Academies feel the credit crunch bite as first sponsor pulls out
As the financial system teeters on the brink of failure, the Government has decided only one course of action will save the day - greater involvement of the state.
But for the past 10 years, education has been told a very different story. Where ministers have seen failure in schools, they have seen an opportunity for the state to retreat. In its place, the academies programme has lured big corporations, wealthy individuals and a host of charities to run schools.
But as the credit crunch bites, how many of these investors will have the resources to put into academies? Will the Government struggle to hit its academy targets as potential sponsors, including private schools, devote more time to their own bottom lines?
As uncovered in last week's TES, Amey, the support services provider, is already in talks to end its sponsorship of Unity City Academy in Middlesbrough. If it goes ahead, it will be the first time a sponsor has pulled out of a school.
The company insists that it is not financial pressure that has prompted the desire to sever its ties. Its Pounds 2 million contribution to the school was paid up front, along with a commitment that senior managers would devote time to the school's board of governors.
But according to Martin Weale, director of the National Institute of Economic and Social Research, the economic collapse, and the Government's standing in the polls, means more academy sponsors will abandon the programme.
"Businesses are very worried at the moment," he said. "They are likely to think, why do we want to be involved with this?
"It demonstrates a weakness of the policy that the Government has been relying on partnerships with businesses in this ill-defined way.
"Once you have a government getting near the end of its natural life, combined with the economic crisis, even if businesses could afford to invest in schools, what is the incentive to do so?"
As the academies scheme has developed, the focus has moved from lone philanthropists sponsoring one or two schools to organisations capable of running whole chains.
The charity Absolute Return for Kids (Ark) has already opened six, with another three planned. Founded by Arpad Busson, a hedge-fund millionaire, it is bankrolled by other wealthy individuals from the industry, which is likely to be hit hard by the financial meltdown.
Lesley Smith, a spokeswoman for the group, said all nine schools currently open or planned are fully funded. But she concedes that Ark's ambition to have 12 schools by 2012, and up to 15 after that, could be hit by the economic crisis. "Over the long term, as with any major charity, it is hard to say what the impact will be," she said. "Some of our donors will be in different circumstances."
Lucy Heller, Ark Schools' managing director, insisted that it was "business as usual", with donors committed to the charity despite the economic woes.
Academy sponsors are usually required to invest Pounds 2m in the first academy they back, dropping to a one-off payment of Pounds 1.5m for subsequent schools.
Once they are up and running, the schools are funded directly by government and should not need the sponsor to make any ongoing financial contributions.
In Ark's case, the charity funds music sessions and other extended school activities, but it says these are not started unless funding is in place to secure them long term. This means that pupils in Ark schools that are already open should not lose out, no matter what depths the economy plumbs.
In a bid to attract more private schools and universities into the programme, the Pounds 2m fee was dropped for educational sponsors.
Lord Adonis, the former schools minister who left the Department for Children, Schools and Families last week, enjoyed considerable success in cajoling independent schools into backing academies, telling them that the state sector needed their educational "DNA".
Elite schools, including Wellington and Dulwich colleges, are now sponsors, with others, including Cheltenham Ladies' College, also lending their educational expertise.
But smaller schools, which might have liked to get on-board before the financial crisis struck, will now be forced to think again.
Jonathan Cook, general secretary of the Independent Schools Bursars' Association, said it was "inevitable" that private schools would be scrutinising their costs and reassessing plans to get involved.
"Although there are no direct costs in backing an academy, there are hidden costs and opportunity costs," he said. "It will inevitably be harder for schools to commit.
"I don't think academy sponsorship will spread much further throughout the sector. There is a finite capacity, and the problems in the economy will mean we reach that limit more quickly."
Teachers' leaders have also been critical in the wake of Amey's proposed pull-out. Mary Bousted, general secretary of the Association of Teachers and Lecturers, questioned whether local authorities would be expected to run abandoned schools.
"In addition, many academies are sponsored by charities, which have been similarly hit by the current economic crisis," she said. "This highlights many of our fears about the entire academy programme."
But not everyone is as pessimistic about continuing to attract sponsors. Dane Halling, a financial expert with Arcturus Investments, describes the current turmoil as "carnage". But he says that big corporations, such as KPMG, which is due to open an academy next September, will not be concerned about a relatively small Pounds 2m investment. A spokesman for the company confirmed that it remained committed to its sponsorship.
There are now 130 academies, with ministers predicting a further 184 within the next two years.
Sam Freedman, head of education at right-wing think tank the Policy Exchange, said the Government would struggle to recruit enough sponsors to hit its ambitious targets even if every university in the country agreed to back one.
"I don't see where they are going to get the sponsors from," he said. "They might consider dropping the Pounds 2m fee, but that would incur the wrath of teachers' unions.
"Really it's remarkable that Amey is the first one to want to pull out.
"It's been very steady so far, but the expansion of academies is about to get much more difficult."
A spokesman for the DCSF said their academy plans remained "as ambitious as ever". "The credit crunch has had no discernible impact on academies, though clearly the economic climate is something government takes account of in all aspects of our work."
The loss of Lord Adonis poses as serious a threat to the expansion of academies as the credit crunch, one sponsor has warned.
Backers of the schools need strong relationships with the Government, which are in jeopardy following Lord Adonis's move to the Department for Transport, he said.
"Andrew Adonis spent years building those relationships, pulling sponsors in. The Government now has to rebuild all that. Without him, it is going to be difficult," he said.
The Conservatives have claimed that Lord Adonis was ousted by Ed Balls, Schools Secretary. But Mr Balls insisted this week that he had tried to get Lord Adonis to stay.
The financial crisis is fuelling a boom in applications to grammar schools as parents retreat from paying school fees, according to an editor of The Good Schools Guide.
"The credit crunch is definitely having an effect. People are not prepared to commit to school fees for 10 years," said Sue Fieldman.
Wallington County Grammar in Surrey had to call in the police when it was swamped with around 1,500 children wanting to take entrance tests for 120 places.
Tina Marden, the school's admissions manager, said parents were looking for better education on a budget because of the economic situation.