Business Studies

The issue of schools and profit making has arisen again as a topic in some corners of the twittobloggoweb. Yet another debate with more heat than light. Obviously the issue of academies looms large in the discussions.

As I understand it, apart from one or two oddities, all existing Academies (or chains of Academies) have to be owned by a charitable trust. Whilst this does not forever preclude them from becoming profit-making, its a fairly good lock on that – for the moment. They all also have rolling contracts (funding agreements) that continue forever, unless they are deemed to be failing (in which case they can be taken back into DfE control pretty sharpish) or either side gives seven years notice of terminating the contract. This might seem like a long period, but in reality it gives protection to all parties, particularly students, who would know before they attended the school who was going to continue to run it for the period they were there. Whilst you may disagree with the Academisation policy in the first place, the fact that these contracts are all in the public domain is a sign of openness rarely seen previously in Government.

So, back to profit making. Companies have been able to take over the management of a school for the purpose of making a profit, but as Toby Young politely pointed out in his article today, they are few and far between. So there does appear to be little current risk of the mass commercialisation of education. But there are those who suspect the motives of the current government in this area. What I would like to see to take that risk away further is to amend the Education Act in such a way that only Charitable Trusts can run state funded schools.

But now to the real point of this post.

If I were a shrewd business person, I would not be looking to run schools. There is too much risk involved due to the large number of external factors that affect how successful they are. For example, we have recently seen how easily the regulatory regime can be changed, almost at the whim of one person. That’s not a good environment to run a business. I think the profit will be elsewhere in education.

As more schools are becoming Academies the pressure on LA’s in maintaining their educational services is great. As the number of Academies grows, in some areas LA’s will no longer be able to provide any of these services (other than a statutory core). Academy chains are taking up some of this slack for their own Academies, and the more entrepreneurial will be offering these services to others. However, more and more small businesses are appearing to fill these gaps.

In the last full year prior to the current Academy expansion programme the part of the schools budget retained by LA’s amounted to approx £4.4bn across England. Potentially all of that will eventually be devolved back to schools which means there will be a sizable market for the provision of the services it used to fund. Succeeding or failing, schools will require these services, which makes for a much more stable business environment. This is where the sensible business will park its bus.

To my mind such businesses would be little different to those that already make money out of education, like exam boards, utility companies, stationary suppliers, builders and so on. Schools would be their customers, able to get the best service (and price) for their students.

Leaving the core “business” of educational management where it belongs, strictly in the not for profit domain.

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