Modernisation of the care home sector

To put modernisation in its context, it is worth reflecting on the short history of the independent care home sector. From being a minor player five decades ago — when the public sector dominated supply — independent sector providers now account for 95 per cent of capacity. The initial trigger for expansion can be traced back to the mid-1970s when the Labour government had to go cap in hand to the International Monetary Fund for a financial bail-out. One of the 'financial discipline' conditions extracted by the IMF was a halt to public sector capital funding of — among other things — local authority 'Part III' homes, alongside cuts in public spending overall. As a result, faced with rising demand, councils found themselves struggling to make care home placements. They had little spare capacity left in their own care homes and insufficient money to pay for outsourcing. It was voluntary sector organisation which first hit upon a solution, which was to use the benefits system (exempt from cash limits) to pay for care home fees for people without resources of their own. Not-for-profits were rapidly followed by for-profit providers eager to exploit Income Support as a new source of public funding. It set in train a massive expansion of for-profit care homes for older people, as illustrated in Chart 1. The rest is history.

For independent sector adult specialist care homes, the story is a little different. Demand for these too was given a massive boost by Income Support funding, and it was further reinforced by the closure of the large mental illness 'bins' which had already started a decade earlier.

The very rapid expansion of care home capacity, largely in the hands of small, local businesspeople, contained the seeds of the push towards 'modernisation' that we see today, because the great majority of new registrations were in small-scale, converted premises. Many of those least well suited to care (such as former seafront hotels) left the sector in the 'cull' of care homes following the 1993 community care reforms that gave cash-limited local authorities the primary role in commissioning care services. But most of the care homes set up in the first flush of expansion remain open today.