Vote Tory if you want schools run for profit

Henry Stewart's picture
 15
This post was originally published in the Huffington Post, where you will also find a response from Toby Young. I'm publishing it also here to include all the links, which were omitted in the Huffington version.

 

The title of this post is unlikely to be a slogan that we will see on Conservative posters at the next election. The Tories know it is a deeply unpopular idea. Only 6% of the UK population support it, according to a YouGov poll for the NUT (84% were opposed with 10% undecided).

But Nick Clegg's claim this week that one of the Tory policies he blocked was "profit-making in schools" reveals what many have suspected, that it is only the coalition that has prevented Michael Gove from handing many of our schools over to companies who want to run them for profit.

Gove stated before the last election that he was in favour of for-profit companies running schools and the Independent reported in July that "academies and free schools should become profit-making businesses using hedge funds and venture capitalists to raise money, according to private plans being drawn up by the Education Secretary, Michael Gove."

Several Conservative think tanks have advocated privatising schools. BrightBlue advocated for-profit schools in Tory Modernisation 2.0, Policy Exchange has argued that for-profit companies should run "failing schools" and the Adam Smith Institute published a report arguing for "Profit Making Free Schools". Sam Freedman, then Research Director at Policy Exchange and later Policy Adviser at the Department for Education, held no illusions about the motives of private companies: "They are not interested for altruistic reasons. It's an investment."

At the moment the groups that run chains of academies and free schools in the UK cannot be directly run for profit. However they can currently purchase services, including management of the school, from for-profit companies that they are lined to and are free to pay their Chief Executives salaries of £300,000 or more.

Internationally the record of for-profit schools has been mixed at best. Sweden recently vowed to "clamp down on for-profit providers" after one company collapsed leaving 10,000 students in limbo. Education minister Jan Bjorklund explained: "We had a venture capital company that didn’t know much about education taking over Swedish schools. They thought they were going to make big money, discovered it wasn’t easy, got tired quickly and quit."

Free market advocates argue that a competitive market will improve education. However the YouGov poll makes clear that the public is not convinced. The failure of profit-making companies in delivering public services - with examples like G4S at the Olympics, A4E in back-to-work schemes and Southern Cross in Care Homes - casts doubts that these proposals will do any more than shift money from education for our children to income for shareholders.

"Open up school and hospitals to profit-making companies" is not a slogan that is likely to win votes, but it does seem to represent the intention of the Conservative part of the British government.

 

Note: The original version of this article stated Sam Freedman was a "Special Adviser to Michael Gove". Sam advises that this was not the case and so it has been corrected above to "Policy Adviser at the Department for Education", a position he held while Michael Gove was Secretary of State. (Policy Advisers are not allowed to undertake political work, whereas Special Advisers, or SPADs, are.)
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rogertitcombe's picture
Sat, 21/09/2013 - 20:42

Let's hope Labour use their Party Conference to reinforce this message that Henry puts so well.


Janet Downs's picture
Sun, 22/09/2013 - 10:04

It's on record Gove said before the last election he's got no problem with schools being run by profit-making companies like Serco (Policy Exchange, 17 March 2010).

http://www.localschoolsnetwork.org.uk/2011/10/gove-is-in-favour-of-profi...

The Co-Op claimed that for-profit providers were being encouraged to open free schools as early as 2011.

http://www.localschoolsnetwork.org.uk/2013/01/for-profit-education-provi...

It was, in fact, earlier. Lord Hill, was actually meeting for-profit education providers when his feet were barely under the table:

http://www.localschoolsnetwork.org.uk/2012/01/dfe-denies-inviting-profit...

Janet Downs's picture
Sun, 22/09/2013 - 10:15

Fraser Nelson, writing in the DT, praised Michael Gove for acting "unobtrusively" in paving the way for schools to be run for profit:

http://www.telegraph.co.uk/comment/columnists/fraser-nelson/8958627/Prof...

One of the comments under this article was one from mikestallard, proposer of a free school in Wisbech (12.15, 12/16/2011) which said, “In March 2010, I personally attended an initial meeting in London with Rachel Wolf [New Schools Network] and Michael Gove where the question of profit actually came up. I remember Michael Gove saying it was no problem, ’You simply subcontract’.

It seems, therefore, the oft-repeated defence that academies are run by charitable trusts and can't make a profit is disingenuous. The can "simply subcontract". And if they subcontract to a trading arm linked to the charitable trust, so much the better.

The National Audit Office (2010) found many sponsored academies were under pressure to buy services from their sponsors. This was a conflict of interest, the NAO said.

http://www.localschoolsnetwork.org.uk/2012/02/audit-office-raised-concer...

So, plenty of room to profit from providing education, then, under the umbrella of "charity" and "altruism" especially if the trustees pay themselves "remuneration":

http://www.localschoolsnetwork.org.uk/2013/07/after-financial-irregulari...

Janet Downs's picture
Sun, 22/09/2013 - 10:26

In March 2011, Fiona wrote that academy chains can be very profitable for those who run them:

http://www.localschoolsnetwork.org.uk/2011/03/academy-chains-prove-to-be...

Since then, for-profit providers have set up charitable arms which will act as a "vehicle" to make a return to investors. Zail Enterprises said (31 May 2013) it hopes its "vehicle " Wey Education Schools Trust would make Zail "the leading provider in private sector led state schools” and “Whilst it is too early to provide reassurance that the Company will ultimately achieve its ambitions…your Board is committed to establishing a business capable of making a return to shareholders.”

http://www.localschoolsnetwork.org.uk/2013/08/how-many-academy-trusts-ar...

Janet Downs's picture
Sun, 22/09/2013 - 10:40

Academy sponsors are supposed to be driven by altruism. And the charitable trusts which run academies aren’t supposed to be profitable.

But when Prospects was temporarily prevented by the DfE from sponsoring more academies because of poor performance at Gloucester Academy, the company complained it was “having a negative impact” on “the commercial operation of our company”.

Fortunately for Prospects, help was on hand. Documents released to Private Eye show ex-schools minister Lord Hill intervened and Prospects was allowed to take on more academies.

http://www.localschoolsnetwork.org.uk/2013/08/did-schools-minister-overr...

Rosie Fergusson's picture
Sun, 22/09/2013 - 13:13

The standards of Regulation in Education by OFSTED are far too weak to allow profit making in schools to proceed ( even if we ignore the immorality of tax-payers money lining share holders pockets and depriving children of facilities) .

OFWAT from the start of the 1990's have effectively and strictly regulated and controlled profit in the water companies because water is a basic human right( as is education). Water companies have to produce asset investment plans and meet strict consumer level of service criteria before they are allowed to raise prices and this is closely controlled by OFWAT.

Janet Downs's picture
Sun, 22/09/2013 - 13:35

Rosie - the water companies were found to be paying out high dividends to shareholders while paying little corporation tax, the Public Accounts Committee found.

http://www.telegraph.co.uk/finance/newsbysector/utilities/9670814/High-p...

Water may be a human right, as are education and health, but it doesn't stop companies regarding the last two as fast-growing areas for profitable investment.

And when market forces are introduced into education, equity goes out of the window. This was summed up by the Belgian Delegation at the 2012 International Summit on the Teaching Profession:

“Commercialization of education is a serious threat to equity, equality and democracy.”

See more at: http://www.localschoolsnetwork.org.uk/2012/07/when-market-forces-are-int...

Rosie Fergusson's picture
Sun, 22/09/2013 - 18:54

Janet,
the recent issue with the water companies was not how much profit they made but how little tax they paid

As water supply engineering has been my field for 25 years and I have colleagues in OFWAT and water companies I can assure you that OFWAT is an excellent example of quality regulation ensuring high quality levels of service to customers are made whilst its up to the companies themselves to keep shareholders happy.

It's the Government that determine how much tax the Water companies pay not OFWAT.

As I said at the start of the post I consider profit in education to be wrong but alas this view can easily dismissed as ideological .

What is a pertinent and valid argument against privatisation is the lack of effective regulation ; this fact cannot be dismissed as merely the ideology of " enemies of promise" .

Even the most ardent pro-free market politician ( assuming their commitment is to children and not to themselves ) should be able to understand that the Quality of Regulation currently offered by OFSTED is inadequate to prevent profiteering and asset-stripping by the investment funds currently circling the English education system.

If we want to stop profiteering in education then campaigning for more effective regulation may be the key. Strict protocols and levels of service may well discourage the more voracious of the carpet-baggers .

Rosie Fergusson's picture
Sun, 22/09/2013 - 13:18

Perhaps the Government should have followed the water board model and privatised the Local Authorities and then regulated with the same rigour as OFWAT has with water companies to ensure client service before profit..


agov's picture
Mon, 23/09/2013 - 08:41

That's one view of water companies, Rosie.

Here's a very different one -

http://www.eureferendum.com/blogview.aspx?blogno=84231

Rosie Fergusson's picture
Mon, 23/09/2013 - 09:42

Thanks for the link agov ..it's quite disturbing.

By disturbing i mean that Nick Cohen and co can so convincingly disguise ill-informed rhetoric as concrete and valid. I can only assume he has an agenda to distract adverse attention from the power companies ( as well as have a morgage to pay ..... after all who would run an article celebrating the combination of privatisation and regulation that the water companies actually represent?)

So 1000 incidents in 9 years....so thats 50 per water company or just over 9 incidents per water company per year or 1 incident per annum for every half million population. Note that Mr Cohen doesn't quantify these incidents in terms of severity.....it could be one privy illegally connected to a storm water drain thats running into the harbour but that would be an "incident".

Mr Cohens use of "information obtained under the freedom of information act" is also an effective way of suggesting subterfuge when in fact pollution incidents are a performance indicator freely available .

Water bills may have risen by £139 since 2005 ( i.e 8 years) but compare this to the rise in other utilities and don't forget the water companies face the same rises in power costs for their plant that domestic consumers face. Add "only" to the sentence i.e " Water bills have only risen by £139 sine 2005" and you can have a more valid statement .

When water boards existed the design regulations stated new sewer systems could only allow overflow to watercourses on a 1 in 5 year storm. However there were ineffectual drivers to stop the frequent pollution incidents that already existed from the undercapacity systems .

Under strict regulation after privatisation the design standard is 1 in 20 years not just for new sewers but also performance standards for existing sewers. If Nick Cohen were to compare the pollution incidents pre privatisation the huge improvements achieved by effective regualtion would be evident. The same strict standards exist for water supply.

agov's picture
Tue, 24/09/2013 - 07:50

Yes, well that's quite clever Rosie but the blog linked to was mainly about prices and profits.

The Cohen piece was itself comment on an article -

http://www.theguardian.com/environment/2013/aug/03/water-companies-pollu...

where we learn

"The revelations have raised concern that the financial penalties are far too low to change the behaviour of an industry that generates billions of pounds in profits and shareholder dividends. The charge is backed by the Sentencing Council for England and Wales, which is proposing major hikes in penalties."

The blog itself linked to a report -

http://centreforum.org/assets/pubs/money-down-the-drain.pdf

which states

"The level of corporate borrowing is becoming unsustainable."

and

"profits, which are funded out of consumer bills, have not been spent on improving customer service or for investing in infrastructure but have been transferred straight to shareholders who have seen extraordinary returns on their investment"

Ofwat now seems to share such concerns -

http://www.telegraph.co.uk/finance/newsbysector/utilities/10109140/Water...

We will have to see what next year's price review brings.

Meanwhile, as with edu-businesses, the Cayman Islands get in on the act -

http://www.eureferendum.com/blogview.aspx?blogno=84022


But if you want to compare water to power companies you could try this one -

http://www.eureferendum.com/blogview.aspx?blogno=83839

"a study commissioned by the trade union Unison which finds that almost a third of an average water bill – more than £100 a year – goes on profit, compared with nine percent in the energy sector"

Rosie Fergusson's picture
Mon, 30/09/2013 - 18:28

re your quote “profits, which are funded out of consumer bills, have not been spent on improving customer service or for investing in infrastructure but have been transferred straight to shareholders "

This is profit AFTER OFWAT have audited the investment they require to be spent on improving customer service.i.e it is not profit whilst allowing degradation to customer service . Surely this just shows how effective regulation drives efficiency .

There is an agenda for attention to be diverted away from power companies .

agov's picture
Sun, 06/10/2013 - 06:39

Or, it shows how ineffective regulation of monopolistic private control of water allows the private owners to extract lots of money from their captive customers.

There should however be lots of attention given to power companies especially on how they are forced to collect huge taxes to support crazy government schemes to bankrupt the nation pandering to unworkable greenoid windmill fantasies.

Janet Downs's picture
Thu, 03/10/2013 - 13:17

Can't say we've not been warned:

"If the rules [about for-profit] aren’t changed, some companies – Edison, probably – will still enter the sector with a view to operating “free schools” under contract, and they might help parent groups set them up on the understanding that these groups will then award them the contracts..." In other words, these companies would use free school trustees as "vehicles" by which the for-profit firm could make a profit.

"If they included a commitment in their [2010] manifesto to allow private companies to own and operate they would be vulnerable to the charge that they intend to “privatise” state education...Yet the present Conservative leadership clearly believe this is the way forward and my hunch is that if they win a second term [in 2015] they’ll push the reform through."

Toby Young, 7 January 2010

http://blogs.telegraph.co.uk/news/tobyyoung/100021581/the-difficulties-o...

This seems to confirm Henry's analysis: Vote Tory if you want schools run for profit.

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