THE late 1980s were something of a bonanza for private care homes. All over the region, large old Victorian and Edwardian houses were converted into residential and nursing homes.

With relatively light regulation and low wage bills, handsome profits were made.

But the bubble burst around 1990 and, since then, more and more care homes have gone out of business, around 50 a week in the UK, according to care home owners.

Yet at the same time as the private residential home sector is contracting strongly the demand for care home places for elderly people continues to rise.

Ironically, when Maureen Horton and her husband Ralph bought their first residential home in Darlington, after a search which took them to Devon and Wales, the downturn was about to kick in.

"Things had been really good in the care home sector up to about 1989," says Maureen, who helps boost family income by part-time teaching.

Despite difficult trading conditions, the couple, originally from Warwickshire, built up their business in Cobden Street, Darlington, expanding from an original nine residents to 20.

"We fell in love with the place. We were looking for somewhere with no stairs, it was just right for us," recalls Maureen.

One of their aims has been to keep the home relatively small to foster a more homely family-like atmosphere.

"We didn't really want to go up to 20 but we had a lot of pressure to increase our income," says

Maureen is helped by Lucy, the couple's 18-year-old daughter, who does much of the routine administrative work.

Ralph was originally involved as a residential social worker but when Warwickshire County Council decided to close all its children's homes, he tried the elderly care home sector - and loved it.

"Ralph realised that was what he wanted to do, he enjoyed the close contact with people" says Maureen.

Keen on promoting closer relationships between staff and residents, Ralph had the large home broken down into four smaller units with dedicated staff.

That theme continued when the couple's quest for a smaller home brought them to Darlington.

It has been tough and Maureen flinches at the financial commitments the couple have had to take on.

"We have managed to keep our heads above water, but only just," she says.

But Maureen, who chairs the Darlington Independent Sector Provider Group which represents around a dozen care homes in the town, fears that additional costs imposed in the last few years will force homes to the wall unless fees paid by local authorities rise.

Ironically, Maureen and Ralph have always been strong Labour Party supporters and agree with the Government's efforts to improve pay and training for staff. But if the extra costs to homeowners are not off-set by higher fees she fears the worst.

"Costs have increased mainly due to staff costs from the national minimum wage. We are pleased to pay carers and nurses higher rates in what has traditionally been a low-paid sector but we clearly need fee levels to match."

Apart from the minimum wage, which has pushed up costs for homeowners, staff are now entitled to four weeks paid holiday a year and, from this month, three paid training days a year.

The European working time directive has also hit home-owners hard. "It is probably affecting us even more than the minimum wage," she adds.

The growing concern about the level of fees came to a head recently when an independent review of costs by accountants KPMG for the Care North East group of homeowners found that fees should be £329 per week for residential homes and £447 for nursing care - this contrasts with average local authority fees across the region of between £230 and £272 (according to level of dependency) for residential care and £345 to £365 for nursing home care.

What is on offer in Darlington is £265 for residential care and £365 for nursing care.

The Darlington group has frequently raised the issue of fees with the town's MP Alan Milburn, who is the Secretary of State for Health.

But while he has always been personally supportive of care homes in the town - "he has been here a few times," says Maureen - he has told the town's care home owners that Darlington is in the same position as other local authorities as far as extra funding for care homes is concerned.

The Department of Health has announced large increases in allocations to local authorities in a bid to support the care home centre but not all councils have fared as well in the share-out.

Colin Morris, director of social services at Darlington Borough Council agrees that fee levels are an issue but he argues that this is a national issue "and one that local authorities are having to face up to."

The council was "working hard" with the care home owners to find ways to address the situation, pointing out that fees this year have increased by more than double the rate of inflation.

Darlington council is also looking at alternative methods of funding, and a successful bid for European social funding will provide extra funds for training for the independent sector.

Despite the gloomy financial outlook, the Hortons take a pride in how they run their home.

Living in a bungalow at the back of the home they are very much "hands-on" owners. Their residents are usually in their 80s and 90s although they have one 100-year-old.

"Most of our residents either lived in the area or returned to the area where they have their roots, says Maureen.

Unlike some homes, they charge self-funding residents the same as residents whose costs are covered by the state.

One of her residents is 89-year-old former carpenter Arthur Hardy, who keeps other residents entertained with his cheery disposition and his poems.

Arthur has come up with an idea for an arts project which will involve depicting the residents' favourite areas of Darlington. Several of his paintings - completed before he lost his sight - hang in the home.

"The poetry just comes out of the top of my head," says Arthur, who used to run the workshop at the old Aycliffe Hospital.

"They try to have a family atmosphere in here and I think they succeed. It's very nice," he adds.

Fellow resident Norah Mansfield, 74, who used to work for Age Concern, is also complimentary.

"They are all so lovely, it is just like being at home. It is such a shame that places like this don't get more money for what they do," she says.

Loyal staff have played a part in building up the family atmosphere.

Care assistant Maureen Peacock - "They call me young Maur" - has worked at the home for ten years.

"I like it here because it like a family. We see Maureen and Ron as friends but we still respect them as employers," says Maureen, who leads sing-songs and bingo sessions for residents.

She even met her husband at the home. "I was looking after his mum," she says.

Cracking jokes with the residents as they are helped on their way into the dining room for lunch, Maureen Horton, is under no illusion about the downside of working with very elderly people.

"You think you are going to get really hardened when you lose one of your residents and you never do. Sometimes the other residents are absolutely devastated," says Maureen.

Despite her respect for Alan Milburn, his recent comments about old people not wanting to be "banged up" in old people's homes made her angry.

"If that is the mind-set in Government we are fighting a losing battle," she says, shaking her head