THE SMELL of boiled cabbage may have been replaced by that of chips, but the unappetising reality of school food lingers on.

Menus may be more imaginative, and there is wider choice, but many cooks struggle with under-investment. To overcome this, more schools are turning to the private sector - and with surprisingly positive results.

The average amount children spend on a school meal rose from pound;1.16 in 1996 to pound;1.28 in 1998. As children get older they spend more - 15 and 16-year-olds spend pound;1.35. The figures, taken from a survey by catering company Gardner Merchant, demonstrate the tight margins providers face. But there is lots of room for expansion: 41 per cent of children never eat school meals. Queues, crowding, poor choice and inadequate portions are cited as factors that deter them.

The food itself is not the problem: 81 per cent of children said they liked school meals and the figure was the same whether they were paying or not.

Gardner Merchant’s answer to the poor image of the school canteen has been to launch “energy download zones”, where bright colours and imaginative design combine with a fast-food format and wider choice.

At All Hallows Catholic school in Farnham, Surrey, the new headteacher, Elizabeth Lutzeier, is enthusiastic about the restaurant’s makeover.

“It’s now got lovely zingy colours - all the kids love it,” said Ms Lutzeier.

Certainly the approach seems to work, with Gardner Merchant reporting turnover on the new-style sites up 18 per cent.

In Lewisham, south-east London, Chartwells recently signed a private finance deal to take over the authority’s entire catering operation - 67 council kitchens and serving areas. The company will be catering for 97 schools, nurseries and early-years centres, seven day-care centres, meals on wheels and staff catering outlets. It is investing pound;4.2 million in improvements.

“Without this deal,” said Jim Mallory, the council leader, “we would not have the money to make these substantial improvements to our catering service.”

Chartwells’ managing director, Mike Sparrow, argues that local authorities have nothing to fear from private contractors. “There’s an increasing understanding that what is good for the authorities, is actually good for us as well.”

Many people have an inaccurate view of how a private contractor operates, he says, the assumption being that companies will come in and try to make a profit by slashing costs and overheads.

“If you squeeze costs continually,” says Mr Sparrow, “you eventually enter a cycle of contraction because the quality of the product you are offering will be inferior. Consumers recognise that and begin voting with their feet.”

He argues that the way to make money from school meals is to pull in more customers. “We make a commercial margin by growing the volume. The way to do that is by having satisfied consumers and satisfied clients.”

In the North-east, that policy is working. Pauline Ramshaw, who chairs Durham’s county school governors’ association and is the administration officer at Shotton Colliery primary school, says: “Our school has virtually 100 per cent take-up of school meals. We have 399 pupils on the roll, only eight go home and none has packed lunches.”

Chartwells is also keen to see schools’ meals facilities used by outsiders.

“Invariably our desire is diversification,” says Mr Sparrow. “In Lewisham, for example, our contract is not just for education outlets. Local authorities are looking for the potential benefits of economies of scale from combining services.”

The market for school meals is huge, with pound;800m of business, 85 per cent of which is still in local authority hands.

Chartwells has about 30 per cent of the existing privatised business. “We operate in 1,250 schools,” says Mr Sparrow. “That’s pound;35m turnover this year, a growth from pound;14m two years ago.”

And that growth is likely to continue as Fair Funding proposals force local authorities to open up to the contractors.

Chartwells is a division of the international Compass Group. Enquiries to 0181 741 1541. Other companies offering catering services to schools include: Castle View 0171 622 6218; Gardner Merchant, 01793 512112; Initial Catering Services, 01344 300444