Whatever happened to the private take-over of education? Two years ago, as Labour won a second term, all the talk was of Tony Blair using the private sector to sort out failing public services.

This reforming zeal was evident in plans for city academies, the promotion of education action zones and, most of all, privatisation of council services.

Since then, things have changed. True, three academies - state-funded independent schools which often have businesses as sponsors and on the board - have opened, with another 12 due by the end of 2004. But action zones have been dropped and the march towards local education authority privatisation has been halted.

In the latter’s case, the mantra of “private sector good, public sector bad” has been replaced by a more considered approach.

This could be because there are fewer failing authorities. As Joe Hallgarten, of the Institute of Public Policy Research, says: “If the private sector was going to be used to tackle failure, then there is little doubt that the kind of situation seen in Hackney and Islington in the mid-1990s is happening less often.”

Also the threat of private takeover has, says Barry Sheerman, Labour MP and chair of the Commons education select committee, “put the frighteners” on under-performing authorities and acted as a spur to improve. But the main reason why enthusiasm for takeovers has waned is simple: as Mr Sheerman admits, the policy has just not produced the hoped-for spectacular results.

Supporters of privatisation, including the Department for Education and Skills as well as Downing Street advisers, have waited in vain for privatised LEAs to vindicate them. But instead, high-profile failures have hogged the headlines.

* Nord Anglia, the firm given control of Hackney services, was replaced by a not-for-profit trust after it failed to make an impact.

* Cambridge Education Associates who took over Islington has twice been fined a significant percentage of its management fee after failing to hit exam targets.

* Atkins Education is expected to pull out of Southwark less than half-way through a five-year contract to run services in the south London borough.

The companies argue that they have often been set unrealistic targets in areas with some of the most intractable problems.

Meanwhile, public faith in the ability of Education Leeds to improve schools can hardly have been helped by the very public tribulations of chairman Peter Ridsdale, who also formerly chaired ailing Leeds United football club and was blamed by supporters for its decline.

Philip Collins is director of the Social Market Foundation think-tank, which pushed private-sector involvement in education - he is also a Leeds fan.

Despite his dislike of Mr Ridsdale’s impact on his team, Mr Collins credits Education Leeds with successes. However, he admits results elsewhere have been “mixed” and there is not a single unequivocal success story of LEA privatisation.

Improvements may have come about after changes in key staff, he says. This raises the possibility that it might have been enough for ailing LEAs to have recruited better managers. A TES analysis of LEA performance gives further ammunition to critics of privatisation.

Last December, every LEA was rated by the Office for Standards in Education. Of the 9 authorities which had outsourced services, five were rated poor, three unsatisfactory and just one, Leeds, as satisfactory.

This undermines ministers’ assertion that the private sector is “what works”. In fact, despite Tony Blair’s belief that Labour is at its “best when we are boldest”, the less radical approach has been more successful.

In their distrust of the public sector’s ability to reform itself, ministers stopped the Local Government Association (LGA) from throwing its hat into the ring to take over LEAs. The first sign of the folly of this approach came in 1999 when Liverpool was lined up as the next LEA on the chopping block after failing an inspection.

To the astonishment of market cheerleaders and others, it escaped the fate of Hackney et al. With the help of an independent monitoring board, it set about improvement. Eighteen months later, it was given a clean bill of health by inspectors.

In the subsequent three years, “twinning” - where a good authority supports a weak one - gained credibility as an alternative to contracting out.

Private firms began to stress the need for “partnership” with LEAs and have often acted merely as consultants to failing authorities.

Of the 15 authorities twinned or subjected to only light-touch private involvement, 10 were judged by Ofsted to be good improvers. Only two, Leicester and Bristol, were unsatisfactory.

Graham Lane, chair of the LGA, says this reflects the inherent problems in privatising LEAs. “Many problems in these LEAs are caused because education has tended to work in isolation from the rest of the council. If it is then privatised, all this does is separate it further.”

Given this record, it is perhaps not surprising that fewer councils have asked to contract out than the Government had hoped.

Bad publicity, uncertain returns and a “tortuous” contracting process have discouraged more firms from entering the education marketplace and led to complaints of a lack of suppliers. Since the last election, Swindon is the only new authority to be forced to contract out services. Serco’s role in Walsall was extended in November after inspectors noted the encouraging progress made with the school improvement service.

In a clear admission that LEA privatisation is less in favour, Charles Clarke has asked the LGA to help with future twinning and find other ways to support struggling authorities. Private firms may do training or consultancy but the days of large-scale privatisations appear to be over.

Mr Collins said: “I do not think ministers will go back to it (LEA outsourcing) in any serious way.”

But he says the private sector still has a role to play in schools. For example, schools might set up firms to deliver services to their peers, or private firms might set up and run schools themselves. LEAs must by law now consider proposals from the private and voluntary sectors before establishing new secondary schools.

Firms are already building and managing schools through the private finance initiative. Now they hope an expansion of the initiative announced last month could see them take over teaching and learning as well.

“PFI procurement could be extended beyond buildings and maintenance.

Companies could provide support for schools or bid for new schools and provide teaching and learning,” says Kevin McNeany, chairman of Nord Anglia.

The battle for LEAs may be at an end but education’s privatisation war is far from over.

PRIVATE INVOLVEMENT: A POOR RECORD

Poor improvers (no stars)

Hackney

Initial takeover of services by Nord Anglia but firm replaced by

not-for-profit trust

Southwark

Takeover of services by Atkins Education

Swindon

Takeover of services by Tribal

Walsall

Takeover of services by Serco

Waltham Forest

Takeover by EduAction (AmeyNord Anglia)

Most improved (three stars)

Derby

LEA acted on consultants’ (Capita) recommendations

Doncaster

Twinning arrangement with Warwickshire

Gloucestershire

LEA devised post-inspection action plan

Redbridge

Council tackled its own weaknesses

Rochdale

Partnership with Blackburn with Darwen

Rotherham

Partnership with Essex and Windsor and Co

Sheffield

Capita report acted on by LEA itself

South Tyneside

Independent monitoring board

Thurrock

Management support team, including Capita, helped improvements