The Solution to Austerity

After the 2008 crash the debate was around whether the deficit would be best sorted by cutting public expenditure; or would it be better to stimulate economic activity so as to generate surpluses and jobs, thus reducing necessary benefits payments. In other words: austerity or stimulus?

Despite pouring billions into ‘quantitative easing’ to support the financial sector, the establishment has argued fervently in favour of austerity for the rest of us. That establishment (referred to elsewhere as the self-perpetuating industrial, financial, media, academic and political establishment – the SPIFMAPE) has proved so powerful, it has effectively buried the stimulus word and replaced it with ‘borrowing’. The establishment’s offer is now “Balance the books or borrow?” as Martin Kettle puts it [Guardian, 25.9.15 p39].

But the establishment is wrong. Stimulus is still the most effective option.
Continue reading The Solution to Austerity

Screwing care homes still makes the easiest money

Taxpayers are going to have to pay for another big care home operator, throttled by tax avoiding financial predators. According to its chief financial officer, Four Seasons, which runs 450 care homes and 50 specialist care units, ‘is reviewing its finances with all options considered’. One option would be to close down, leaving the taxpayer to pick up responsibility for its 20,000 residents and patients.

Four Seasons is carrying debts of £500million on which it is paying interest of around £50million. It’s not immediately obvious how they got into so much debt nor why they should be paying interest at 10% pa when the official bank rate is 0.5%.

£500million of debt is a popular care home sum. When private equity Blackstone acquired Southern Cross, then leading UK care home operator, it sold the freehold of the care homes, pocketed £500million proceeds, lumbered the care home business with the costs of leasing back their homes, floated the business on the London Stock Exchange and beat a rapid retreat. It took around 5 years before the rental payments bankrupted Southern Cross. Meanwhile Blackstone were able to repeat the predatory exercise with the £500million.

The tax avoiding financial predator that acquired Four Seasons was private equity Terra Firma Capital Partners, owned by Guernsey based Guy Hands. The acquisition was completed a few months after the collapse of Southern Cross had demonstrated how profitable such deals could be.
Continue reading Screwing care homes still makes the easiest money