Federation plans first privatised college

6th April 2012 at 01:00
Barnfield College is seeking private equity investment

Barnfield College, which has pioneered FE sponsorship of academies and free schools, is planning another first by entering talks with private equity backers about plans to form the first privatised college.

It is the latest bold move from the Luton college, which now sits at the heart of a federation of two secondary academies, a primary free school and a studio school that offers vocational courses for 14- to 19-year-olds.

The college's chief executive Pete Birkett said that his vision for expansion included a further three primary academies this year, rising to a total of about 40 schools in the future, as well as a potential chain of private schools.

But the college itself requires investment. With capital from public funds for new buildings scarce, Mr Birkett said he had decided to look at options other than bank loans, and had approached private equity investors.

"My view is that if you need to borrow money to create facilities to provide learning opportunities, you can contact a bank and take (out) a mortgage or you can look at another, better form of borrowing," he said. "People go into the Dragons' Den not just to borrow #163;50,000 - they can get that from the bank. They go for the expertise of the people lending #163;50,000."

The Education Act 2011 allows FE college corporations to dissolve themselves, and to transfer their assets and liabilities to another organisation. However, the corporation's assets may then be used only for charitable educational purposes.

For that reason, Mr Birkett said that the college was considering setting up two new companies. One would hold the college assets, carry out its educational work and attempt to generate surpluses. The other would be an investment vehicle for private equity, able to receive an agreed portion of the surplus, invest in the college and sell management services.

Unions have already set themselves against any privatisation plans - the ATL education union has described them as "the start of a slippery slope to giving the interests of shareholders priority over the interests of learners". It said it feared that privatised colleges would overlook vulnerable groups such as students of English for speakers of other languages in favour of individuals or companies who can pay fees.

So Mr Birkett also has to win over staff. To that end, part of the surplus could be distributed in a profit-share scheme to teachers and other staff. "It's really about giving them some ownership over the college, as well as accountability and reward," Mr Birkett said.

The college would also have to consult on plans to dissolve the corporation and transfer assets and notify the secretary of state. However, the final decision rests with the governors.

"Colleges have been incorporated for around 20 years," Mr Birkett said. "They've become more businesslike, more entrepreneurial. But they need to step up now." He said colleges got too little value from their premises if they were open just 38 weeks a year. "We need to sweat our assets," he said.

The college is also looking for new sources of income by investigating opportunities to run its own private schools, trading on its track record in improving the performance of the academies that have joined its federation. Asked by The Sunday Times about this plan, education secretary Michael Gove said: "I think Pete would not just give some independent schools a run for their money, he would out-compete them."

Expanding its portfolio of academies and free schools is also aimed at improving the bottom line, as the federation benefits from economies of scale, sharing services and staff. It also defends the college from hostile competition, at a time when an Association of Colleges survey has found that academies with sixth forms are blocking colleges' efforts to recruit students.

Mr Birkett said that he saw a limit on the growth of the federation, however. "There's lots of research that suggests you maximise the educational standards and outcomes and financial benefits up to a turnover of about #163;180 million. That's about 40 academies."


How to privatise a college:

- The college corporation must publish details of its plans, consult on them and take into account the responses.

- Governors must set a date to dissolve the corporation and inform the secretary of state.

- The assets and liabilities of the corporation can transfer to another body or company, as long as the recipient agrees.

- Even if the recipient is not a charity, it can use the assets only for charitable educational purposes.

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