Third way or blind alley?

16th March 2001 at 00:00
Private takeovers of education services have had questionable success at huge cost. Warwick Mansell reports on the halting progress of a flagship Blairite policy

Calling in private-sector know-how as a panacea for public-sector failure is a classic tenet of Blairite Third Way orthodoxy. But has it really helped to transform former local-authority services for schools?

Office for Standards in Education inspections of 123 of the 150 English local education authorities have prompted ministers to call for outside intervention in 20. At its most radical, this has meant a wholesale takeover of all education services.

Yet, a TES analysis has found that, with the typical start-up costs of establishing a company to take over schools services approaching pound;1 million, the exercise has proved expensive for the Government and lucrative for management consultants.

Leeds is establishing a private public partnership firm to run its education services. Start-up costs are estimated at pound;740,000. Of this, the taxpayer has paid all but pound;50,000, including pound;608,000 to consultants.

In Southwark, south London, pound;800,000 has been spent preparing a contract with engineering firm WS Atkins for the largest privatisation to date, most again paid by the Government. The partnership is worth pound;141m over five years.

But is the policy working? Ministers insist it is too early to say, but early signs have not been good. The first inspection two years after the private-sector cavalry was sent in to Hackney, north London, criticised contractor Nord Anglia.

The policy faces its biggest test yet next month when inspectors report on Islington, north London. The borough handed over its services to Cambridge Education Associates in an pound;80m, seven-year deal last April. It was the first authority to be privatised almost entirely.

Chris Woodhead, the former chief inspector, whose antipathy to LEAs is no secret, has blamed David Blunkett for blocking Downing Streets more gung-ho approach to private-sector involvement.

But the Education Secretary's caution may also have been prompted by some embarrassments on the way. In particular, in Haringey, north London, he was forced to scrap privatisation plans two months ago because the bids from private contractors were just not good enough. Unfortunately, the council had already allocated pound;350,000 for consultancy and legal fees. In total, it has spent an estimated pound;800,000 responding to the critical inspection report.

The whole idea of LEA privatisations has been given the thumbs-down by the capitalists' bible, The Economist, which concluded the risks for firms were too great and the returns too small.

Benno Schmidt, chief of Edison, which runs schools in the United States came to England but left again because profit margins were too small and employment laws too constraining.

In fact there are much easier ways to make money in education.

Neil McIntosh, chief executive of the Centre for British Teachers, the not-for-profit trust which lost out to CEA for the Islington contract, questioned whether it would bid for any more intervention work. The company has notched up a pound;65m turnover administering the national literacy and numeracy strategies. It also has a share of the pound;40m for introducing teacher appraisals and pay threshold assessments.

Undoubtedly the inspections of LEAs have made education directors' lives more interesting. A bad report often leads to a parting of the ways (with the leaver often moving straight into an education consultancy); a glowing one can turn a CV to gold, with high-fliers such as Ian Harrison (see profile, right) moving over to lucrative jobs in the private sector.

Of course there has been one notable LEA success story. A poor report on Liverpool led to a total reorganisation with a new director. When inspectors returned they said the authority had turned the corner - without any private-sector help.

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