Profit-Making State Schools, Why this is a terrible idea (part 2)

In profit warning part I ( ) I argued that neoliberal pressure to allow schools to make profits were absolutely nothing to do with raising standards or improving outcomes for students. The motivation behind allowing companies to cream off profits from running state education is purely about profit and the enrichment of the elite who will own the largest stakes in these companies.  If profit making companies are allowed to run schools, then standards will actually drop as they have done in the liberalised markets for energy and rail.  Nor will the tax-payer make any savings, as the government will fund these schools places at least the same level as non profit-making schools, and pressure from neo-liberals may even create the same kind of distortions we are going to see in the NHS as ministers bend over backwards to create favourable conditions for profit making for private enterprise.

Allowing market forces into education will not work for many reasons.  When people talk of market forces and competition, it is interesting to probe what particular markets they are holding up as successful and vibrant examples of the capitalist genre. One such ‘market’ is food retailing and the domain of the supermarkets. It is true that competition to win the ‘weekly shop’ has led to unprecedented choice and value for Britain’s shoppers. The large supermarkets constantly innovate to get us through their doors, and for those resistant to the might of the big chains, many towns offer alternatives such as traditional markets, organic outlets and so on.  As an example of competition and the profit motive driving up standards, it is hard to argue with food retailing, although the bullying tactics of the large supermarkets in squeezing margins out of their suppliers such as dairy farmers do reveal how even this text-book capitalist template has its negative consequences*.

Schools are not supermarkets; education is not food shopping.  If Tesco was a school, you would get to visit the supermarket as prospective customers on an open day and the manager would show you a powerpoint presentation of the facilities, for this is mostly what happens when parents set out to choose schools. If you liked it, you could put your name down and if successful you would then be allowed to shop there for the next 4, 5 or even 6 years. You’d better hope you made the correct choice, as you would only be shopping there and you wouldn’t be able nip along to another school to take account of a special offer, or a juicy 3 for 2 deal.  You could transfer to another supermarket if they had a spare slot for a customer and you could bear doing all of the paperwork.  This is the fabled ‘choice’ held up by Neo-liberals as the consumer pay off for accepting a privatised alternative to a state service. The choice here though is nothing but a chimera; you can’t shop around, split your shop up to get the best value or stop going to a particular store altogether as you can do with your weekly shop. Once the decision is made, you are captive, and captive customers can do nothing to influence the quality of the service they get.

Profit making schools will probably do many things to ensure that they deliver a healthy profit to shareholders and senior management of the parent company. Firstly, as a school’s main budgetary outlay is staffing, particular the cost of teaching staff, they will seek out the lowest paid teachers (those with little experience), and whenever possible employ unqualified teachers on the lowest wages. Michael Gove’s announcement in July 2012 that unqualified teachers can now work in academies and free schools suddenly makes sense, paving the way for a way for profit making chains to commence the profit-seeking race to the bottom.

Profit making schools in Britain may also look to the Charter Schools of America for handy tips on how to boost the bottom line.  Reports on the Noble Network of Charter Schools in Chicago ( ) reveal how they see parents as nice little earner on the side, and have created a system of ‘disciplinary charges’ to fine parents of students they believe have broken school rules. Some students have racked up hefty fees for their parents for what seems like trivial infringements.  The potential for abuse here is astonishing.  Schools needing some extra cash can simply mete out detentions to students (whether justified or not), and then soak the parents for ‘administration fees’. The ultimate irony is that a student with a poor disciplinary record is far less likely to be offered a place at another school, so the family is trapped into handing cash over.  Schools will also no doubt be tempted to inflate other costs for parents, the school trip could no longer be a cost-neutral exercise, but have a hidden surcharge to boost the coffers, and the uniform could only be bought from the school, again with added margin to rip off the parents and enrich the schools shareholders.

The blind belief in the power of the markets, despite the overwhelming empirical evidence of failure in energy supply, rail transport and so on is a very real form of coercion through which the state forces people to accept a second-rate service simply to increase the wealth of a narrow elite.  Profits created are either the result of cartels (as with energy), or state funded monopolies (rail, and education if that ever comes to pass) being handed tax payers’ money. Nor does the state itself shrink as most free market advocates would wish, as government still has to fund these services through general taxation and have regulatory oversight to correct the most egregious failings of these quasi-markets create.


* This was written before widespread contamination of Beef by Horsemeat was discovered in UK and Irish foods. Rather than modify the blog, I merely ask the reader to reflect on how the failure of the supermarket supply chain impacts the arguments made here about the perfectibility of markets.

This blog was originally published on The Backbencher

Profit-Making State Schools: Why this is a terrible idea. (Part 1)

Gove’s education reforms, in particular his expansion of the academies programme and the launch of free schools, are moving inexorably to the moment where companies will be encouraged to run schools for profit. Gove let slip at the Leveson enquiry that he would be happy to see Free Schools make a profit in the second term of a Conservative administration and Think Tanks such as Policy Exchange have been agitating for quite a while to let providers make a profit from state education. A recent posting on this site  ( called for the ‘profit motive’ to be allowed into education so that the ‘disgraceful situation’ of only 7% of state educated people getting top jobs could be remedied.

Education is now being ‘worked-over’ in a classic neo-liberal pincer movement with the end game being the state allowing companies to take tax-payer money for providing a service, and extract a profit from this.  The first part of the pincer movement is to comprehensively rubbish the existing state run system. Gove has been working hard at this from his time as shadow education secretary to the present day. He frequently cites the International PISA studies and England’s position in them. He relishes statistic showing Britain has plummeted down the league tables for Maths, Science and Literacy like a football pundit commentating on a team’s slide from Premiership dominance to 2nd division obscurity.  The media have followed Gove’s lead and the general perception is created that schools are failing, that students leave with limited literacy, no understanding of science and mathematical skills equal to the average South Korean child at the age of just 6.

How uncomfortable it is, then, when the very same international comparative measures show a different story.  The company Pearson conducted a meta-analysis of the international comparative measures (such as PISA, TIMMS and PIRLS) and found that the UK came 6th in the league table of education systems in the developed world ( The combined school systems of England, Wales and Scotland beat the Netherlands (7), and beat Germany (15), and Sweden, the model for Gove’s free schools did not even figure in the top 20. Finland was the only European country to beat the UK, the other 4 countries were those Asian countries which always do well (Singapore, Hong Kong, South Korea) largely as a result of the extremely high intrinsic value placed upon education culturally.  This composite did merge the English, Scottish, and Welsh systems into one but English schools are the largest proportion, and the Scottish and Welsh performance is very close to the English number.

The conclusion is quite clear, the crisis in education we are constantly being told about is a construct, a convenient fiction, or a downright lie (take your pick). If the advocates of profit-making schools confronted reality, then they would have to admit that, whilst not quite world-beating, the schools in the UK are well above average and better than countries such as Germany so often held up as shining examples of economic prosperity and productivity.  Of course the doom-sayers can always come back and say the measures used in this analysis are not the right ones and they paint a far rosier picture than is really the case, but Gove can’t have his cake here and eat it.  He constantly used PISA scores to denigrate the system and convince people of the need for reform, so he’ll have to swallow it when the same measures show that things are not as bleak as he paints. This is clearly a case of PIRLS before swine.

The second part of the neo-liberal pincer movement is to stress how much more efficient private enterprise would be running state schools. The argument here is that the state is a bloated, slow-moving dinosaur, unable to innovate or act quickly, whereas companies bring new thinking, new methods and can implement these rapidly and effectively. The motivation of a profit to be had at the end of the quarter focuses the company ruthlessly on results and outcomes, and the juicy lure of the bonus gives the organisation a hunger and desire which the dead-hand of the state could never have.

Well if this is the case, and if it is going to apply to schools, then the neo-liberals have some more explaining to do, concerning the liberalisation of the rail network in the UK and the privatisation of energy supply. The bracing winds of the liberalised market were allowed to blow through energy and rail during the 1980s and 1990s, so these are hardly new reforms and have had a lot of time to bed in.  By now, if the logic of the neo-liberals held true, then competition in the energy market should have delivered world-beating service and low prices to UK consumers for electricity and gas and a constant stream of new innovations.  And likewise the rail network in the UK should be one of the most efficient in the developed world delivering great value for the traveller and clean uncrowded trains running exactly to time. The reality is once again very different. The UK energy market is confusing for the domestic consumer with an abundance of tariffs making best value very difficult to assess. In fact the failure of the market to deliver value for the customer has been a source of embarrassment for politicians, most notably David Cameron who promised legislation to force companies to put home-owners on the best possible tariff, but then had to backtrack on this when it turned out to be unworkable ( .  On top of this, the big 6 energy companies are currently being investigated for what looks like a massive and cynical (even criminal), market rigging exercise ( The consumer was promised a competitive market; but neo-liberalism has delivered a cartel.

Rail it seems has done no better from the neo-liberal experiment, UK fares are among the most expensive in Europe (popular commuter routes are sometimes 3x more expensive than comparative German or French routes), trains are crowded and dirty and the tax-payer subsidy for the network is much larger than countries which have retained public ownership of rail. On top of this the bidding process for the renewal of the West Coast Franchise went spectacularly wrong when it was revealed the winning bid had used profit projections for the final years of the franchise which were so exaggerated as to be either the result of gross incompetence or downright lying on the part of the bidders.  Scrapping the bid alone has cost the tax payer over £40M.  All of this profit making seems to come at a cost, a cost largely borne by the tax payer and the customer.

So a simple question should be posed to the profit making school hawks:

What will be different about the contracts and execution of the deals which let private companies run state education to those which have gone so badly wrong in energy and rail? 

And if you have the answer to this question, can you please let the Energy and Climate Change Secretary  and the Transport Secretary know as soon as possible, so they can correct the gross distortion and terrible value for the tax-payer operating in their respective areas.

This blog post originally appeared on the Back Bencher Site .

The limits of the free market, energy and health compared

Meter showing electricity

This blog posting is not about teaching or technology, but sometimes you just need to write about what makes you angry.

When general elections come round, UK politicians start agonising about the public’s lack of engagement with the democratic process and then they begin to blame each other for this mysterious disjunct which has formed between the House of Westminster and the ordinary person in the street.

Well maybe if they weren’t such ideologically-driven, greedy, narrow-minded idiots this wouldn’t happen.  Today Chris Huhne the Energy Secretary, and David Cameron (the Prime Minister) have been making a great play of an energy summit where they have called to account the 6 major energy firms in a bid to save the “hardworking families” of the UK from major increases in fuel prices ( It seems that these companies have been spectacularly successful of late, managing to ratchet up their profits by 733% per customer. You would think in an economy whose recovery, so the Con-Dems say, is going to be built upon private enterprise, that this would be cause for celebration. Surely Huhne and Cameron were meeting them to see what the secret of their success was and how they could share this excellent business knowledge with other sectors of the economy.  But alas it is not the case. Apparently the British consumer does not like being ripped off with high energy prices, particularly when the cartel of the big 6 who supply around 95% of the gas and electricity we use put up prices at the meter when the wholesale price goes up, but never reduce them if they fluctuate downwards. It is a licence to print money; well when I say ‘print money’ I mean this in the old figurative sense of the term, meaning make a pile of cash for doing sod-all. Not the new literal: ‘licence to print money’ meaning, which is where the UK taxpayer prints money and then gives it to the banks so they can rebuild their balances which they blew on greedy speculation in casino style banking games.  But the banks have had a hard time of it lately, and it’s only right that in a free market economy that the tax payer steps in to prevent private entities going out of business.  After all, they were and are, too big to fail.

But back to the energy companies and government’s laughable attempts to try and appear tough on the price rises and on the side of the consumer. To be honest I have an image of Huhne and Cameron feebly tapping on a pensioner’s kitchen window as inside he is bent over the kitchen table (we are back to figurative language here you understand) whilst the energy firms queue up to give the poor old boy a long hard lesson in free market economics.  From outside the window the hapless politicians watch on and cough feebly to draw attention to themselves ‘I say, do you mind taking it a bit easy on that chap, we’ll need him again in 4 years time as a voter; and when we have to bail out RBS again in a few weeks time, I’m afraid he’ll be in for more of the same then too’.

So it appears that even a conservative politician has to admit that free markets are not perfect and companies do not always deliver in the best interests of the consumer, they can put profits before service (SHOCK HORROR). And even a Liberal Democrat who authored a chapter in ‘The Orange Book‘ a liberal paean to the forces of choice, competition and neo-liberal abandon has to follow suit and appear to give the companies some tough words as if the magical self-correcting mechanisms of the free market had somehow been knocked out of kilter when it comes to piping electricity and gas into people’s houses.

In something of an anti-climax, after the summit Huhne urged us all to: switch providers more often, shop around as we would do for a a toaster, pay by direct debit, and to insulate our homes. (Thanks Chris, I never thought of those steps, you are certainly worth every penny of your £134K of tax payer’s money, well done!).  So the responsibility for the energy price debacle mysteriously rebounds upon the consumer who appears, in Huhne’s construction, to be a rather feckless kind of fellow, careless with his money, with leaky roof and windows, and not able to shop around for the best deal.  Well if Chris Huhne can make sense even of my energy bills, let alone the bewildering number of tariffs on the market then he truly is a better man than me. I have switched 5 times in the last 5 years, and never really knew if I got a better deal. What I do know is that the process is time consuming, opaque and the companies appear to conspire to make it as hard as possible for the consumer.  If this is true consumer choice at work, then I’ll bend myself over the kitchen table and take what’s coming to me!

So back to this concept of private companies, competition and the free market. The big idea behind the NHS reforms, so big that it was absent mindedly left out of the Conservative Manifesto is to have private companies provide services for the NHS.  The increased choice and competition, it is argued, will drive up standards and provide better value for money. This is the point at which the person in the street loses it with the politicians. Are these besuited benighted politicians too stupid (or greedy) to see that they are simply creating a similar situation in health that they created in energy (and transport for that matter), and that companies will enter the market looking to make money, solely, entirely, exclusively to make money? Because the lesson of the shitpile excuse for an energy market which are saddled with is that companies do, exactly that, they look to make money to the detriment of any other possible activity. And there will be no doubt be a limited number of providers who will soon build a cartel of pricing and service and hold the NHS to ransom. This is the very opposite of the free-market rhetoric which the politicians use, this is just an excuse to let some people get very rich by cherry picking services which should be in the public sector.  Switching between providers for the GPs who are supposed to ‘commission’ healthcare will be a tough business I imagine (the companies will have better lawyers and wilier contracts than the GPs); and whilst the medical professionals spend their time agonising over these decisions, the patients will be piling up in the waiting rooms wondering when they are going to get seen.

What will the politicians do when a cartel of companies corner the market in cost effective terminal cancer care and their profits soar by 733% per dead patient? Will David Cameron and Andrew Lansley (the vacuous robot in charge of Health) look annoyed and call a summit and gesture idly at some toothless watchdog which they believe will bring these companies in order? Will they take the Huhne approach bouncing responsibility off government, off the company and simply advise the customer to eat his greens, exercise and jolly well not to get cancer in the first place? Probably.

What they should do, the honest thing, the neo-liberal thing,  the thing which will never happen, is visit the company and laud its commercial acumen and make a speech congratulating the highly paid CEO and board of directors (which they will probably be joining in an non-exec capacity in the future) upon how efficiently his company has turned illness and misery into a money-making enterprise.

It’s a good job there is a kitchen table in nearly every household in the UK; we are going to need them.

Image is creative commons, from Flickr, courtesy of JohnWilson1969. Available: Image adapted by author.

Assaulting the Ivory Tower: The HE white paper and the ‘Free Market’
Image licensed through Creative Commons (see end)

The Higher Education White Paper was published on Monday 28th June 2011, and sets out the coalition vision for the reform of universities.  Higher Education policy in England has not had the happiest of times since the Coalition government came to power and the issue of tuition fees and charging structures has created considerable media interest.  Mike Baker provides a useful summary of the key points here so if you have not had time to read the entire paper, or even the chapter by chapter summaries, Mike’s summary is a good place to start.

The White Paper introduces a market  and competition into higher education with universities competing openly for 85,000 places on the open market.  The Neoliberals of the coalition have an answer to just about every ill which they think afflicts a public sector service. The trouble is, the answer is always the same, the answer is always applied without reason to the consequences, and the answer is always the introduction of a market and more competition. The coalition tried it with the NHS and ran into a brick wall of opposition and had to backpedal,  but stand a much better chance of introducing a free market into Higher Education as fewer people care about universities, people don’t die if we get higher education, and the consequences of these proposed reforms are less well understood.

The reasoning that Willetts and the Neoliberals give for the introduction of the free market in Higher Education is that universities are large complex organisations turning over millions of pounds annually, and given that they are not run along the lines of a private business, they must be inefficient and therefore ripe for reform. David Willetts during his media tour to “big up” the white paper even intoned that he thought that ‘universities should see themselves as part of the private sector’.  Now Willetts’s near religious faith in the power of the free market to cure all ills is not in question here, nor is his willfull lack of understanding of the principles of state funding coupled with minimal political interference which have created our genuinely liberal university sector.  What is in question is what these reforms will do to English universities. At the end of the reforms will we have a better university sector than before, and will social mobility be improved as students from poorer backgrounds get the education they deserve.

The White Paper is trying to repair some fundamental flaws in the introduction of the new fees structure and the failure of ministers to spot the serious errors in their plan to allow universities to set their own fees up to a stipulated maximum of £9000.  In particular what the ministers failed to spot was the value/price imperative which meant it was extremely difficult for any universities to charge less than the maximum £9000 for fear of creating the impression that their degrees were second best or bargain basement offering. So most universities are charging at the maximum rate; comfortable no doubt that they can satisfy the Office of Fair Access that they are making reasonable steps to give places to students from poor families.  At the moment that is not particularly hard as the Office of Fair Access is exactly that, an office, and a small one at that with about 3 employees although the white-paper makes recommendations that this is beefed up.  But the OFA has a long way to go before it becomes a fearless guardian of the rights of poor students to social mobility and access to the best university places and given the way in which Private Sector companies run rings around regulators (utilities and banking are two examples), I don’t believe OFA will be anything other than a fig leaf covering the naked scramble for places which universities will have to commit to in order to stay in business.  Now  David Willetts may be reputed as having 2 brains, but it seems that neither of these was powered up when the charging regime was announced to universities, and he failed to spot the rapid emergence of a cartel (albeit a legal one) with universities closing ranks and fixing prices in order to maximise their income.  This created a big headache. Under the new system of loans, the student attends the university and the treasurer pays the university for their tuition and then retrieves the loan from the student once they hit the criteria for repayment (earning more than £21,000).  Because the treasury is effectively lending money to the universities on behalf of the students, the implication of £9000 being the norm is that the treasury has to find quite a lot more cash than they budgeted for.  So that part of the policy backfired in a way which will seem to many the result of a schoolboy error.  The white paper has to pull some radical reforms out of the bag to try and plug this funding gap between what the universities can consume in terms of public money and how much the coalition think the country can afford to give them.

Here are some of my thoughts on the implications of David Willetts’ exhortation to universities that they should see themselves as part of the private rather than the public sector.  The first is that I expect the pay of the Vice-Chancellors and senior management of universities to start heading North with alarming rapidity. VCs will soon cotton onto the fact that they can evoke the rhetoric of the free market and their peers in corporate boardrooms to justify rapid increases in their wages. The increase, they will argue, is commensurate with the responsibility they hold, namely running a large organisation turning over millions of pounds and employing thousands of people; ensuring that they start really hurting the competition and championing the private sector ethos in their organisation. So salaries of £500,000 and more will soon be the norm I imagine. Nor can those of us without those jobs comfort ourselves that failure of the top people will lead to any kind of real consequences. If a VC does run his university into the ground and it goes bust, the most s/he can expect is a few lines of censure in the Times Higher Education Supplement and big bag of cash as consolation. After all if Fred Goodwin could make a significant contribution to a worldwide global financial crisis and walk away with a £16 million pound pension, the VC of Hunstanton University gazing wistfully over the half built international student centre which sucked all of the operating capital out of his establishment can hardly expect anything ‘really bad’ to happen to him.

As the senior management pay inflates rapidly into proper boardroom territory and the pensions and benefits accrue platinum plating, there will be the inevitable move to sweat the assets of the organisation and ensure that nobody else working there really enjoys this cash bonanza, in fact things will get tough for those in the lower floors of the ivory tower very quickly. The primary assets to be sweated here (once land and buildings have been sold off to bolster flagging bottom lines) are the workers in the university (both teaching and non teaching) who are mostly paid low and modest incomes.  They will see private sector tactics employed in order to bring the wage bill down. Casualisation, revision of contracts, and attempts to erode formal union involvement will be used as universities seek ever greater efficiencies to knock costs off their bottom line.

Kim Catcheside in an excellent piece speculates that policy makers do not really have full understanding of what their reforms might mean, and argues that a delicate eco-system is at risk. and I agree. The new private sector style reforms will be owe more to Terry Leahy than Terry Eagleton. Dissenting voices, critical perspectives and the tolerance of eccentricism which thankfully still lives on in some corners of our university system will be rooted out by the zealous application of managerialism and the imperative to have all functions of the university readied for the fight against competitors.  Marketing budgets will rocket as universities vie for the most lucrative 18 year olds.  Who knows, the universities may even start to use the techniques of our privatised utility companies who compete aggressively to sign people up to their services and encourage them to switch their electricity and gas supply over. Maybe soon students will get visits from ‘representatives’ from a nearby university and get asked to transfer to that course during their studies. Maybe some will even be switched without signing anything, turning up to a lecture only to be told that the University of Chorley is no longer their HE provider and they should wait 4 weeks until the paperwork comes through and they can then start attending lectures at the University of the Lune Valley.

There are also implications for research.   Will research in the future be even more geared towards projects which can be commercialised rapidly, will blue skies research fall by the wayside as universities are forced to collaborate more closely with industry? Will it be less of Alan Turing and more of Alan Sugar? Will the demands of the entrepreneur needing to shift some beige boxes to make a quick buck take precedence over the kind of  genuine disinterested intellectual enquiry which gifted humanity the conceptual workings of modern computing and made this blog posting possible.  The simple fact is that some of the work which goes on in universities needs to be protected at all costs. It is important work and blasting the cold wind of the profit and loss account through these highly specialised forms of intellectual activity will not improve things, it will kill them as cold winds kill seedlings.  Genuine innovation and creativie talent will move overseas in search of  a safe haven and world class research will be more and more difficult on these shores.

Peter Wilby writing in The Guardian takes an incisive position on the claims of Ministers that these reforms will deliver a higher quality university system for England and drive up standards to those found, for instance, in the US:

Ministers are open about their ambition to move English universities more towards the American model, and to create an equivalent of the US Ivy League. They believe, as most Britons do, that US higher education is more egalitarian and successful. They are wrong. The most selective US universities admit only 3% of their students from the lowest socioeconomic quartile (mostly African-American), 74% from the highest. As Howard Hotson, an Oxford academic, pointed out in the London Review of Books, the UK does better in international university rankings than the US, once population is taken into account, with four in the top 20 (one per 15.5 million) against America’s 13 (one per 23.9 million) (Peter Wilby, Guardian Article, 29th June, Available here).

Somebody I follow on twitter, tweeted: “Willetts you are a &^*^ing barbarian” as he defended the white paper in an early morning interview Radio 4. In truth Willetts may not be a barbarian, at the recent THES awards I sat two tables across from him and he appeared at ease using a knife, fork and a spoon. But Willetts’ unquestioning belief in the power of the free market has blinded him to what is important about our university system and the results of his reforms, if unchallenged, may deal a hammer blow to English higher education.

Image courtesy of  licensed under Creative Commons..