1 June 2011 Last updated at 20:36

No bail out for struggling care home company in Wales

Southern Cross provides accommodation for more than 30,000 people in the UK

The Welsh government has said it will not bail out a struggling care home company.

Southern Cross, which has 34 homes in Wales housing mainly elderly residents, said it will reduce its rent bill amid financial trouble.

It plans to pay landlords a third less over the next four months.

Councils said they were aware of the company's difficulties, but the Welsh government said there must be a commercial solution.

In Bridgend county borough, where the company has four homes, the council said it was preparing contingency plans.

Darlington-based Southern Cross, which operates 750 homes and is the UK's biggest care home company, recently reported half-year losses of £311m. It warned then that it was in a "critical financial condition".

The Welsh government said its priority was the care of residents.

A spokesman said: "We will continue to keep an open dialogue with the company and also ensure effective contingency plans are in place through councils and the NHS.

"The Welsh government will not play a role in funding any solution, there should be a commercial solution for a commercial problem."

Bridgend council said it was monitoring the situation with the regulator, the Care and Social Services Inspectorate for Wales (CSSIW).

'Business as usual'

A spokesperson said: "As well as sharing information with neighbouring south Wales authorities, we are preparing contingency plans as a precautionary measure to ensure that services will be able to continue as normal.

Older People's Commissioner Ruth Marks says she is concerned about the uncertainty

In a statement, Blaenau Gwent council said it was in regular contact with the care homes.

"We have been reassured that there is no concern of immediate closures. We will work with residents and their families to find suitable alternative accommodation should the need arise," it said.

Commentator and former NHS Trust chairman Roy Lilley told BBC Radio Wales that social services were under huge pressure and the company's occupancy rates had dropped.

"The company finds itself between a rock and a very hard place," he said.

'Critical mass'

"If we bailed out the banks we are going to have to bail out this company. What is the alternative? For social services to try to re-locate these people into other care homes? Impossible."

Labour AM for Cardiff West Mark Drakeford said thousands of very vulnerable people in south Wales are housed by Southern Cross.

"From a government point of view I absolutely see there's no alternative but for governments to hold the line and to say you can't expect the public purse to bail out a private company when things go wrong."

Southern Cross said on Tuesday it would defer 30% of its rent for four months while it tried to resolve its financial difficulties.

It also reiterated its belief that a longer-term solution to its troubles would be "forthcoming".

The firm said it was confident "a critical mass of landlords" would support the move.

The rent deferral runs from 1 June to 30 September. Southern Cross said it would issue an update in July.

CSSIW said it was working with the Welsh Government, councils and the Association of Directors of Social Services Cymru to monitor the arrangements they have put in place for the 34 care homes.