The Adam Smith Institute argues that Free Schools should be able to exist as profit-making concerns

James Croft is an Adam Smith Institute research fellow and author of its new report, Profit-making free schools, which is published today.

The progress of free school development to date has been disappointing. The Conservatives have rightly identified the need to expand the market as the most promising route to raising educational standards, but lack the necessary conviction in the free market to match their aspirations. In a report published by the Adam Smith Institute today I make the case for an expansion in the private sector’s remit, specifically in respect of the development and delivery of free schools.

The debate about the impact of for-profit management on educational outcomes has thus far focused on the performance of schools run for profit in countries where they are a relatively recent phenomenon.

However, proprietorial (for-profit) independent schools have a long history in England which has been generally overlooked. In their heyday in the nineteenth century, these schools played a crucial role in widening access to education for the emerging middle classes. Today, of 1,849 mainstream independent schools educating pupils at the statutory age, 489 are owned and managed by the proprietors for profit. 83% non-selective, typically secular, with fees at the most accessible end of the spectrum, attracting a high proportion of first-time buyers, 80% located in urban or sub-urban areas, distributed liberally across some of our most wanting metropolitan areas, and socially and ethnically diverse in pupil composition – these schools in many ways already embody the aspiration of what many of the new Free Schools hope one day to become.

The performance of these schools at inspection indicates that the need to make a profit focuses minds on educational outcomes. Proprietorial schools, even those at the lower end of the fee spectrum, inspected by Ofsted 2007-10 significantly outperformed the ‘all independent schools’ group of which they constitute a subset on all key teaching and learning-related criteria. Those inspected by ISI 2006-09 were discovered to have done so on three of the five criteria relating directly to pupils’ education. Clearly, putting quality first is the most important condition for the possibility of a successful proprietorial school business.

Furthermore, the evidence suggests lively and capable interest in the for-profit schools proposition in the English market. There has been a dramatic increase in market activity over the past decade, with a staggering 200 of these schools (of 489) established or changing hands in the period. While the remarkable success of the Cognita and Alpha Plus schools groups has been much publicised, my study reveals that the greater part of that activity (42%) has been down to the efforts of smaller aspirant chains of between 3 and 5 schools and individual school entrepreneurs and partnerships. (In comparison chain acquisitions and start-ups accounted for 39.5%.)

A number of overseas-based chains, with capacity to do much more, have gained a foothold in the market over the decade, while nursery-based chains have led the way in expanding their provision into the statutory age. Expansion up, or down, a stage of education from the initial competency, in fact, is a common characteristic of proprietorial schools. Of the 72% of all proprietorial schools that are essentially preparatory (up to the age of 13), 80% of these also make provision for the early years. The sector has potential to expand where, demographically, demand is strongest.

Significantly, 41% of proprietorial schools operate on fee levels less than, or on a par with, the national average per pupil funding in the state-maintained sector. As well carrying spare capacity (not, as the DfE supposes, related to their educational performance), which could be made used of, these schools would be well positioned to convert to free schools were it not for the fact that they are proprietorial.

The government’s insistence that academies and free schools be governed by trusts operating as companies limited by guarantee, on a not-for-profit basis, is an artificial construct designed to maintain a delicate political compromise. This overly prescriptive approach severely limits the potential for free school development. My research finds that a range of different legal frameworks, commercial and otherwise, have been made use of by non-charitable trust independent schools, to equally good effect. A number of different company types have been employed; indeed some proprietorial businesses choose to remain unincorporated. Each framework leverages the assets, resources and goodwill accessible to proprietors in different ways. Freedom of form clearly widens participation.

Markets develop in response to opportunity. In-depth study of the proprietorial sector’s development over the past decade reveals individual entrepreneurs, SMB enterprises, and aspirant chains of schools with spare capacity, resources for growth and keen interest in the Free School market. These and others active in overseas markets, such as the Swedish chains Kunskapsskolan and Internationella Engelska Skolan, clearly have much to contribute. Were present market constraints to be lifted, new providers would undoubtedly emerge.

There is no reason why brilliant and innovative educationists cannot effectively partner with able businesspeople, for-profit. There is every reason to believe, to the contrary, and on the evidence, that for-profit incentive will in fact work to lift pupil attainment. It’s time to open the gates.