How low can fees go?

27th May 2005 at 01:00
Aggressive new operators are starting a price war in the genteel independent sector. But what can parents expect from budget schools that charge just Pounds 1,000 a term? Graeme Paton reports

Eight years since the start of Tony Blair's drive to improve state schools, parents are still casting an envious eye over private education.

According to a MORI poll last year, half of all families would educate their sons and daughters privately if they had the money. Even one in four state school teachers, responding to a TES survey in March, admit they would go private if they could afford it.

So it does not take a genius to work out that there could be an untapped market out there. Thousands of parents may be willing to switch to the private sector if the price is right.

Step forward a new breed of profit-making private schools, all with the same aim: to provide a cut-price independent education without compromising on the sort of quality parents expect. But, with average private-school fees now pound;7,668, just how easy will it be to do that?

Cognita, the company chaired by Chris Woodhead, the former chief inspector, broke into the sector last year pledging to establish a chain of affordable schools based on traditional values. Now with 25 schools, it is the biggest profit-making owner of private education in the UK. But the company, backed by a pound;487 million private equity fund, is quick to admit its schools are far from "cut-price".

Addressing an independent schools conference at Brighton College earlier this month, Professor Woodhead said: "If by cut-price we mean pound;6,000, Pounds 5,000 or less, then I do not think it will happen. I don't think it is possible to provide a quality education for less than pound;6,000."

But Sunny Varkey, the Dubai-based millionaire behind Global Educational Management Systems (Gems), reputedly the world's biggest owner of private schools, disagrees. His aim, in the next five years, is to manage 200 schools in the UK - a mixture of so-called premium, mid-market and budget schools. Some of these, he says, will eventually have fees as low as pound;3,000.

Yet, for all Sunny Varkey's rhetoric, he, too, is a long way off realising his dream of genuinely cut-price education. In Gems' current portfolio of 14 schools, only a handful of its preparatory schools charge less than Pounds 5,000 a year; its most expensive school, Sherfield, in Hampshire, charges almost pound;10,000. Fees at these schools will have to drop considerably to tempt a new swathe of children from the state sector.

In fact, many commentators are sceptical that fees can ever be brought low enough to prompt a mass switch to private education.

A TES survey last year showed just how much fees will have to fall to attract parents who are at present paying nothing for their chilren's state education. Of those parents in England who said they would be willing to switch from the state sector, 37 per cent said they would only do it if the fees were a seemingly unattainable pound;400 a year or less; a further 30 per cent said they would be willing to pay pound;800; 16 per cent said pound;2,000; 6 per cent would go up to pound;4,000; but only 4 per cent would pay pound;5,000 a year.

That is not to say that costs cannot be cut. Some private schools already charge well below the pound;7,200 average fee.

Tim Baines, a partner at accountants Horwath Clark Whitehill, said in a report this month that it was possible to educate a child for less outside the state sector. At the moment, he says, the Government spends an average of Pounds 4,313 a year on every schoolchild, but (as well as paying for local education authorities and quangos such as Ofsted and the Teacher Training Agency) the charge only allows for an average of 19 pupils to every teacher.

In private schools, parents pay around pound;3,000 more a year (an extra 70 per cent) but get roughly twice as many teachers, meaning fewer than 10 children in the average classroom.

"About 75 per cent of direct costs in a day school are teaching staff," said Mr Baines. "My question is then, what would the independent school cost per pupil be if your schools were reorganised with half the teachers, to give an average pupil:teacher ratio of 19 to one, rather than 10 to one? Considerably less of course."

So it seems there is the stark choice for Sunny Varkey and the cut-price market: keep staff levels and fees as they are, or slash the number of staff, allowing fees to drop substantially.

Mr Varkey argues there are other ways to cut costs. One of the key ways of doing this, he says, will be centralising administration and sharing curriculum plans for a group of schools.

It is an idea other profit-making businesses are already trying to exploit.

The VT Group, which runs support services for local education authorities, this month touted the possibility of providing services for groups of private schools.

Fergal Roche, the former headteacher of Gems' Bury Lawn school in Milton Keynes, and now VT's business development director, told the Brighton college conference: "The idea I have got in my head is to try to federate a number of schools without any takeover or mergers. Creating a hub of schools and providing for them the range of services which can so often be such a drain on a school budget. It will allow schools to reduce overall costs, which could then allow them to put their fees down or increase the amount they spend on teachers."

But, among more established private schools, there is deep suspicion that this tactic alone will ever be enough to reduce fees to the extent Mr Varkey claims.

Geoff Lucas, secretary of the Headmasters' and Headmistresses' Conference, which represents 240 of the UK's leading private schools, including Eton and Harrow, said: "There is a degree of scepticism in the sector and that is because, whatever you say about attempting to make savings elsewhere in the budget, the biggest cost to any school is the salaries bill. They could not maintain that nine-to-one or ten-to-one pupil:teacher ratio that you currently get in the independent sector if they reduced fees by such an extent."

In Dubai, the Gems model is already well established. There, fees range from almost pound;10,000 for the top schools to around pound;1,000 at the other end of the market, and parents certainly get what they pay for.

At the bottom of the range, is the Westminster school, which is high on academic achievement but low on facilities. Most classrooms are amazingly basic, with rows of simple desks lined up facing the blackboard.

Pupil:teacher ratios are high and children are certainly not given much individual attention.

Unlike at other Gems schools in the Gulf state, there is no swimming pool, walls are bare and, when The TES toured the school earlier this year, two or three children surrounded every computer screen. It would be easy to provide cut-price schools if Gems were to adopt the same budget-stretching principles here.

The Centre for British Teachers, an educational charity, runs a similar school in Kent. St Andrew's, which takes children up to the age of 11, operates on around pound;1,000 a term, but does so using only the "bare essentials", according to CfBT chief executive Neil McIntosh. The school even rents its playing fields.

"It is possible to do," he said. "To a large extent costs are not dictated by the educational essentials, they are more to do with luxuries. You can reduce staff and spend less on the quality of your buildings, but it is difficult to run a school like that."

Is that really what parents expect from a private education? And will families actually be willing to pay for less than they can get for their child at the local comprehensive?

These questions are made all the more complicated in the present climate where parents are encouraged to exercise choice in the state system and the expansion of so-called "independent" state schools, such as city academies.

The Independent Schools' Council, in its annual report earlier this month, put it like this: "Fees are the price parents pay for generous staffing as well as constantly updated facilities. Survey evidence consistently shows that parents regard smaller teaching groups and greater individual attention for pupils as one of the principal attractions of independent schools."

Lose the small classes, it seems, and the private sector risks losing its appeal.

Another voice 22

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