The Government is to look at business models used by firms providing public services following the “failure” of the one used by Southern Cross Healthcare.

Yesterday’s announcement by Vince Cable comes after stinging criticism of the sale and leaseback model, which saw Southern Cross sell most of its homes and lease them back.

The Darlington-based firm, responsible for the care of 31,000 people, has since seen rents rise faster than the income it receives, primarily from local authorities, for care.

The Business Secretary told the Commons that the company would not be bailed out with public money, although he promised residents affected if the firm closed its homes would be re-housed.

Mr Cable said Southern Cross “had a failed longstanding business model”, before committing the Government to review the business models of all companies that provide public services to ensure they are stable.

“What I am doing is that I have asked my officials to look carefully at the business models of companies that do provide public services and to ensure that they are stable and the sector regulators responsible for them are able to act appropriately,’’ Mr Cable said.

On Wednesday, Southern Cross said it was planning to cut 3,000 jobs.