Profile: Charitable Care Investment Fund

Towards the end of November Ros Altmann – a former pensions’ minister under Prime Minister David Cameron – said the UK is “sleepwalking into a social care crisis”. The ageing of Britain’s population is a ticking bomb.

The number of people aged 85 and above is expected to grow from 1.5 million now to 2.5 million in 2030, and we can expect around one in six people to need a bed in a care home of one sort or another. Currently there are more than 500,000 care and nursing home places in the UK so that around 750,000 new beds over the period will need to be provided.

As the local authorities are no longer in the market, around 75% of the care beds are currently provided by the private commercial operators with the balance provided by care charities. The expansion of the care sector has been driven over the last decade or so by the availability of investment funds available from private equity investors.

However, the Financial Times reported recently that a quarter of all Britain’s care homes are “facing financial crisis over the next three years”. Many of these care homes are small, stand-alone providers, facing a squeeze – as are many larger care operators – from two directions: higher wage bills following the introduction of the National Living Wage; and cuts to local government funding by central government. About 60% of residents are funded by their local councils. It’s no surprise that the focus of current investment by the private sector is at the more luxurious end of the market.

Last year the think-tank Respublica projected a funding gap of more than £1 billion for older people’s residential care by 2020/21, “which could result in a loss of around 37,000 beds”; the vast majority of those 37,000 displaced individuals would have no-where to go and would be likely to end up in an NHS bed, at an annual cost of £3 billion.

Mike Hoyle, the CEO of Fincch, the promoters and investment advisers of the Charitable Care Investment Fund (CCIF), a member of the Social Stock Exchange, puts it bluntly: “Most people know there is a crisis – what they want to see is action. In the Autumn Statement [by the Chancellor of the Exchequer] the Government was silent on this crisis. Private equity backers of the private sector care providers are worried about making their financial model work. They are concerned about the crisis but mainly because it hits their bottom line.”

Photo: Mike Hoyle

Where the state sector is overwhelmed, the private sector needs to come forward with visionary solutions: which is where CCIF comes in. Dermot Bates, an executive director of Fincch, says it has been set up to lend to UK-based care charities. “The accommodation CCIF will part fund includes residential care homes, nursing homes, and hospices, among other types of care providers. The European Investment Bank is keenly interested in backing CCIF with a loan of between £40-£60 million, and CCIF is now in the process of raising another £360 million,” adds Bates.

For Hoyle, “there are two USPs [unique selling points] regarding CCIF. The first is that it attracts large amounts of finance from financial institutions to lend-on to care charities on terms which meet their criteria of being very low risk, having no surprises and generating a positive real return. CCIF provides a mechanism to enable funding of the main social sectors outside of the government’s finances in a way which has never been done on this scale.. The second is that it focuses on charities – who are in turn focused on the poorer people. The motivation of the charity trustees and the CCIF investors are closely aligned, and therefore not distorted by considerations of who gets the profit.” As a result the projected social impact of CCIF is very significant.

What’s happening in the UK’s care home market alarms Bates, who says: “Across the country there is currently a £4 billion gap per year on social and care spending. Banks who used to lend in this sector, particularly for the smaller organisations, have almost completely withdrawn from the market. Or if they haven’t, the money that they are offering is significantly more expensive than the funds that we are offering. Our target investors are institutions that need long-term, reasonably fixed returns for their money, predominantly pension funds. In the past they would traditionally have used gilts. Now at present you’ve actually got to pay for the privilege of owning treasury bonds. What we have designed CCIF to do is effectively to give a fixed return over a 20 year period and one that is very stable.”

Photo: Dermot Bates

CCIF is at the start of a long process and it probably – hopefully – will not be the only entity to seek to step into those parts that the state can no longer reach. Bates sees the Social Stock Exchange as being a critical path to success. For him and CCIF “the value of the Social Stock Exchange is that it says of its member companies, ‘here is an organisation that has been vetted to create a real social impact.’ When you are running around trying to tell people that there is a financial return and a social aspect, it’s incredibly powerful to be able to say ‘and we are listed on the SSX which exists purely to encourage or create investment in socially and humanly viable projects.’ The beauty of the Social Stock Exchange is that it’s going out into the regions, and I think that’s really significant, mobilising local money. As that regional network begins to mature it will be logical to raise money and invest in those regions. People in the SSX think outside the box; they’re committed; they’re driven. And I think they are in a space whose time is coming.”

As Richard Humphries, assistant director of policy at the King’s Fund, said recently in The Guardian, the chances of large-scale social provider failures “that imperil the care of hundreds or even thousands of people is an ever-present possibility. The government is taking big risks on all of these fronts as a direct consequence of its indifference. How big a price, in human as well as financial terms, it is prepared to pay remains to be seen.”

CCIF offers a way to reduce the impact of this potential crisis by building a bridge between the financial institutions on one hand, and on the other the care charities, which are driven totally by the welfare of their residents. CCIF generates a win-win possibility – for the poorer residents and care charities, and for financial institutions and Government.



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