Free Schools revolution will fail without profit-making schools

 21 April 2011

·  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.

· In-depth 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.

· There are already 489 independent profit-making schools in England, and these are overwhelmingly non-selective, secular, and concentrated in some of our most wanting metropolitan areas.

· 41 percent of these schools 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.    

In a report released today (Thursday 21st) 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.
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, only 323 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 Adam Smith 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 education expert James Croft, provides the first in-depth, empirical analysis of England’s existing for-profit schools. It identifies 489 of them, which – perhaps contrary to expectations – are overwhelmingly non-selective, secular and urban or suburban. Moreover, 41 per cent of these schools operate on fees less than or on a par with the average per-pupil spend in the state sector. Both this subset of inexpensive for-profit schools, and for-profit schools in general, significantly outperformed the independent sector as a whole in Ofsted inspections between 2007 and 2010.
Crucially, Croft also finds that these for-profit schools have significant spare capacity relative to their size – although they only have 15 percent 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 (1), 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.

You can read the full report here. For media enquiries please contact Sally Thompson on 07584 778 207.

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