Monday, July 11, 2011

What’s missing from Cameron’s public services white paper

Private equity firm Blackstone escaped most of the blame for Southern Cross’s demise on Monday (see previous post How Blackstone made its £600m from Southern Cross) but the techniques it used to make its windfall raise serious questions about whether private equity firms are appropriate owners for public service providers.  

The questions are relevant now because David Cameron has just published his White Paper on public service reforms, detailing plans to open nearly all public services to the private sector – schools, hospitals, rehabilitation, childcare, council services, visa application centres etc - with virtually no safeguards against financial engineering or against brave new social enterprises being swamped by big business (see Peter Holbrook's post).

The White Paper has some good suggestions, such as allowing social enterprises, charities and employee-led mutuals to compete for services whose provision had grown stale under the state.

But it contains big contradictions, mostly relating to the role of the private sector and highly relevant to private equity. Here are some suggestions for making it safer.

How Blackstone made its £600m from Southern Cross

Five years before Southern Cross failed, private equity firm Blackstone owned the company and its main freeholder for two years in which time it engineered a profit of £600m - pretty impressive given that the UK care home group had annual operating cashflow of only £50m. Blackstone has faced accusations of profiteering and worse ever since.

This post tries to explain how Blackstone made its money and where it really came from.

Tuesday, July 5, 2011

ICB submission

Click "Read more" to see the full text of my submission to the Independent Commission on Banking