Ministers plot radical role for private sector

Lucy Ward

A vision of a future where every college facility but teaching could be run by the private sector has been unveiled by the Government.

The radical role envisaged for private enterprise within further education has emerged in the formal extension of the Private Finance Initiative to the sector.

The scheme, designed to bring commercial expertise and cash to FE while taking funding pressure off the Treasury, could ultimately see colleges transformed into "rump" units concentrating on recruitment and teaching of students, while every other service from catering to creches might be owned and operated by private firms.

Such a scenario takes links with the private sector much further than straightforward loans towards the cost of capital projects. A Pounds 650 million "wish list" of 478 schemes put forward by colleges for the launch of PFI reveals that most are seeking finance rather than partnerships at this stage.

The opportunity to hive-off certain functions will be welcomed by some principals relishing the new, entrepreneurial role now expected of them, while others will be less comfortable with the concept.

At a conference to persuade major players in business and finance of the investment opportunities in the sector, Christopher Jonas, a member of the Further Education Funding Council outlined a three-phase "evolutionary process" in which colleges might begin by contracting-out services such as cleaning or catering.

A second phase might see a private company taking full control of the management of a facility such as a creche or sports hall on behalf of a college, while a third would see the organisation not only running but owning that entire process.

"The college is then back to its professional role. The principal and his staff are simply concerned with running the educational process," said Mr Jonas.

But some principals privately admit to strong reservations about handing over many college services to outside agencies. The principal of one large northern FE college said: "There is an argument for outsourcing some services, but I think people outside the sector do not always realise how intimate the connection is between the core business and other services."

He would not consider contracting-out cleaning or security arrangements, which required an understanding of the unique operations of colleges compared with other companies.

Despite having entered a series of bids totalling several million pounds in the PFI register, the same principal expressed strong scepticism at the chances of investors wishing to pump cash into "a low-income community where the return on the money is not going to be significant".

Another said: "When you consider rumours about the finances of many colleges would you really want to hand over your money? I have a high degree of scepticism."

Others are more optimistic over their chances of benefiting from the scheme. Dunstable College, Bedfordshire, has proposed six projects, including the opportunity to run a garden centre in partnership with the college, allowing sale of produce grown by horticultural students. "You can exploit the commercial advantages of PFI with significant educational spin-offs," according to principal David Brown.

The Government, energetically wooing potential investors into FE, is aware it must first overcome the hurdle of general ignorance of the sector. Business people are also being assured that a partnership with a college is not charity under another name - "We are not looking for philanthropy but for hard-headed commercial deals," said FEFC finance director Roger McClure.

Some attending the conference pointed out deals were already underway with colleges - Pounds 100 million has been agreed in loans so far - and questioned whether the PFI process might create sufficient red tape to put off investors.

David Stewart, commercial banking director at TSB, warned the FEFC against applying the same standards to all projects, creating "unnecessary bottlenecks". "Using sledgehammers to crack nuts must be avoided," he said.

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