pure rent extraction. The actual activity of caring for human beings is very much a secondary concern.
But this does not mean that labour exploitation is not at work here: quite the opposite. Precisely because this is a sector with high labour costs and low margins, the big chains need to squeeze labour as hard as they possibly can to extract the returns they are looking for. This matters to them not just because of the profits they extract directly, but because it helps to pump up the value of the business for prospective future owners, ready to be sold. The labour process may not be where the big money is being made (at least not directly), but the end result for workers is the same: consistent downward pressure on pay, conditions, qualifications and staff numbers – all of which makes this essential job more stressful and less rewarding.
As well as cutting costs, firms also need to pump up revenues as much as they can. They do this through higher fees, and by avoiding those who are less likely to be reliable sources of income – for instance, by discouraging those who rely on government funding rather than being able to pay their own way, and focusing on wealthy areas whilst ignoring poorer neighbourhoods. The result is a crisis of care provision – with many people either being unable to access local care at all, or simply being unable to afford it. Even worse, the shape of care itself is subordinated to the demands of this business model. For instance, chains have built bigger care homes in pursuit of economies of scale, despite evidence they are more likely to result in poor care. This provided a perfect environment for Covid-19 to spread quickly to large numbers of people during the first wave of the pandemic. Research in Canada found that financialised care home chains saw higher Covid-19 death rates than municipal and non-profit homes, and even than other types of for-profit providers. The inhuman incentives of this way of owning and providing care are not just socially unjust: they are literally killing people.
To sum up, none of the people who actually have a stake in care are doing well out of these ownership models: not (paid and unpaid) carers, not adults who need care or support, not parents, not young children, and not the government. Meanwhile, the owners have almost no stake in the activity at all: as far as they are concerned, it is simply an asset to be managed like any other. If we want to reimagine care as a democratic public service, it needs to be not just decommodified but de-assetified. Yes, we need care to be properly funded by the government and provided as a universal service, guaranteed to everyone as of right. But we also need to put ownership and control of care in the hands of those with a stake. We need to boot out the extractive models and replace them with a mix of public and co-operatively owned care, run in a way that respects the dignity and humanity of everyone involved.
Unlike some other sectors, where large-scale public ownership makes sense – say, natural monopolies like the railways – care demands a more pluralist approach, one that respects the need for human scale and the right to independent living. Of course, this doesn’t mean that local authorities shouldn’t own care homes and nurseries, as they did in the past – but there are strong reasons to feel that state-run institutions should not be people’s only choice. In researching my forthcoming book, I’ve spoken to the founders of some inspiring experiments in co-operative care – including Friendly Families, a parent-led nursery in Deptford, and Equal Care Co-op, a platform co-operative based in Halifax which provides home- and community-based care and support. Eliminating the extraction means they offer a materially better deal for both workers and care users – although government under-funding puts hard limits on how far they can go. For instance, a key part of Friendly Families’ raison d’être is to take co-operative childcare beyond the middle class enclaves that previously had access to it. But this means they need to be accessible to families who rely on government-funded ‘free’ hours – which do not stretch nearly far enough to pay staff the wages they truly deserve.
Our earlier analysis of the ‘asset-isation’ of care helps us to understand all this. If we assumed that big firms were extracting value through huge operating profit margins, we might think that a different ownership structure would automatically unlock huge resources for higher wages and lower fees. The reality is more complicated. Democratising ownership cannot be an alibi for funding care properly as an essential public service, or for better entitlements for unpaid carers. And co-operatives are certainly no silver bullet. We are not going to transform our care system one start-up at a time – not least because they risk being out-competed by less scrupulous providers with access to vast amounts of capital. They are not a substitute for whole-system reform, but they do show us what a better system might look like.
What’s most inspiring to me about these models is actually not their direct economic benefits, but their potential to change the nature of care – to re-embed it in communities of caring, and thus provide a more connected and loving experience for everyone involved. In different ways, both Friendly Families and Equal Care Co-op express a deep commitment to fostering meaningful relationships – re-centring the human needs that the system should really be serving, which are currently a sideshow to various forms of rent extraction. They also both seek to break down the barriers between paid professional carers and the parents, friends and relatives who provide crucial unpaid care. In doing so, they show us how an economy free from the imperative to extract rent could look more, well, caring. Friendly Families was designed and run by parents, who can also help out at the nursery in exchange for reduced fees. Equal Care Co-op’s stated aim is to put “power in the hands of those who matter most – the people who give and receive care and support.” People in need of support choose their caring ‘circles’, which can be a mix of paid workers, family members and community volunteers. These circles are free to organise themselves as they choose, without having to constantly refer decisions up a management chain.
By connecting people to something larger and building a sense of empowerment, such experiments also show how we might build a politics that can take on the rentiers – transfiguring our own identities along the way. One of the founders of Friendly Families told me that parents who attended their early workshops began to talk to each other about their struggles to find affordable childcare, and for the first time started to realise that these were systemic problems rather than individual failings. A colleague liked to joke that they were doing “political education through stay-and-plays”. We could also say that such efforts are a form of consciousness-raising: they transform the daily battle to balance work and childcare from a source of personal shame and guilt into a shared political fight to be won.
As I argued in my last piece, exploitation under modern rentier capitalism is multi-faceted, and we need to think beyond ‘the means of production’ in envisioning an economy that delivers good lives within ecological limits. This means that the task of building a new economy is partly about helping people to organise collectively around particular identities – whether as tenants, as debtors, as parents or as workers. And the point of a democratic economy is not just to make life materially better for people by stripping out rent extraction, but to offer new ways of relating to each other and governing our lives together. Of course, the interests of care workers and care users will not always be identical (for instance, higher wages may be seen as conflicting with affordability). But we can contain these tensions in democratic spaces where both groups work together as part of a community – which is surely better than surrendering to distant corporate ownership structures which do not respect the needs of either. At Friendly Families, I was told that parents gradually came to understand the value of paying care workers more than the minimum, appreciating through direct experience the skilled and important job they do. Through such experiences, we can come to better understand each other’s needs and our interdependence. In this sense, a democratic economy is not a destination: it’s a journey.
Christine Berry is an Autonomy Writer in Residence, based in Manchester. She is a Trustee of Rethinking Economics, a Fellow of the Democracy Collaborative and a Contributing Editor of Renewal journal. Previously she was Director of Policy and Government at the New Economics Foundation. She is currently writing a book on democratic ownership as part of the answer to rentier capitalism (Verso, 2022).