Schools should be able to make profits

According to The Times, Sir Simon Milton - adviser to Boris Johnson and leader of the Local Government Association - believes that profit-making companies should be permitted to run schools and fire under-performing teachers.  We agree.

The average school building and grounds are hugely under-used for large parts of every week and for the summer and Christmas periods.  Teacher unions have predictably opposed the idea but surely there must be a way of encouraging private firms to "sweat" school buildings so long as a high proportion of the proceeds go back into the school.  The proceeds could help to pay for higher pay for the best teachers - another recommendation from Sir Simon.

Michael Gove is stating that “the money we spend on education should stay within education.”  This doesn't sound like a closed door to private firms using school facilities to earn extra money and being allowed to keep some of the returns.

Comments

[Tony Makara]

Its absolutely bad economics to let school facilities go unused when they could be making money for the school. This is good forward thinking and I hope politicians will give this serious thought.

[John W]

It is bad economics to let school facilities go unused while they could be making money for the school.

It is also bad economics to have profit making companies run schools - it confuses incentives. Quite frankly it is a moronic idea.

We need a supply-side revolution in schooling provision driven by the third sector. We do not need profiteering in education which will inevitably be done on the back of the tax-payer.

[Editor]

John W: Do you oppose a profit-making company running school premises and grounds and trying to make money out of them - all outside of school hours?

[Tony Makara]

Schools should take sponsorship and have resources pumped into real vocational training instead of the pointless qualifications that currently leave so many pupils with meaningless knowledge. Young people leaving school need the skills they can apply in real life and there should be more emphasis put on blue collar skills with an academic route for those aiming for further education. We need to be training the young in more than just abstract concepts. A real life employer and his money could provide fantastic opportunities for apprenticeships from an earlier age.

[Sammy Finn]

We could and should make much greater use of school facilities.

A sixth form's gym facilities could be improved by renting it out to locals in the evening at weekends.
An evening restaurant could be run out of the school canteen; many local people would support it.

I could go on!

The rule would be that 75% of all revenues were reinvested in the school. Who would lose from this?

[Sasha]

State schools can, and some do, put facilities such as sports and assembly halls up for hire.

[Andrew Lilico]

>It is also bad economics to have profit making companies run schools - it confuses incentives.<

How and why?

[John W]

Editor: No. Although this is a very different prospect, and one which I think would be complicated by 'school hours' becoming hard to define when you are trying to increase the extra-curricular activities which add so much value to a good education.

Maybe this touches on a wider point of us having a very narrow definition of what it means to take control away from central government bureaucracies and put it in private hands. Profit making companies aren't the only options for running things well - there are a plurality of models that can be used to free people from government controlled inefficiency. And some of those models structure incentives in a far more rational way than adding 'profit making' into the bargain.

[Tony Makara]

John W, 'Profit-making' isn't a dirty word, it is what drives incentive, and in real terms gets things done. I don't like how the word 'profit' has negative connotations.

[ToryJim]

Do schools and colleges no longer run evening classes or rent space out to local groups? They did when I went to school.

[John W]

Oh hello Andrew, do go easy on me.

Perhaps I could put it another way: in running schools 'profit' should be realised in the utility of the children being educated rather than in a financial profit accruing to a capital investor.

A private profit making company will be incentivised not to produce the best education for the least amount of money, but to meet targets set by a commissioning body for the least amount of money.* These two are not the same thing.

This isn't an indictment of profit making companies, it is saying they aren't an appropriate private model for running schools.

A parent/community run school, charged with meeting minimum standards by the government and funded by them would provide a better education, because incentives will be better aligned. With the powers to sack rubbish teachers, run year on year surpluses to invest in the future, or indeed borrow money against future income streams they would possess the advantages of private companies, and profits would be realised in terms of a better education.

(btw: I do think some private companies would run many state schools better than they are currently).

*I know there's an argument here about parents being consumers and maximising their utility in a free market by choosing to send their children to the best privately run school. But I am talking about how do we best incentivise schools.

[John W]

Tony, as you will see from my reply to Andrew's question, I don't think 'profit making' is a dirty two words.

I think your position is a very reductive one - that the only two options available are: state run monolith or classic privately run, financial profit making, company.

Private individuals can combine together in an almost infinite variety of ways to run something.

To some extent our accounting practices limit our ability to innovate in this regard.

[Ulster Tory]

Should schools not be about effectively educating and training the children and young people of Britian academically and personally first and foremost? Putting profit before that* would be ludicrous.

Couple of questions so I can understand this better to get a more specific view:
Would these schools be fee-paying?
How would the companies actually make money from it?
What happens to existing schools?

*I have no problem, that I can currently think of, with it coming 2nd

[David Belchamber]

It would be much better that school facilities were used rather more by the pupils themselves. The lack of sport and other extra-curricular activities is shameful in many schools. We see senior pupils getting off the school bus by half past three; what about some after school sport, music drama etc?

Once again, if we had a government that was prepared to use independent schools' help, they could show the way to hire out unused facilities.

[Ulster Tory]

RE: David Belchamber @ 14:43

"We see senior pupils getting off the school bus by half past three; what about some after school sport, music drama etc?"

This may be getting off the topic slightly, but as a 'senior pupil' myself, I don't participate in as many after-school activities as I would ideally like. Mainly because the workload we have is rather large. With writing essays, doing homeworks, making extra notes, background reading, doing coursework, revising and possibly having a part-time job we don't have alot of time to be deeply involved in a multitude of activities. The vast majority of 'senior pupils' don't get off the bus to hang around street corners.

[Bishop Hill]

John W

I'm not following your argument. You say:

I know there's an argument here about parents being consumers and maximising their utility in a free market by choosing to send their children to the best privately run school. But I am talking about how do we best incentivise schools.

The first part of this statement implies that the best way to incentivise schools is to make them accountable to parents rather than bureaucrats. This is correct IMHO. YOu then go on to say that the best way is actually to keep schools accountable to bureaucrats but that they should be run by parents.

Where is your evidence for this? The only successful models we have for schools in the UK are private schools. They do not have standards set by bureaucrats or politicians.

[Stewart Geddes]

Let's not beat about the bush. Anyone should be able to run a school. The measure of success will be the reputation it develops for educating pupils whether academically or otherwise. Key point is that must be the only measure. If we allow a school inspection authority to continue it will set targets and will inevitably torpedo any attempt to restructure and improve the education system- as has happened in all previous attempts to reform education.

Let the parents decide and let the money follow the pupils.

[simon j]

The best schools are not for profit. For instance: public schools such as Westminster and Eton; Grammar schools such as Reading School; Catholic or CofE schools like the London Oratory; and many good Comprehensives. Do we want a 2 tier system: wealthy upper-middle classes send their children to the above quality schools and everyone else goes to the for for-profit, utilitarian Asda-style school. No thanks.

Therefore Conservatives should knock this idea on the head. The new Conservative Education policy is excellent. Raising issues like this just confuses things. Rather like what happened over Grammar schools to David Willetts. Keep it simple.: £6000 follows the pupil; LEA's can't skim. Parents can choose from a range of not-for-profit schools. Basically good 'Catholic' style schools for people who aren't religious but want an ethos of learning, discipline, and respect.

[John W]

Bishop Hill:

I'm sorry I expressed myself so badly. Schools should not be accountable to bureaucrats, they should be accountable to parents. There should be some standard if tax payers money is to fund them, but these standards would be narrow, similar if not less broad than the standards required of private schools.

As for the footnote you quoted, it was a footnote for a reason, acknowledging that there is a different argument for having for-profit schools: trying to create a perfect market for education. I think it is not a very good one but I didn't want to go into why.

[Andrew Lilico]

John W and others,

Suppose that I have a company that organises parachute jumps for beginners. And suppose that my company (like, I would hazard, virtually every such company in the UK) is a profit-making enterprise. Do you think that this prevents the company from having an appropriate concern for preserving the life of jumpers?

Or a tyre company. Do you suppose that the fact that it is profit-making mean that it does not strive to ensure that it is safe to use its tyres in cars?

So why would you imagine that if a school were profit-making, that would mean it had limited incentives to provide a good education for children?

Surely the incentives of a profit-making company are to provide goods and services that are fit-for-purposes at the lowest possible cost (with fit-for-purpose-ness being dependent upon the company's business model). So if a company is contracted to provide education that meets a certain standard set by the education-commissioning authority, then (assuming that appropriate penalty causes are involved for failure to meet the target) the company has incentives to strive to meet the quality target.

In contrast, without a surplus motive, a company would have no obvious incentives to provide education of any particular quality. Rather, the activity of the company depends on the specific goals and aspirations of those involved. So a school might include people that honestly want to provide high-quality education but are not competent to do so, whilst another school might include people that are competent but can't be bothered. And without a profit motive, there is no clear reason why we would expect such an arrangement to deliver high quality education.

From virtually every walk of life, but in particular public services (think, for example, of how British Telecom was pre-privatisation) experience suggests that quality is higher, cost lower, and innovation greater when there is a profit motive involved. Practical experience and overwhelming empirical evidence makes this so clear that it is a matter of continuing astonishment to me that anyone would attempt to dispute this.

[James G]

Andrew Lilico:

I don't think anyone in this discussion is against profit making in very many organisations, from British Telecom right through to healthcare.

But turning this into a theory to be applied to all walks of life, including for example the education of our children or our national defense, appears impractical and is heading towards dogmatism.

Before the state started to intervene in the education of children in the 19th century, the private sector was free to invest in schools and make profits if it wished. It did not do so. Education was provided by non profit making churches and charities. And was inadequate, (there were not enough school places because charities did not have the means to provide them) which is why state education was introduced in the first place. What has changed in the intervening period ? What concrete evidence do you have to show that private companies will now prove to be a panacea ?

If you want to create a national system of profit making schools as you appear to, you cannot do so in a free market. The state will have to continue to subsidise each pupil, but instead of paying what is, importantly, the same pool of teachers directly, subsidies will go to private companies, who will then allocate pay to teachers as they see fit.

The Companies performance will presumably be judged by exam results, and so companies that run already successful schools in middle class areas will receive extra subsidies, pay higher salaries and poach the best teachers from less successful schools. If standards rise in some suburban schools, they will inevitably fall in inner city schools. This would represent a failure over all, and would be unfair. What will the children/customers of a failing school do?

Look at the example of insurance. If you are old, sick or poor, you represent more of a risk, and insurance companies will not make any profit from ensuring you: a purely profit based system will leave you with nothing. Hence the need for public insurance, to provide for the physical needs of a section of society. It is inefficient for a society to let these people fall by the wayside: who would profit from that?

The more I look at the question the less I understand how anyone can be so sure of the implacability of the profit logic. As today's diary shows, it is highly debatable. So even the most convinced person needs to show more circumspection than you do, especially as this is about children.

Indeed profit making is not the only objective of education. Even if your only aim in education is to make children economically profitable in their lives, they have to know things unrelated to making profit: an electronic engineer should also learn about english culture or shakespeare to be successful at work. What do you think a society that forgets its history would achieve when history isn't profitable enough and is neglected by a system driven by profit? The reason why the profit logic cannot be applied everywhere (as you have suggested) is because when it crosses the interests of physical and intellectual integrity that allow people to survive in life, it is unable to fairly attach a montary value to them using the same criteria. They are not worth anything in monetary terms in the same way as goods. This is true of education, health, defense, and the environment. Public intervention is needed to balance the incapacity of the profit making logic, and prevent capitalism from ultimately destroying itself.

Your reasoning seems limited. Do you have children? Watching them going to school every day and being pushed into a system that exists primarily to make money for those who run it is fine for you is it? It doesn't make you doubt your theory even for a second?

The free market is a sound basis for conducting business in many walks of life, and I believe the conservatives should always defend it. But turning it into an ideological doctrine and trying to apply abstract, untested theories to the future of our children's education or for our national defense is absurd. The free market cannot be applied to education: even the most radical proposal here involves massive state subsidies of education companies.

Which begs the question: Do we really want to get into a debate about
free market theory in a sector that will always be funded by the state?

[Andrew Lilico]

James G,

So much confusion. What on earth did I say that made you think I advocated an unregulated free market in education, without state intervention? I was arguing against the proposition that having profit-making firms provide education is incompatible with those firms striving to provide a high level of education for children. What is all this you say about much of education being for general cultural merit rather than profit - that Shakespeare might be as valuable as engineering? Of course! And does that mean that we can't have profit-making book stores selling Shakespeare?

What "abstract untested theories" did you imagine me to be proposing? I am not saying that I disagree with whatever theories you had in mind - I simply have no idea to what you are referring, and I was not talking about such issues myself.

[James G]

Andrew Lilco:

You seem to have understood perfectly what I was saying as you are reduced to speaking about book shops, choosing to ignore my explaination of why the profit motive is NOT beneficial everywhere. Since you now except that the state (non profit making) has a role to play in public service, (not what you said originally) you must by extension believe that a profit making institution would perform this role less well. How can you then continue to argue that the profit motive is always better?

You failed to answer my point that a (regulated) market in education will inevitably produce more inequality, something which is unacceptable to parents: if some schools improve, others will get worse. Schools in more deprived areas achieve worse exam results for reasons that are mainly out of teacher's control. The market will exaccerbate not reduce this, as the market needs to reward success to function. This will be unfair, irresponsible and certainly not in the national interest.

Is your failure to answer this point an indication that you agree, but choose to ignore it to stay in the comfort zone of your dogmatic theory that the profit motive is always best?

So far your only justification for this position is that schools are basically the same as shops selling goods. I think most people would disagree. Indeed, if they were, then the kind of state regulation and subsidies you argue for in profit making schools would be unnecessary, right?

If you do not have any other arguments to support the introduction of profit making in schools, I suggest you abandon the idea forthwith. After all, children's education is more important than stubborn ideological theories.

Why is it so difficult to accept that the profit motive is best in most, but NOT ALL areas, and get on with improving our state schools in the interests of all children. The last thing they need is more dogmatic, ideological and bureaucratic interference from politicians who have yet another "big idea".

[Simon Denis]

Nothing will benefit schools without selection. No factory would take in any old raw material - a combination of porcelain, say, with pig iron and potatoes - and expect to turn out anything. So why inflict this very madness on education? Class, sneer the socialists, shamefully echoed by Willets and - alas - Cameron. Class, they say, produces brains and so selection, by benefiting brains, reinforces privilege. Even were this so, a school is not a blunt instrument for sorting out the problems of wider society. It can only deal with what time or nature have contrived between them. It is up to social policy to improve the conditions of the poor so that by te time they are eleven their brains have not been mashed by lager, porn and computer games. Moreover, class in fact does not make brains, as the brave Charlton pointed out: brains make class and the middle classes are ipso facto more academic than the working class. Their children will therefore be more likely to have brains in turn and only oppression in alliance with cant attempts to disguise this truth. Why not upset these foul harrumphing boneheads of the left? Tell the truth, campaign for the truth...

...and yet, as Cameron has recognised democracy is a sham and the pretensions of the powerful - the Toynbee upper middle class which rules and ruins this country - have to be soothed if there is to be any hope of office.

Is this so? How horrible if it is.

[James G]

Simon Denis:

There is no need to be so gloomy about it! Nobody is saying that the more intelligent children should be "held back" for the sake of equality! This would be unnecessary. We shouldn't see this as a black and white opposition between a selective and/or profit making system on the one hand, and a state monolith system on the other!

There are plenty of excellent comprehensive schools, in which middle class kids get good exam resuts (as good as in grammar schools). Sure, working class kids in these schools don't get the same results, but as you say, this is for reasons outside teacher's control- and unfortunately, whatever system you have, you won't solve this! Most importantly, working class kids in comprehensives get better results that they do in sink schools, without holding back the middle class kids.

I disagree that class is an indicator of intelligence: going back to selection at 11 would mean that many middle class parents get their (less bright) kids through using private tutors, and many bright working class kids who don't pass the exam are consigned to an education that does not push them academically. This is artificial state social engineering.

Give comprehensives more autonomy, less bureaucracy, more resources, and better teacher training, and stop this constant meddling with the system based on untoughtout, flawed (because ideological) theorising. The last thing schools need is yet another target-based-voucher-incentivised-profiteering-academy-big new idea-brave new world-initiative. Because at the end of the day whatever the catchphrase, these initiatives just represent more centralised state interference by politicians who want to make their mark.

[Simon Denis]

When will it be clearly understood that secondary moderns are NOT "sink" schools? And when will people admit that comprehensives - apart from those which practise covert selection, either by interview or by the happy chance of their location - ARE?

James, you admit that the low academic achievement of many working class children is beyond the teacher's control only to substitute a subtler but equally misleading idea, that at a comprehensive they will do marginally better than they would otherwise. Not true. The figures all demonstrate that they do better in schools tailored to their place in the academic spectrum. Thus it is that the overall achievement of Kent and Buckingham is superior to all the comprehensive LEAs in the country.

Finally, why should the non-academic bother with this pseudo-academic training? Shouldn't we be preparing the plumbers and bricklayers and technicians of the future? We're happy enough to import them from Poland.