Profit-Making Free Schools

Profit-Making Free Schools: Unlocking the Potential of England's Proprietorial Schools Sector

Key Points

The need to increase supply

The need for increased supply is indisputable:

1. According to the Department for Education, by the 2014/15 school year, pupil numbers will rise by 8%.
2. An extra 350,000 places will be required to meet this demand.
3. 29% of all schools are currently oversubscribed.

So far, the Free Schools program has not succeeded in meeting this demand:

1. The Conservatives had originally set their sights on 3,000 new schools, which they hoped would expand overall capacity by 222,000 places (15% of provision on today's pupil numbers).
2. There have only been 700 expressions of interest (March 2010) have issued in just 323 actual applications, with only 41 proceeding to business case stage, and a handful set to open in Sept 2011.

Proprietorial schools can fill the gap

Can profit-making schools fill in the gap that charitable schools have failed to fill? Yes.

1. There is excess capacity in the profit-making schools sector, so the urgent need to provide places for children can be met in short time.
2. There are currently 58,000 unfilled places in mainstream independent schools in England. The vast majority of these are in good schools where students achieve higher results.
3. Profit-making schools operating at the lower end of the market (at fees approximately equivalent to the average level of funding in a state-maintained school) perform at least as well as non-profit schools.
4. The profit motive will enourage schools to be established where there is a need, but where parents do not have the free time to engage with the complicated Free Schools application and management procedures.

Does profit harm outcomes?

The chief arguments against profit making free schools is that they commodify education, reducing it to simple targets and league tables, and produce worse educational outcomes than non-profit schools. The evidence does not support this view, suggesting instead that proprietorial schools has played a vital role in Britain’s education system:

1. Proprietorial schools have a long and rich history of providing quality education in the UK.
2. For-profit nursery education currently accounts for 74% of the early years education market.
3. Non-selective independent schools at the lower end of the fees market (where fees are similar to per student expenditure in state schools) perform at least as well in standard league tables and exam results as all independent (including non-profit) schools.
4. In respect of proprietorial schools, the highest concentration of spare capacity lies in some of the most successful schools operating in the most competitive market conditions.

Proprietorial sector overview

The proprietorial system is already strong in England. There are 489 independent mainstream proprietorial schools in England educating pupils at the statutory age, which together provide for 82,528 pupils.

1. 72% of these are ‘preparatory’ (up to 13). 80% of these also provide early years care.
2. The average school size is 205 pupils.
3. 83% are non-selective.
4. 80% are in urban or suburban areas.
5. These schools are mainly secular. Only 1% are ‘confessional’ faith schools.
6. Average fees are c. £7,500. The range goes from £3000 - £15,000 (with one or two exceptions, schools charging £15,000 were boarding or international schools).
7. 41% of schools charged within 10% of the national ‘revenue and capital combined’ average per pupil funding figure of £6240.
8. Pupil composition is socially and ethnically diverse.

The impact of lower fees on outcomes is surprisingly small. Of the 134 schools charging below the the national ‘revenue and capital combined’ average per pupil, Ofsted’s rankings say:

1. 103 schools judged either good or outstanding on the overall quality of their education.
2. 99 judged either good or outstanding for how well the curriculum and other activities meet the range of needs and interests of pupils.
3. 104 judged either good or outstanding for the effectiveness of teaching and assessment.
4. 107 judged either good or outstanding for the progress pupils make in their learning.
5. Almost all were judged good to outstanding for the quality of their provision for pupils' spiritual, moral, social and cultural development, and on the behaviour of pupils.
6. Nine schools were outstanding across the board.

Policy proposals – Unlocking the potential of profit-making free schools

Proprietorial schools have delivered outstanding results where they have managed to operate, and the government should unlock this potential to give more choice to parents, introduce competition to raise standards in schooling, and increase supply to meet growing demand for schools in the coming years.

1. The requirement that Free Schools applicants be charitable vehicles should be lifted.
2. Requirements for Free School conversion applications should be relaxed in order to allow a greater diversity of schools to operate.
3. Proprietorial schools must be allowed to convert to Free Schools without requiring that their proprietors relinquish ownership of their businesses.
4. The sector must be allowed to develop its own best practices without any formalization of these models. Like all businesses, Free Schools should be free to innovate to produce the best outcomes for students.

Whether schools are operated as charities or profit-making businesses is immaterial to parents and students. Most parents simply want to be able to send their children to a good school – choice and competition are the means to achieve that outcome. What matters is outcomes. Allowing profit-making Free Schools to operate can revive the Free Schools momentum, improve outcomes for children, and unlock the potential of the private sector.

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The English school system is not fit for purpose. The government has concluded that the best way to improve standards is to increase supply. This would increase choice and competition between schools, and address the shortages of supply caused by Britain’s rapid population growth over the past decade. The Free Schools project, introduced by the government in 2010, is the main policy by which the government hopes to achieve an increase in supply. The idea behind Free Schools is a good one, but the restrictive nature of the policy has led to disappointing results so far.

Our new report released today, Profit-Making Free Schools: Unlocking the Potential of England's Proprietorial Schools Sector, takes these problems head-on and assesses the gains that would come from opening up the Free Schools programme to profit-making schools. It looks are the challenges facing the government and the excess capacity currently available in the for-profit schools sector.

In a groundbreaking study, it reviews Ofsted and Independent Schools Inspectorate reports of the profit-making schools sector in detail, and determines that these schools deliver results that are equal to or greater than all independent schools. In other words, there is no evidence that profit damages outcomes. Crucially, this holds true even in profit-making schools that charge fees roughly the same as the state's per student education expenditure. The report concludes that the excess capacity in the profit-making schools sector can be unlocked by liberalizing the requirements for Free Schools. This project has the potential to be this government's most lasting legacy, but for this to happen Free Schools must be given exactly that – freedom. [Key points]

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