IT IS a modern Christmas pantomime. A Guernsey-based millionaire. A private-equity house. And a business that cares for people in the final years of their lives. Four Seasons, one of Britain’s largest care-home firms, is in financial trouble, a few years after being acquired by Terra Firma, a company founded by Guy Hands. Lately Four Seasons has piled on debt, which it is struggling to repay. The firm’s difficulties worry many. “Debt-fuelled companies are too risky to be left in charge of frail, elderly people’s lives,” said Ros Altmann, a former pensions minister.

The tale of Four Seasons hints at wider problems with care homes, which look after half a million elderly folk. In the past decade profitability in the industry has plunged. That has limited investment in the care homes of tomorrow—which are sorely needed, since the population is ageing. Since 2015 the number of beds has in fact fallen slightly, according to a report from LaingBuisson, a consultancy. That puts pressure on other services. The number of hospital beds occupied by people who are well enough to be discharged but who have no care home to go to has risen by 75% since 2011. What has gone wrong?

In the 1970s the provision and the purchasing of care were both done mainly by government. Since then, much has changed. Local councils pay some or all of the care-home fees of those with assets of less than £23,250 ($31,000), while those with more must pay their own way. In all, the state foots about half the bill. The care homes themselves are mainly run by the private sector. A fragmented industry has emerged, in which the ten largest for-profit providers hold just a quarter of the market.

A number of factors explain why the industry is in poor shape. Sir Andrew Dilnot of Oxford University points to one. Privately funded residents cannot know how long they will live for, and therefore what their eventual care bill will be. In order to conserve money for the future, they often choose the cheapest possible care, Sir Andrew says. This limits care homes’ profits.

Government intervention could solve this market failure. In an official review in 2011 Sir Andrew proposed capping the total amount that a person would pay at about £40,000 in today’s prices, after which the state would step in. But the government has prevaricated. David Cameron kicked the introduction of a “Dilnot cap” into the long grass. This year Theresa May’s election manifesto ignored the review, instead proposing to increase the amount that some people would pay for their care. After this was dubbed a “dementia tax”, the policy was hastily rewritten, and since the election it has been forgotten.

The muddle over social-care financing is not the only way in which the government has hampered care homes. Perhaps 15% of social-care workers are on the minimum wage, roughly twice the share seen across the whole economy. Since 2015 the government has raised the wage floor for the over-25s by 12%.

It is hard for providers to meet these higher costs by charging their customers more, as they might in a properly functioning market. In many areas the care-home market is “monopsonistic”, with one dominant buyer (the local council) and many sellers (the care homes). Town halls thus have huge pricing power. With their budgets slashed since 2010, councils have reduced the fees they pay to care homes.

Firms do what they can. Charles Taylor, whose family runs two care homes in Oxfordshire, says that the firm increasingly focuses on specialist care, for patients with conditions such as dementia. That gives it more bargaining power when negotiating with the local council. Courting private payers, who have deeper pockets than councils and can thus subsidise state-funded residents, also helps. Such options are not open to all firms, however—especially those in poor parts of the country, where there are few private payers.

The Four Seasons pantomime will not be the end of the care industry’s troubles. Councils will not become more generous any time soon. And Brexit will reduce the pool of potential employees. For the 80% or so of people who will some day need care, this is worrying stuff.