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Friday, 27 September 2013

Why I changed my mind on for-profit schools



Back before the last election I wrote several reports arguing in favour of profit-making schools.


In 2009 I wrote:
 
"The question of profit is one the most emotive aspects of [school reform] and has been the focus of discontent on the left of American and Swedish politics. There seems to be little basis for this, or for the queasiness over potential profit-making schools in the UK, beyond an intuitive dislike of the idea that money could be made from educating children."
 
I never thought it was key to reform
 
"We do not believe that the inclusion of for profit firms in any reform is essential to making
making reform work – and reformers may consider the additional opposition it creates not worth the trouble."
 
But I did think that it would create extra incentives for people to develop federations of schools (which I've always thought is key to the success of any school reform movement):
 
"However, for-profit groups are much more likely to have the scale and ambition necessary to create multi-school federations. Larger charities with a national or regional focus, such as Harris and ARK in the UK or KIPP and the other CMOs in the US, are also able to do this, but such groups are relatively few and far between, especially during an economic downturn."

So why have I changed my mind?

Well I haven't had a Damascene conversion to Marxism. I still think that the intuitive horror many on the left have to the use of for-profit companies to provide public services is irrational. There are plenty of existing examples where for-profit companies fulfil a need at least as well as alternatives. It perhaps works best where services are simple and easy to measure (rubbish collection; maintenance etc...) but the NHS uses for-profit companies to buy-in treatments; many parents spend their nursery entitlement in for-profit nurseries. And so on. In parts of the developing world for-profit schools are the only chance many children get to have a decent education.

The question for me isn't "are for-profit schools inherently good or bad" it's "would for-profit schools improve the education system as it currently is". And there my answer is no - for three connected reasons.

One: the incentives that I thought allowing profit would create exist anyway

I failed to predict, back in 2009, how many natural entrepreneurs existed in the education system who would take advantage of the Academies Act to quickly develop chains and federations. When I left the DfE back in February there were around 150 schools that had not only converted to academy status but started up their own federation. I expect that number is now closer to 200. Some chains have grown very fast (some have grown too fast).

In some cases I guess this surge of entrepreneurship is linked to desire for personal gain or status (you don't have to run a for-profit company to make a lot of money yourself). But I think in most cases it has been motivated by moral purpose - successful school leaders wanting to reach more children than they could do by running a single school.


Two: allowing for-profit wouldn't in any case create much extra incentive because it's not a profitable industry

As many a CEO has found to their cost in America and Sweden it's very hard to make any money out of running schools. 80% of a school's costs are staff; without good staff you can't have a good school so offering lower salaries isn't really an option. There are only two ways you can make any money. First employ fewer teachers by using blended learning approaches. To put in kindly there's not a huge amount of evidence for these approaches (the for-profit "virtual" charter school sector in the US is an absolute scandal). Secondly, run so many schools that you make your money by cutting back-office costs. But the number of schools you'd need to make much profit make this pretty undesirable too. Most of the reputable firms that have run the numbers on schools have backed off pretty quickly.

You might be thinking (though you probably aren't) that it's worth a try anyway. You might get some really innovative companies that come up with a way of running great schools and making some money at the same time. But...


Three: allowing for-profit would require a complete overhaul of current processes
 
One of the big misconceptions about the Government's reform programme is that it "paves the way" for profit-making schools. In fact the system only works because all academies and free schools are not-for-profit. Back under the last Government anti-academy campaigners judicially reviewed the decision to allow UCL to sponsor an academy in Camden. They argued that it broke EU law because there wasn't a public procurement process where anyone could bid for the "contract". The judge ruled for the Government but only on the grounds that academies were all sponsored by not-for-profits. Had the Government handed that academy to SERCO they would have lost the review.

That means if the current Government wanted to allow for-profits they'd have to run a full procurement exercise for every sponsored academy and free school. The Swedes get around this by giving licenses to run free schools to any provider who meets a certain threshold. But that means losing any real control over who can set up a school. And as it precludes handing out capital (because you don't know how many will be over the threshold) it also pushes not-for-profits out of the market. There are no big not-for-profit chains like ARK or KIPP in Sweden. In any case that model wouldn't work for sponsored academies.


So that's why I changed my mind. We don't need them and the cost of overhauling the system is completely disproportionate to any potential benefit they could bring. For these reasons I can't see any Government going down this route for the foreseeable future.


 
 
 

 

 
 
 
 
 

 

200 comments:

  1. Here's another reason why pursuing for profit education is a bad idea:

    because it distracts so much time, attention and energy away from the many powerful and positive reforms which web2.0 technology has made so easy to achieve.

    This isn't really just about for profit education is it though Sam? The comments you've made apply equally well to the whole debacle of the pursuit of the idea that a totally free 'market' in education is affordable and beneficial.

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  2. re sams quote "In some cases I guess this surge of entrepreneurship is linked to desire for personal gain or status (you don't have to run a for-profit company to make a lot of money yourself)"

    As an example of the above I would cite TeachFirst which look after their executives and staff very nicely thank you at a cost of , I believe £38 k per teacher trained. I believe there's a 50% drop out rate so this would price the cost of Teach First providing a teacher lasting longer than 3 years as £76K.

    It's about time a "value for money" review was perhaps undertaken agaisnt other teacher training institutions.

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