To stop giving government contracts to asset strippers such as Southern Cross that buy and sell your granny was no more than common sense.
A Our Man in York has pointed out:
We know the answer for market processes: bankruptcy and loss of investment, followed, normally, by a reorganisation of the assets. Again, the norm is that this is done by those “asset-stripping predators” Miliband so hates. They buy the assets at a distressed price and then put them to better use. In the case of care homes, there’s not much you could do to change the use, so the acquirer simply tries to run them better than their predecessor.
We have seen the market processes in action quite effectively with Southern Cross. I would hazard to say that, in fact, so far from being a black mark against private-sector care, this is a positive sign, showing responsible error-handling by market participants.
Or, for those hard of understanding. The solution to Southern Cross was asset stripping.
Company has a bunch of assets. Contracts to run care homes, staff, systems etc. Company screws up on how they run them (specifically, S. Cross messed up on whether to own or rent the homes themselves and the contracts by which they did so).
So, what happens next? The asset strippers move in. The contracts to run care homes are reassigned, the staff moves to another employer. We have, or various people have, stripped the assets from S. Cross.
Granny is still being cared for in the home which she lives in. Nurses, carers, bed pan emptiers and cooks are still turning up to work. Buildings are still there.
All that has changed is the ownership and management of some of these assets: they’ve been stripped out of the previous hulk and insterted into new formations.
Or, for the seriously hard of understanding: asset stripping is a reaction to failure and it’s a reaction to failure that works very well indeed.
Just think what would have happened if the asset strippers had not existed.
So, S. Cross goes bust and all the contracts lapse. All the staff are laid off. All the contracts to run care homes cease. Food stops being delivered. Adult nappies are no longer changed. Tens of thousands of elderly are left rotting and starving.
Umm, isn’t it better that some sharp cookies buy into these assets, strip them, than this happens?