School profits are doomed

7th September 2001 at 01:00
Harry Brighouse is convinced that we shouldn't be following the US example of privatisation

Publication this week of a new White Paper has focused attention on the issue of private-sector involvement in the state education system. Its contents reveal the Government's intention to allow even successful schools to tender out more of their functions to private contractors. This follows the news that Surrey education authority has handed over one of its schools to a private, for-profit, company, Nord Anglia. In the run-up to the White Paper, we have been treated to a flurry of media reports, one of which looks to the United States, where private involvement in public service delivery is much further developed than here.

Some of the reporting is confused. One BBC report cited the Ford school in Detroit as a precedent for the Nord Anglia case. But the Ford School is sponsored, not run, by Ford and Ford does not profit from its contributions.

Now, before I'm accused of being an old-fashioned absolutist about public services, I should say that in extreme cases where schools are perpetually failing and all known strategies have been tried, I can see no harm in handing them over to private companies, though it would be naive to expect miracles. But as a general policy, increasing involvement of for-profit companies in state schooling will fail.

Education policy is intrinsically political: voters and politicians insist that schools must be democratically accountable. This means that contracts awarded to private companies must be short-term, so that incompetent companies can be sacked. It also means that companies will face an ever-changing regulatory regime. In the free market, companies have to expand and build customers. They are perpetually in competition with each other. Without such competitive pressure there is no reason to expect them to deliver any more effectively than the old-fashioned state sector.

Short-term contracts and constantly changing regulations will be unappealing and there will be few bidders for them.

Short-term contracts have other disadvantages. There is no incentive for the investors to make long-term plans since they have no assurance that they will reap the benefits. The likely outcome of this is that government will be called upon to provide investment and we will end up with either government control under another name or, as with the rail system, government subsidies for shareholders' dividends.

Nor can companies be sure that, even if they retained the contracts, they would be able to profit from them: imagine the public outcry if Nord Anglia announced that it was making pound;1 billion a year in profits from its government contracts with schools.

Education is a highly-skilled labour-intensive business. There are three reasons why governments have traditionally been able to purchase this labour at a very low cost. First, women had few other opportunities than teaching, so were willing to work for low salaries. Second, teachers had a public service ethic that encouraged them to work for less money. Third, teachers were willing to forgo earnings in exchange for job security, or tenure.

The first of these conditions has disappeared but the others would be undermined by the widespread use of for-profit companies. A company with a five-year contract can guarantee its workers their jobs for exactly five years. And a company-employed teacher knows that they are there to create profits for shareholders.

These are all pretty theoretical reasons for opposing the trend. Supporters tell us to look to the US where, they say, privatisation works. But they are wrong. The US is a bad model for us, because the public education system is more expensive, less efficient, and more unjust. The regulatory framework and tax system are also much more business-friendly than in the UK. So successful use of for-profit companies there would not translate to here.

But, more importantly, these companies are not successful at running schools even in the US. The biggest, and most high-profile company involved, Edison Schools, does not expect to break even until 2006. In 1999 it posted losses of $49 million.

Both economic theory and hard evidence count against for-profit companies running schools. Let's hope that the Government is not so wedded to the dogma of privatisation that it wreaks on the education system the havoc its predecessor did on the railways.

Harry Brighouse is professor of philosophy of education at the Institute of Education, University of London

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