Captains of market forces

28th January 2000 at 00:00
The private-sector assault on state-run schooling is firmly under way. Chris Bunting looks at who will lead the charge to win hearts, minds and contracts.

The Thinkers

James Tooley

IF anybody deserves to be called the high priest of privatised education in Britain, it is James Tooley, a thirty-something Newcastle University professor and director of education and training at the right-wing Institute of Economic Affairs (see below).

Professor Tooley made his name as a critic of the public sector, whose preference for private initiative over state control extends to opposing the national curriculum and the Government's testing regime.

"Absolutely the last thing we should want is a monopoly supplier of educational opportunities, able to indoctrinate and inflict us with its own world view and values, particularly one, like the state, with monopoly coercive power," he argues.

He advocates going "much further than current reforms". And says we should "do away with the state regulation of the curriculum and teaching force, away with state provision of schooling".

He recently became chairman of the Education Partnership, one of the firms competing to take a piece of the privatised school sector, and is working up to three weeks a month as an education consultant to the World Bank.

He has argued for the school leaving age to be dropped to 14 and has also advised companies to use IQ tests, rather than A-levels or GCSEs, when recruiting.

The Institute of Economic Affairs

THE bad news for the opponents of privatisation is that there are plenty more where Professor Tooley came from.

Founded in 1955 by Antony Fisher, the businessman behind Britain's first large-scale broiler-chicken farm, the free market think-tank went on to develop many of the key ideas of Thatcherism. In recent years it has done a lot of work on education.

While Professor Tooley has grabbed the headlines, researchers such as Dick Atkinson, Thomas Lange and Dennis O'Keefe have fleshed out a critique of state intervention in education. The institute has urged ministers to think the unthinkable - abolish local education authorities and slow down the expansion of state higher education. It has also publicised private-sector approaches to school improvement across the world.

Social Market Foundation

ESTABLISHED in 1992, with help from Lord Sainsbury, the foundation's main focus has been on making state welfare work better through increased competition and choice. Although less purist in its free-market thoughts than the Institute of Economic Affairs (its founders were leading lights in the now-defunct Social Democratic Party) some of its suggestions in education have been radical and influential.

An article by the historian and Tory peer Robert Skidelsky in 1996 advocating education enterprise zones was taken up in the Blair Government's public-private education action zone partnerships.

But a follow-up paper warned that the policy was being hi-jacked by local authorities determined to undermine its original aim: ushering in a new generation of schools run at arm's length from central and local government, managed by the private and voluntary sectors and with freedom to depart from the national curriculum.

To get the policy back on track, the foundation recommended that the Government should allow private firms to take over the management of individual schools within zones.

Public Spending, a book by foundation council member and BBC journalist Evan Davis, said the state could continue to use taxes to pay for education. But it should put private companies, or public-sector organisations run like them, in charge of delivering the services.

The Doers

Nord Anglia

FORMER English teacher and Britain's first education multi-millionaire Kevin McNeany, is nothing if not ambitious. No surprise then that his company Nord Anglia's mission is to be "the pre-eminent independent provider of education products and services to governments, institutions, businesses and individuals in the UK and worldwide".

That global objective may be some way off but Nord Anglia already has good claim to be top of the tree in England. With a turnover of pound;62 million last year, it is the largest of the education specialists bidding for the new privatisation contracts.

In December, Nord Anglia announced a 9.8 per cent rise in pre-tax profits to pound;2.78m. Although it has irons in other fires - notably language schools and Office for Standards in Education inspections - Mr McNeany sees education services as a key growth market. (He estimates the sector will be worth between pound;8m and pound;20m next year).

The surprise success of relative minnow Cambridge Education Associates in the bidding to run Islington's education services means that his company will be relying largely on its contract to run key services in Hackney to establish its credentials.

Mr McNeany confided to a conference of education managers in September that Nord Anglia had not yet made a penny from the state sector, but assured them that it would, though it was "unlikely to be huge". How did it intend to do it? "That's for me to know and you to find out," Mr McNeany said.

Centre for British Teachers

A FORMER director of the charities Voluntary Service Overseas and Shelter, Neil McIntosh heads the not-for-profit trust, the Centre for British Teachers.

The Reading-based consultancy runs a string of services in areas such as teacher recruitment, teacher training, careers services and OFSTED inspections that make it one of the bigger fish in the private education pond (about pound;50m turnover this year). It has recently been moving aggressively into education management.

The company has been heavily involved in running an education action zone in Lambeth, south London, and got an early lead by winning the contract to help turn around Hackney's Rams Episcopal school in 1998.

Its experience at Rams Episcopal revealed the difficulties of private-public partnership. It says specific recommendations about changing the staff at the school were ignored by the local authority and school governors. When its contract ended, the school was still on special measures.

Perhaps chastened by this, it has since adopted a selective approach to privatisation contracts. It did not apply to run Hackney's education services and submitted a bid for Kings' Manor school in Surrey that contradicted the authority's requirements. The failure of a serious bid in Islington capped off a quiet year for the company.

However, with the experienced and well-connected Mr McIntosh at the reins it would be premature to bet against the firm.

Cambridge Education


AN OUTSIDER in the bidding to take over Islington's school services, Cambridge Education Associates nipped in at the last to take the prize from bigger rivals Nord Anglia and the CfBT. The pound;86.6m (over seven years) deal - the biggest privatisation of state school services so far - is expected to more than triple the private company's turnover.

Founded in 1987 by former Cambridgeshire deputy chief education officer Brian Oakley-Smith, the firm started out as a consultant on local management of schools (which had been pioneered in Cambridgeshire).

It later moved into OFSTED inspections, becoming the largest contractor in the field, a staple of most of the successful privatisation bidders. Its consultancy and training arm expanded into headteacher and inspector training, curriculum development, strategic and financial management and the implementation of monitoring and appraisal systems.

Having finalised the Islington deal this month (including a profit cap of pound;600,000 a year and large penalties if it fails to perform), the company says it will not be in the market for another privatisation contract until it has digested its catch. If everything goes well in north London, it is likely to be a major player in privatised education for years to come.

Other players

CEA, Nord Anglia and CfBT may have captured most of the headlines this year but investors should be warned that the private education industry is in transition.

The Government is committed to expanding the supply of consultants by encouraging more companies into the market (one reason given by Nord Anglia's Kevin McNeany for CEA's victory in Islington last year). Today's big fish may be swimming for their lives tomorrow.

Other names to conjure with are the international accountancy firm Arthur Andersen, The Education Partnership, Capita, Windsor and Co, and the CEM consortium. All of these companies are on the approved government list to tender for local authority services. The list also has non-private-sector partners including the local education authorities of Birmingham (with Arthur Andersen), Essex (with Windsor and Co), and Hampshire.

A separate list includes the six companies approved to go into struggling local authorities and analyse their needs. They are charged with writing the job description for the service contractors - a vital role. On the list are KPMG, Lorien, Capita, The Office of Public Management, PriceWaterhouseCoopers and the partnership of Arthur Andersen and Birmingham LEA.

The Do-gooder

Peter Lampl

PETER LAMPL is the prime example of a new and influential beast: the multi-millionaire education philanthropist. Donations to schools have multiplied since the late Eighties when Margaret Thatcher's government introduced city technology colleges - giving business the chance to fund new schools and influence the way they operated.

There are now 365 specialist schools, which are the successors of the original CTCs, and funding the state system seems to be increasingly popular among the very rich.

Sir Stanley Kalms, chairman of the Dixons Group, Peter Vardy, chairman of Reg Vardy plc, Lord Harris, chairman of CarpetRight plc, publisher Lord Hamlyn, and retailer Lord Sainsbury are all prominent givers. But Mr Lampl, who made his fortune in investment, has set the pace in recent years.

His summer camps giving under-privileged youngsters a taste of top universities have provided the model for copy-cat government schemes and a flagship scheme to fund poor pupils at a private school, which is putting a sledgehammer through traditional independent-state divisions.

Mr Lampl will be paying up to pound;850,000 a year to ensure that The Belvedere School in Liverpool has a 100 per cent "needs-blind" admissions policy. All pupils in the school will be selected on merit (unlike the Assisted Places Scheme and the old direct-grant schools programme) with those unable to pay the fees getting Lampl money.

The Americans

Benno Schmidt

PIONEERING experiments in America with private-sector management of state schools have provided much of the inspiration for UK interest in the idea.

And, as the public face of America's biggest school-management company, Benno Schmidt has been taking the role of spreading the private-sector gospel very seriously indeed.

Dr Schmidt, chairman of Edison Schools and a former president of Yale University, has made a number of visits to the UK to convince politicians of the merits of private-sector managment. While his company has put plans to expand here on the back-burner following a stock market flotation, he has said he ultimately wants to run up to 50 British schools.

Dr Schmidt, whose company runs 79 schools with 38,000 students across the US, told MPs during a recent visit that he could reduce class sizes and give each pupil a laptop at no extra cost to the taxpayer.

He is fond of claiming that schools are "the last of the cottage industries", arguing they need the research and development power of big business behind them.

Apart from private investment, Edison takes funding from American local authorities, gleaning its profits from the money (up to one-third of the total budget) usually retained by the authorities to manage schools.

The company quotes encouraging results. In 1998, its schools were boasting an average pupil-teacher ratio of 18:1, well below the national average, and in 80 per cent of its schools performance was better than average.

However, internal documents released by Edison before its stock market flotation last summer acknowledged: "We have not yet demonstrated that public schools can be profitably managed by private companies and we are not certain when we will become profitable, if at all."

Alan Kreuger

IF Edison and Dr Schmidt are stimulating unprecedented interest among our policy-makers, then the other side of America's publicprivate debate may also be worth listening to.

Alan Kreuger, former chief economist at the US Department of Labor and professor of economics at Princeton, has visited the UK to attack what he claims are distortions from the privatisers. "The argument goes that US schools are crummy and we should scrap them. I think that's dead wrong," he says.

"What's the evidence? They say test scores are no good - but they have gone up for the majority of students. They say schools don't take inputs and turn them into targets. But look at Tennessee." The Tennessee project in the 1980s saw markedly higher results when state-school kindergarten children were put into smaller classes.

"To alter the institutional structure of US schools radically without sufficient evidence that the reforms would be successful is to put our children at risk," he warns.

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