Free schools revolution will fail without profit-making schools

The success of the Government’s school reforms depends on a large increase in the number of good school places. But the free schools programme, as currently constituted, will not be able to deliver this, according to a new report

New research suggests that the only way the Government will be able to meet its targets for new schools and extra school places is by allowing profit-making schools to participate in the free schools programme.

The research into 489 independent profit-making schools in England, which are overwhelmingly non-selective, secular, and concentrated in some of our most wanting metropolitan areas, shows that 41 per cent operate on fees less than or on a par with the national average per-pupil funding in the state maintained sector, but still significantly outperformed the independent sector as a whole in Ofsted inspections between 2007 and 2010.

The Adam Smith Institute has called on the Government to allow profit-making companies to open and run free schools, without the need for a charitable vehicle or trust framework, as required by existing legislation.

Free spirit
The institute endorses the spirit of the free schools programme, but argues that unless the profit motive is introduced, its impact will be limited. Tom Clougherty, executive director of the Institute, says: “The idea behind Michael Gove’s reforms is that if you let independent providers open schools within the state sector, you will hugely increase the supply of good school places. That will create choice and competition, and drive up standards. But unless you allow for-profit companies to enter the market, it is very hard to see where all those new school places are going to come from.”

In 2008, the Conservatives set a target of 3,000 new schools to provide 222,000 extra school places. The state education system as a whole will need to provide 350,000 extra places by 2014. Yet, so far, around 320 applications to open free schools have been made. Just 41 have proceeded to business case stage, and only a handful will open in September 2011. The institute believes that for-profit schools can and should fill that gap.

Profit-Making Free Schools: Unlocking the Potential of England’s Proprietorial Schools Sector, by James Croft, provides the first indepth, empirical analysis of England’s existing for-profit schools. Croft finds that these for-profit schools have significant spare capacity relative to their size – although they only have 15 per cent of the total number of pupils educated in the independent sector, they carry 25 per cent of the sector’s spare capacity. This, coupled with their proven ability to add capacity, suggests that for-profit schools are the ideal solution to the Department for Education’s problems.

Croft adds: “There is no evidence to suggest that trust governance guarantees solid educational outcomes. Nor is there any evidence to suggest that for-profit management compromises standards – in fact, the opposite appears to be true. So why shouldn’t we have profit-making free schools? My research suggests they would provide sorely needed additional capacity and deliver a good education at an affordable price. The government should be welcoming them with open arms.”

The report concludes by proposing that the government remove any requirements relating to corporate or legal structure from the free schools legislation. Schools would no longer have to be run via a charitable vehicle or operate under a trust framework. Public companies, private companies, partnerships and sole traders should all be able to participate in the free schools programme. The report also advocates measures that would make it easier for existing for-profit schools to convert to free school status, and suggests that the government set up a bursary scheme that would allow children eligible for the pupil premium to take advantage of spare capacity in independent schools.

Snapshot
Over the last decade, 200 proprietorial schools experienced a change of ownership, comprising 9 per cent new school openings and 32 per cent in takeovers.

While the impact of the larger chains has been particularly marked, so too has the contribution of little-known aspirant chains of between three and five schools, and that of incorporated business interests generally. A number of overseas-based chains, with the capacity to do much more, have gained a foothold in the English market over the decade, while nursery-based chains have led the way in expanding their provision into the statutory age. Expansion up, or down, a stage of education from the initial competency is not limited to nursery-based providers.

Fully 84 per cent of proprietorial schools overall have expanded their provision either up or down a stage from their initial competency. Notably, of the 72 per cent of schools that are essentially preparatory, 80 per cent of these also make provision for early years. As such, these schools offer spare capacity and the potential to expand where demand is strongest.

Profit-Making Free Schools: Unlocking the Potential of England’s Proprietorial Schools Sector is published by the Adam Smith Institute A PDF is available to download free of charge at http://tiny.cc/j4h1v.

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