Category Archives: Vested interests
Britain: an oligarchy in which power is concentrated in the hands of an elite, elected or otherwise – 2
Theresa May’s one-time adviser Nick Timothy, startles in the Telegraph with an article Britain’s cosy establishment is the product of a dysfunctional political system: Recent allegations of sleaze and corruption reflect far deeper issues within our political culture
He refers to allegations which have swirled and rows which have lingered about so-called “cash for favours” appointments to the House of Lords, and the hiring and firing of senior civil servants, commenting, “While there is no doubt that we can and should scrutinise specific decisions, we are in danger of missing the bigger issue”:
Our problem is not really about individual politicians, nor even political parties. The problem is our political system and culture
After summarising the Richard Desmond’s alleged gain from a planning decision relating to the redevelopment of Westferry Printworks in east London, he asks, “Why are government ministers (e.g. Robert Kenrick) put in positions – as a matter of routine – that allow powerful people such as Desmond to lobby them, directly and inappropriately?
Nick Timothy observes that the Desmond controversy is closely related to the laws that govern the financing of political parties, which push party fundraisers to beg and borrow from wealthy individuals and organisations: “For the Conservatives, the donors are almost always from big business and the City. For Labour, the money comes mostly from the trade unions, but they take significant donations from business leaders, too”.
One of 13 transgressions listed by the Government’s chief whip, Lord Taylor
He continues: “The Lords is undeniably a deeply corrupting influence in public life”
Many donors end up with peerages in the House of Lords. In the days of hereditary peerages, Lloyd George lampooned the upper chamber for consisting of “500 ordinary men, chosen accidentally from among the unemployed”. But, asks Timothy, is it any better to have 800 men and women chosen on the basis of friendship, financial support and blind political loyalty?
He describes the British establishment as having a deep complacency and a self-serving nature:
“Senior officials retire from unelected and unaccountable executive power, only to gain unelected and unaccountable legislating power. Senior business figures mark one another’s homework thanks to slack corporate governance. Some take the shilling of foreign businesses whose interests they must know clash with those of our country. Some manage to buy political access and influence, and even titles and political positions of their own. And some politicians succumb to pressure and temptation while reassuring themselves that they are serving a higher purpose”.
Another feature not mentioned by Nick Timothy, in a blog post last March, came from Boris Johnson’s adviser, Dominic Cummings, who described the military procurement process as a “farce”.
He accused the military of having “continued to squander billions of pounds, enriching some of the worst corporate looters and corrupting public life via the revolving door of officials/lobbyists”.
Nick Timothy ends, “We should not be surprised that members of this privileged class scratch one another’s backs, but that does not mean we should meekly and passively accept it. The cosiness of our establishment is related to the state of our state, with its informality and amateurishness. For reasons of probity as much as efficiency, it all needs to change”.
Paraphrasing George Monbiot’s Rings of Power essay: personnel employed by opaquely-funded thinktanks, that formulate and test the policies later adopted by government, circulate in and out of the offices of the UK Prime Minister and US President. Their output is published or reviewed in the print media, most of which is owned by billionaires or multi-millionaires living offshore.
Michèle Flournoy, a former US Under Secretary of Defense for Policy, and the co-founder of WestExec Advisors, described as ‘a diverse group of senior national security professionals with recent experience at the highest levels of the U.S. government’, has today published an article in the Financial Times.
It is – ostensibly – about the recent India/China confrontation, but is actually another move in what Robert Armstrong calls the US-China fight.
This cartoon replaces WestExec’s patronising cartoon of PM Modi and President Xi battling with stone-age clubs. It is taken from Jonathan Power’s FT article earlier this month:
Fanning the flames: “In principle, it is a moment that demands US leadership to convene and mobilise the region’s democracies”
Embedded in the article are Ms Flournoy’s references to China’s rising military expenditures, its growing assertiveness, coercive measures to enforce excessive maritime claims, expansive global infrastructure development strategy, modernised armed forces and multibillion-dollar state-directed campaign to develop (and steal) key emerging technologies. She adds:
“Its vessels have collided with foreign ships in the South China Sea (Ed, in 2014). Japan protests that its vessels re being harassed in the East China Sea. Chinese aircraft have encroached upon Taiwan, and Beijing has promulgated a new national security law for Hong Kong that seriously erodes its liberties”.
She then calls for deeper security co-operation among like-minded states, naming Japan, the US, India and Australia, urging these ‘major democracies’ and other countries who are anxious about Chinese intentions and capabilities, to treat China’s border clash with India as a clarion call and take steps to protect their common interests and values. If they do not, she continues, China will continue pushing boundaries, posing unacceptable risks to international order, ending: “In practice, however, that may have to wait for a new occupant in the White House”.
Another voice says: ‘The attack on China should stop’
Jonathan Power writes:
“The world is supposed to be pulling together to defeat the Coronavirus and to some extent it is. Earlier on Russia sent special equipment to the US and recently the US has sent some to Russia. China has aided Italy and Africa with doctors and equipment. Tiny Cuba, with its deep pool of doctors, has also helped Africa (detail here). Around the world there is a sense of “we are all in this together” and that this is a bigger problem than the ones the world has faced since World War 2.”
But President Donald Trump has suggested Chinese culpability for spreading the COVID-19, calling the virus “a Chinese virus” – and some Chinese senior officials publicly retorted.
Powers forecasts that the Coronavirus debate over who is right and who is wrong could become a watershed moment in the relationship between the US and China.
The World Health Organization has brought all the world’s countries together to discuss how to go forward now and – as Power continues – Trump’s representatives needed to say “Let’s sit down and with our best scientists discuss not who is to blame but how such diseases can be forestalled”. That is likely to bring a better result.
Power adds that despite Trump’s good-humoured meetings with Xi, “this antagonism is not a new development. There were three rounds of tariffs in 2018, and a fourth one in September last year. The most recent round targeted Chinese imports, from meat to musical instruments, with a 15% duty. He has refused to negotiate an extension of the nuclear weapons reduction agreement with Russia unless China (a relatively small nuclear power) is brought into the deal”.
Though both countries have an extreme superiority complex and think they are exceptional, unlike China, Power notes, the US has sought to prevent the emergence of a peer competitor, whether Western Europe, Russia or China, that could challenge its military dominance.
Fareed Zakaria in Foreign Affairs agrees: “Today’s China is a remarkably responsible nation on the geopolitical and military front. Beijing is now the second-largest funder of the United Nations and its peacekeeping work. It has deployed 2,500 peacekeepers, more than all the other permanent members of the Security Council combined.
It has not gone to war since 1979. It has not used lethal military force abroad since 1988. Nor has it funded or supported proxies or armed insurgents anywhere in the world since the early 1980s. That record of non-intervention is unique among the world’s great powers”. Powers comments: “For its part, the US has attempted regime change around the world 72 times”.
If Michèle Flournoy were to study the writings of Zakaria and Power, heeding the 16th century advice from Thomas Cranmer, to “read mark, learn and inwardly digest” – she might change course.
George Monbiot describes Britain’s claims to being a functioning democracy as ‘only skin deep’ and explains what he means in a Guardian article:
“Our political system has the outward appearance of democracy, but it is largely controlled by undemocratic forces. We find ourselves on the wrong side of the portcullis, watching helplessly as crucial decisions are taken about us, without us”.
Until the illness of minister Alok Sharma prompted a lightning u-turn, many were feeling uneasy about this week’s parliamentary decision to deny self-isolating MPs the ability to vote remotely, as others queued inside and outside the building, but they could see no effective way of bringing about positive change.
To those who argue that democracy functions well, as all adults have the power to vote, Monbiot explains that established power in this country is surrounded by a series of formal and informal defensive rings, briefly described below.
POLITICAL FUNDING for the Conservative party comes mostly from a small number of very rich people. Just five hedge fund managers have given it £18m over the past 10 years. The Leader’s Group* – an elite Tory dining club – grants big donors special access to the prime minister and his frontbenchers in return for their money. Monbiot’s response: “This corrupts our politics, replacing democracy with plutocracy”.
THE STRUCTURE AND SYMBOLISM OF PARLIAMENT, its rituals and procedures favour former public schoolboys, educated in a similar environment. Even its official emblem tells us we are shut out. It’s a portcullis: the means by which people are excluded from the fortress of power. Boris Johnson is described by Monbiot as being, in effect, a monarch with a five-year term and a council of advisers.
THE HOUSE OF LORDS has some seats reserved for hereditary aristocrats, some for bishops and the rest are grace and favour appointments, keeping power within existing circles. Many are granted to major political donors, reinforcing the power of money.
THE PRINT MEDIA are informal rings of power most being owned by billionaires or multimillionaires living offshore.
Monbiot points out that the UK is a democracy only in the weakest and shallowest sense: even when public trust and consent collapse, there are no effective channels through which the decisions government makes can be affected, ending:
“If there’s one thing the coronavirus fiascos show, it’s the need for radical change”.
Mark Shapiro draws attention to an article by Alan Macleod reporting that – though the US economy is suffering – American arms manufacturers are thriving.
“The American economy has crashed – only the military industrial complex is booming. A nationwide pandemic that has (officially) claimed some 84,000 Americans has also led to an estimated 36 million filing for unemployment insurance and millions frequenting food banks for the first time”. But weapons manufacturers are busier than ever, advertising for tens of thousands more workers:
- Northrop Grumman announced that it was planning to hire up to 10,000 employees this year.
- Last month, the Air Force commissioned Raytheon to develop and build a new nuclear cruise missile.
- Raytheon is still advertising 2,000 new jobs in the military wing of its business.
- Boeing is looking to add hundreds of new workers in its defense, intelligence, and cybersecurity departments and
- Lockheed Martin, the world’s largest arms dealer, announcedon Friday that it is “actively recruiting for over 4,600 roles,” in addition to the 2,365 new employees it has taken on since the lockdown started.
Washington has designated weapons manufacturers as “essential” services during a pandemic (CNN report)
In February, the Pentagon released a $705 billion budget request for 2021, revealing that there would be a “shifting focus from the wars in Iraq and Afghanistan and a greater emphasis on the types of weapons that could be used to confront nuclear giants like Russia and China.”
Confronting nuclear giants like Russia and China
MacLeod points out that, just as Donald Trump was increasing the military budget, he slashed funding for the Center for Disease Control and for the World Health Organization, perhaps the only international body capable of limiting the spread of the virus.
In America and the rest of the world, poverty and disease have inflicted a far higher death toll than warfare
Yesterday US COVID-19’s death toll was 99,886. The United States has suffered the highest death toll from COVID-19 and the pandemic has led Americans to ask whether the enormous military budget is making them safer or whether well-funded healthcare, education and social care would have saved or enhanced more lives.
(War figures include American military deaths in battle, and in-theatre deaths as available. DEPARTMENT OF VETERANS AFFAIRS; JOHNS HOPKINS UNIVERSITY)
Alan Macleod ends: “However, that question appears not to have been debated within the walls of the White House, where it is full steam ahead with weapons production”.
Journalist Simon Jenkins reported last year that the British government boasted of record sales with 80% going to the Middle East.
He asserted that Britain should not be weaponising the suppression of dissent in Egypt, Bangladesh, Colombia, Uzbekistan or Saudi Arabia and other Gulf states – their national defence better termed, regime defence.
Calling the last London arms fair (above) “a stain on the nation . . . the most awesome glamorisation of death on the planet”, he added “The reality is that Britain and the US are in an arms race with the Russians in this theatre – with no remotely peaceful objective”.
And Symon Hill, in an article on security, points out that for years, “security” and “defence” have been euphemisms for war and preparations for war, adding that the coronavirus crisis is a fatal reminder that security, safety and defence cannot be found in armed force.
He ends: “In the long term, we must put our resources into addressing real threats, not into the waste and destruction of war”.
WordPress error: photograph could not be uploaded; it was included in the mailing list alert.
Britain has been providing arms with which its allies continue to bomb the people of Yemen for the fifth year, in contravention of a Court of Appeal ruling. This stated that it is unlawful to have licensed the sale of British-made arms to the Saudi regime without assessing whether their use in Yemen breaches international humanitarian law.
The United Nations has described the effect of this five-year air onslaught, leading to many thousands of Yemeni deaths, as “the worst humanitarian crisis in the world.”.
Peter Lazenby reports the words of Andrew Smith (Campaign Against Arms Trade – CAAT): “It is a crisis that has been enabled by the political and military support that the UK and other arms-dealing governments have given the Saudi regime and its coalition partners”.
Yemen’s healthcare system is already in crisis, with many damaged and destroyed hospitals and a weak healthcare system, already struggling with cholera and malnutrition. The Red Cross reports that medical supplies, drinking water and sanitation are scarce.
Ahmed Aidarous, 36, a resident of the southwestern city of Taiz, who survived dengue fever, expresses the general fear to MiddleEastEye: “In Yemen, there are some diseases like dengue fever and cholera but we know their reasons and we can be treated for them. I heard from media that coronavirus spreads through the air and we cannot protect ourselves from it.”
Two days after his 23 March appeal to warring parties across the globe for an immediate ceasefire, UN Secretary-General António Guterres called on those fighting in Yemen to end hostilities and ramp up efforts to counter a potential outbreak of the COVID-19 pandemic. The FT reports that, in response on Wednesday, the Houthi movement and the exiled Saudi-supported government agreed to an immediate end to hostilities.
Part 1: economic ramifications, food security and pandemic bonds
Many of the points highlighted in this article are summarised below. It is published in full here.
Alan Simpson opened: “The delusions of neoliberalism stand at the edge of an implosion just waiting to happen. But, as with the emperor’s new clothes, global leaders are too fearful to say that their economic model has been stripped naked”.
The last week has seen that – following the wild weather – coronavirus and tumbling stock markets are ganging up to form an economic “perfect storm.” It will only get worse.
Initially, the industrial world had only a passing interest in the coronavirus outbreak in China: stupid Chinese, eating the wrong stuff it thought — good job that an authoritarian state could turn a city of millions into a quarantine zone.
Then markets began to panic and central banks are having to intervene
But now Italy has followed suit. In a dramatic, middle of the night statement, the Prime Minister announced the quarantining of a whole region of northern Italy, affecting 16 million people around Milan and Venice. Even this may be too late. The ramifications are massive. Start with China.
- Its output accounts for around a quarter of global manufacturing,
- huge quantities of which are currently stored up in containers that cannot get out of Chinese ports.
- accounts for one quarter of global automotive production
- provides 8% of global exports of automotive components for other manufacturers, many of whom rely on just-in-time assembly processes.
- The same applies to steel and plastics, chemicals and high-tech telecoms.
- Tankers arriving now set off before China went into lockdown. The real shortages will start to kick in this month.
The ripple effect of these logjams is running through the entire industrial economy, including a shortage of available containers themselves.
And when goods don’t flow, nor do payments associated with them. First-world firms struggle to work out how to pay bills (and workers) in the same way that China is having to pay workers to stay at home in quarantined areas.
The UK Treasury official who has just advised that agriculture is unimportant to the UK economy could barely have been more mistaken. Real alarm bells should be ringing all around Parliament about the amount of crops that will rot in the ground of waterlogged fields around the land. How are we to feed the public throughout the coronavirus crisis?
Weather related problems, including flood, drought and fire will throw food production systems crisis, with no globalised supply lines to step in as the safety net. But food security is an issue Parliament has barely touched on.
Why are political leaders reluctant to call what we are facing “a pandemic”?
(WHO) definition of a pandemic is relatively clear. It is “an epidemic or actively spreading disease that affects two or more regions worldwide.” This clearly describes today’s geographical spread of the highly contagious novel coronavirus and its significant clusters of cases far from China; principally in Italy and Iran. Countries closer to China, like South Korea, have also experienced an explosion in novel coronavirus infections. And Europe and the US are rapidly catching up.
The World Bank has launched a $12bn fund to help developing nations deal with “the epidemic.” But this is where the politics turns ugly. Behind the scenes, casino spivs stand to lose lots of money if we call this a “pandemic” not an “epidemic.” It all goes back to
In June 2017, the World Bank announced the creation of “specialised bonds” that would fund the previously created Pandemic Emergency Financing Facility (PEFF) in the event of an officially recognised (ie WHO-recognised) pandemic. The high-yield bonds were sold under the premise that those who invested would lose their money if any of six deadly pandemics (including coronavirus) occurred. If a pandemic did not occur before the bonds mature on July 15, 2020, investors would receive what they had originally paid for the bonds along with generous interest and premium payments.
This is why Trump has gone out of his way to pooh-pooh use of the word “pandemic.” If we don’t call it out until after July 15 speculators get paid and it’s the public who then pick up the bills.
The first “pandemic bond” raised $225 million, at an interest rate of around 7%. Payouts are suspended if there is an outbreak of new influenza viruses or coronaviridae (SARS, MERS). The second, riskier bond raised $95 million at an interest rate of more than 11%. This bond keeps investors’ money if there is an outbreak of filovirus, coronavirus, lassa fever, rift valley fever, and/or Crimean Congo haemorrhagic fever. The World Bank also issued $105 million in swap derivatives that work in a similar way.
In 2017, $425 million of these “pandemic bonds” were issued, with sales reportedly 200% oversubscribed. For many, they looked more like “a structured derivative time bomb” — one that could upend financial markets if a pandemic was declared by the WHO.
He adds, “And that’s where we are now. Call it a crisis. Call it an emergency. But whatever you do, don’t use the word “pandemic” because it might kill the market”. Concluding that there is no way to magic this crisis away, he says we must manage our way through it as best we can, adding, “But calling a pandemic a pandemic would at least treat countries and communities as human entities, not just chips in casino capitalism”.
8 March 2020
Step out of line and share Assange’s fate: Prof. Melzer: “And nobody will care. I can promise you that”.
Today, people from several campaigns supporting Julian Assange, including Defend Wikileaks, will be demonstrating against his extradition.
A message has been received from Tracy Worcester (below) who gave a clear and persuasive address outside Belmarsh prison where she visited Assange. Reuters – unlike more right-wing outlets – yesterday gave a straightforward account of the proposed extradition of Julian Assange to the USA, about which a decision is to be made shortly.
Another message, from a Bournville reader, says that extradition would be an injustice crowning all those he has suffered already and a threat to free speech everywhere – with particular implications for whistle-blowers, journalists and bloggers.
He forwarded a long and detailed interview with Professor Nils Melzer, a Swedish academic, professor of international law at the University of Glasgow who is serving as the UN Special Rapporteur on Torture and other Cruel, Inhuman or Degrading Treatment or Punishment. Some points made by Melzer follow:
Assange reported to the Swedish authorities on several occasions because he wanted to respond to the accusations
After a detailed examination of the rape allegations he pointed out that far from fleeing from the Swedish judiciary in order to avoid being held accountable, Assange reported to the Swedish authorities on several occasions but the authorities stonewalled. He contacted the Swedish judiciary several times to make a statement – but was turned down. Melzer (below) says:
“I speak fluent Swedish and was thus able to read all of the original documents. I could hardly believe my eyes: According to the testimony of the woman in question, a rape had never even taken place at all. And not only that: The woman’s testimony was later changed by the Stockholm police without her involvement in order to somehow make it sound like a possible rape. I have all the documents in my possession, the emails, the text messages.
The media and government agencies have painted a completely different picture over the years
Melzer gives a long and detailed account of the charges, opening: “We know that the original statement, according to the chief public prosecutor, apparently did not contain any indication that a crime had been committed. A revised statement was edited without the involvement of the woman in question and wasn’t signed by her. It is a manipulated piece of evidence out of which the Swedish authorities then constructed a story of rape”.
Though the public prosecutor’s office gave him written permission to leave Sweden for short periods of time, on the day that Julian Assange left Sweden a warrant was issued for his arrest.
His lawyer explained that Assange had to go to Berlin for a conference and had asked if he was allowed to leave the country. During the flight, his laptops disappeared from his checked baggage. Existing correspondence proves that after arriving in London, via his Swedish lawyer, Assange offered public prosecutors several possible dates for questioning in Sweden.
Then he heard that a secret criminal case had been opened against him in the U.S. His lawyer said that his client was prepared to testify in Sweden, but because of Sweden’s record (in one instance they had to pay a million dollars in damages to two men who were extradited to the CIA in Egypt without any legal proceedings) he demanded a diplomatic assurance that Sweden would not extradite him to the U.S. The Swedes declined to provide a guarantee, arguing that the U.S. had not made a formal request for extradition.
Assange said he was willing to be questioned in London or via video link under the cooperation treaty between the United Kingdom and Sweden
Under the terms of the treaty, Swedish officials can travel to the UK, or vice versa, to conduct interrogations or questioning can take place via video link. During the period of time in question, such questioning between Sweden and England took place in 44 other cases.
The Swedish prosecution avoided questioning Assange for five years and eventually his lawyers petitioned Sweden’s Supreme Court to force the public prosecution to press charges or to close the case.
Melzer recalls that when the Swedes told the UK they might be forced to abandon the case, the English Crown Prosecution Service wrote “Don’t you dare get cold feet!!” in a document addressed to the Swedish Chief Prosecutor Marianne Ny, a copy of which was obtained by the Italian investigative journalist, Stefania Maurizi, in a five-year long Freedom of Information litigation which is still ongoing. Sweden finally abandoned the case against Assange in November 2019
Why would the Swedish and British authorities act like this?
In July 2010, Wikileaks – in cooperation with the New York Times, the Guardian and Der Spiegel – published the Afghan War Diary, one of the largest leaks in the history of the U.S. military. Wikileaks obtained a document in which Stratfor, a security consultancy that works for the U.S. government (email@example.com) advised American officials to deluge Assange with all kinds of criminal cases for the next 25 years.
What Wikileaks did is a threat to the political elite in the U.S., Britain, France and Russia. Wikileaks publishes secret state information – they are opposed to classification – and in a world, even in so-called democracies, where secrecy has become rampant, that is seen as a fundamental threat
Was another suppression related to a 2017 allegation by former congressman Dana Rohrabacher that Donald Trump had offered to pardon Julian Assange if he claimed that Russia had nothing to do with a leak of Democratic party emails in 2016? Trump offered to pardon Assange if he said that Russia had nothing to do with WikiLeaks’ publication of Democratic Party emails in 2016. accusation.
What awaits Assange if he is extradited?
Melzer feels sure that Assange will not receive a fair trial in part because Assange will be tried in Alexandria, Virginia, the notorious ‘Espionage Court’ where jury members are drawn from a local population, 85% of whom work in the national security community – at the CIA, the NSA, the Defense Department and the State Department. He adds that the cases are always tried in front of the same judge behind closed doors and on the strength of classified evidence. Nobody has ever been acquitted there in a case like that. He continues:
“I am the Special Rapporteur on Torture for the United Nations. I have a mandate to ask clear questions and to demand answers. I visited Assange in his cell in London in May 2019 together with two experienced, widely respected doctors who are specialized in the forensic and psychological examination of torture victims. The diagnosis arrived at by the two doctors was clear: Julian Assange displays the typical symptoms of psychological torture. If he doesn’t receive protection soon, a rapid deterioration of his health is likely, and death could be one outcome”.
Melzer then asks three questions:
- What is the legal basis for denying someone their fundamental right to defend themselves?
- Why is a man who is neither dangerous nor violent held in solitary confinement for several months when UN standards legally prohibit solitary confinement for periods extending beyond 15 days?
- Why have none of these UN member states launched an investigation, answer my questions or even demonstrate an interest in dialogue?
And gives a warning to all:
When countries like Sweden allow themselves to be manipulated like that, then our democracies and our human rights face a fundamental threat. Power corrupts if it is not monitored. A show trial will make an example of Julian Assange. The point is to intimidate other journalists. The message to all is: “This is what will happen to you if you emulate the Wikileaks model”.
Assange has published proof of systematic torture. But instead of those responsible for the torture, it is Assange who is being persecuted. Melzer added: “This could just as easily happen to us or our children. And nobody will care. I can promise you that”.
Our Bournville informant ended: “Evil triumphs when good people do nothing”:
Before 1990, healthcare in the United Kingdom was provided by health authorities which were given a budget to run hospitals and community health services in their area. The National Health Service and Community Care Act 1990 introduced an internal market into the supply of healthcare in the United Kingdom, making the state an ‘enabler’ rather than a supplier of health and social care provision.
Care homes were then outsourced by local authorities to the private sector which employed large numbers of low-paid workers with weak representation by unions and professional organisations. Spending on social care is now below 2010 levels.
Gill Plimmer describes the way in which global private equity, sovereign wealth and hedge funds have piled into the sector in the past three decades, lured by the promise of a steady government income and the long-term demographics of Britain’s ageing population.
Three of the biggest chains — HC-One, Four Seasons and Care UK — are in the hands of buyout groups.
At the Four Seasons Whitchurch Care Home in Bristol (above), emergency buzzers went unanswered, some medicines were not dispensed and many of its frail and elderly residents had not been given a bath, shower or a wash for a month, an official inspector’s report found. A broken elevator meant residents on the second floor could not be taken to hospital appointments.
Problems are in part a result of:
- a long-term decline in fees paid to providers for social care,
- a state mandated rise in the minimum wage,
- a decline in state funding for local governments, which pay for 60% of their residents,
- short term investment and speculation,
- larger private equity-owned care homeowners have a short-term investment focus and complex structures, involving scores of subsidiary companies, many of which are listed offshore and
- the money to fund the trading coming from taxpayers or from middle class people running down their savings.
When Terra Firma (building better businesses) bought the Four Seasons chain in a £825m deal in 2012, there was still £780m of outstanding borrowings hanging over the business. Now around £1.2bn of interest-bearing debt and loans from unspecified “related” parties.
Nick Hood, analyst at Opus Restructuring & Insolvency, which has advised several care home chains, said “owners are playing with the debt and expecting returns of 12 or 14 per cent and that is simply unsuitable for businesses with heavy social responsibilities”
He adds that the watchdog — the Care Quality Commission — should require the entire corporate structure to be held within the UK
Jon Moulton, the private equity veteran who ran Four Seasons in the early 2000s recommends that care home chains should hold a certain amount of capital, just as banks are requited to do by the Financial Conduct Authority.
Toothless regulator/watchdog places all responsibility on Britain’s cash-strapped local authorities
Kate Terroni, chief inspector of adult social care at the CQC, says that for now it has no authority to introduce minimum capital requirements or to intervene to prevent business failure. “Our powers are to provide a notification to assist local authorities who are responsible for ensuring continuity of peoples care
Meanwhile, as Four Seasons “hurtles towards insolvency”, directors are paid lavishly and their care homes continue to close.