Southern Cross collapse– true face of privatisation


On Monday Tory prime minister, David Cameron, unveiled the long awaited White Paper that will enshrine in law the ‘presumption’ that public services should be privatised.

Everything from schools, hospitals right down to park-keeping will now be up for grabs with a legal duty imposed for public services to be sold-off to private companies out to make a profit at any cost.

In an act of supreme irony, Monday was also the day that the inevitable outcome of this privatisation bonanza for the speculators and hedge funds was revealed when Southern Cross, the UK’s largest care home provider, finally went bust leaving 31,000 elderly residents at risk of seeing their homes closed and being thrown onto the streets.

These homes will now be taken over by the existing landlords – according to research carried out by the GMB union more than half of whom are based outside the UK for tax reasons.

The whole saga of Southern Cross reveals what actually happens when the private sector vultures are let loose on the Welfare State.

The company was bought by the private equity firm, Blackstone, in 2005.

They set about ‘re-organising’ by selling off the previously owned homes and renting them back off the new landlords, a procedure much favoured by these equity companies and which produces a large amount of profit through what is essentially asset stripping.

Under the terms of the lease back, Southern Cross was legally bound to pay an annual rent increase to their new landlords.

Blackstone bailed out shortly after this ‘re-organisation’, floating Southern Cross on the stock market for £640 million and washing their hands of the entire business having made their huge profit.

With the prospect of an everlasting supply of public money coming in from local councils paying for elderly people in care homes, super profits were assured for the private investors who now owned Southern Cross.

The wheels came off this gravy train with the economic collapse of the banking system in 2008 and the subsequent cuts in local council finances by the government, determined to slash public expenditure to bail-out the banks.

Southern Cross, facing a £200 million a year bill for rents on its 752 homes, simply could not afford to keep going so they have gone bust and washed their hands of 31,000 elderly, vulnerable men and women that the capitalist state entrusted to their care.

Now Cameron and his LibDem coalition partners are determined to enshrine in law the principle that every section of the public sector and welfare state is to be opened up to the same asset stripping, get rich quick and bail-out before the crash comes, private vultures that have destroyed care home provision in the UK.

The coalition government is fully aware that privatisation of public services will inevitably lead to the Southern Cross collapse being replicated in hospitals and schools.

According to the Guardian newspaper, government ministers have been advised by civil servants that markets are ‘susceptible to failure’ and that it is vital for private companies to have an ‘exit’ strategy from the public services they take over.

This exit strategy would lead to hospitals and schools closing because the privateers can no longer extract the profit they demand.

This is the true face of privatisation that no amount of lies about choice or ‘power to the people’ can hide.

The only answer is to demand that the unions act immediately in defence of the welfare state and public sector by calling a general strike to kick out this coalition and replace it with a workers government that will expropriate the banks, put an end to the financial parasites and advance to socialism.