Category Archives: education quangos


The government is trying a new approach to supporting education exporters. Can it work? Patrick Watson

Published in ‘ Education Investor-’ September 2012

This government, it claims, is committed to export-led growth. Education is our seventh largest export industry, worth over £14 billion in 2008-09, and is growing at a rate of 4% a year but, ministers feel, it could do more.

So, in a tacit acknowledgement that our exporters need more support, UK Trade & Industry is moving to offer a ‘system to system’ approach to help education exporters. Its new UK Education Services unit aims to bring the best expertise in the private, public and voluntary sectors together under one roof, to enable a more joined up approach to education exports. The intention is to sell international customers a distinctive UK offer comprising a number of providers working together. This, the theory goes, will be more attractive to potential customers than a number of competing UK offers that meet only parts of their needs. This is quite a change. Until now, the go to organisation for UK education businesses abroad has been the British Council (BC), but that bodys inadequacies are well-known. Its too thinly spread, lacking the capacity, expertise or, indeed, competence to provide the support commercial education firms require. It also suffers from a conflict of interests. Though tasked with representing our education services, in practice the BC often competes with it, by providing language training and so on itself. Accordingly, it often keeps valuable commercial information to itself. To compound the problem, as its grant funding has decreased, its exhorted its staff to act more commercially. This toxic mix of conflicts of interest, overstretch and quality deficit once amounted to an irritation. Increasingly, though, its turned into a crisis.

UKTIs latest initiative, then, could represent a step change in the way the government supports the UKs education industry. We know whats needed: the UKTI spells it out in an overview of its new approach.

First, the identification of major opportunities, through detailed country market analysis. Second, engagement with UK education providers and supporting agencies to identify those with the capability and interest in exporting to these countries.Third, engagement with the host government contacts to develop opportunities to the point where they can be offered to UK providers. And, finally, facilitation and support to UK providers in bidding for contracts.

So far, UKTI has mainly focused on the needs of Higher Education institutions, but increasingly it accepts the need for a more inclusive approach. After all, the UK exports a wide-range of education services: independent schools and their franchises, school improvement, qualifications and assessment, inspection, teacher training, language teaching… Such specialist services are often poorly understood by our local representatives, and so havent had the support that they might.

The UKTI approach sounds promising, but  will  need to be backed by political will and resources. Secondments from the private sector would give this initiative some focus and traction. Using education service providers as a sounding board will help, too.

But heres one more idea. The BC receives a lot of grant money specifically to promote UK education, but the consensus is that this has not been used cost-effectively. Why not simply transfer it to UKTI, and use it to fund, say, secondments from the private sector?

Published in Education Investor September 2012 Vol 4 No 7

Education Investor is organising a conference in London  on 17 October 2012  ‘Exporting excellence: capitalising on the global value of UK education’, at the Westminster Conference Centre


UK Trade & Investment (UKTI) works with UK-based businesses ‘ to ensure their success in international markets, and encourage the best overseas companies to look to the UK as their global partner of choice.’ It is  part of the  Department for Business Innovations and Skills (BIS). Lord Green is the Trade and Investment Minister .

Note 2

Unsurprisingly the BC has taken exception to my views on its role and competence, insisting on a  right to reply in Education Investor. Its weak reply in letter form  amounts to  flannel and flummery so typical of that organisation , signally failing to address the core issues raised. It   suggests that I am  articulating my clients views, the implication being that these views do not represent the broader education sector.  Wrong. There is a broad consensus among  UK based education providers, most of whom are not my clients  (if only!) about the inability of the BC to represent their interests, for the reasons given above. Many have to work in partnership with the BC or suffer commercially without  fully understanding the reasons why. The BC behaves like the worst kind of monopoly, and  in consequence  damages UK education interests abroad in a sector where we should have some competitive advantage. It really is that simple. The real shame is that our politicians and civil servants allow  the BC to get away with it. But for how much longer?


Charities-How the government lobbies itself and why

Charities are not always what they at first seem


Christopher Snowdon, of the IEA, said  last week, in a new report, Sock Puppets: How the government lobbies itself and why that ‘ It’s time for a radical overhaul of state-funded charities.’

The report claims that in the last 15 years, state funding of charities in Britain has increased significantly. 27,000 charities are now dependent on the government for more than 75 per cent of their income and the ‘voluntary sector’ receives more money from the state than it receives in voluntary donations.

State funding weakens the independence of charities, making them less inclined to criticise government policy. This can create a ‘sock puppet’ version of civil society giving the illusion of grassroots support for new legislation. These state-funded activists engage in direct lobbying (of politicians) and indirect lobbying (of the public) using taxpayers’ money, thereby blurring the distinction between public and private action.

This surge in government spending coincided with a politicisation of the third sector which was actively encouraged by the state apparatus from the Prime Minister down.  The report reveals the true extent of government funded lobbying by charities and pressure groups.  Snowdon argues that, when government funds the lobbying of itself, it is subverting democracy and debasing the concept of charity. It is also an unnecessary and wasteful use of taxpayers’ money.  And by skewing the public debate and political process in this way, genuine civil society is being cold-shouldered.

In 2007 the think tank Civitas raised similar concerns  in its report Who Cares? It said  that Charities that derive over 70 per cent of their income from the state have reached a level of dependency which makes them more part of the state than civil society and they should lose their charitable status in order to preserve the integrity of the sector. In a section of the report entitled ‘Paying You To Tell Us What We Think’, the author, Nick Seddon describes the use by government departments of government-funded charities to carry out research that supports government policy. Seddon believed that ‘As the government funds charities, and even turns statutory bodies into charities, the lines are becoming blurred. These charities come to resemble more and more the statutory departments on which they depend for money, whilst also competing with genuinely independent charities for donations, and creating confusion about what a charity is.’

The IEA report adds that State-funded charities and NGOs usually campaign for causes which do not enjoy widespread support amongst the general public (e.g. foreign aid, temperance, identity politics). They  typically lobby for bigger government, higher taxes, greater regulation and the creation of new agencies to oversee and enforce new laws. In many cases, they call for increased funding for themselves and their associated departments.The report concludes that ‘urgent action should be taken, including banning government departments from using taxpayer’s money to engage in advertising campaigns, the abolition of unrestricted grants to charities and the creation of a new category of non-profit organisation, for organisations which receive substantial funds from statutory sources.

Action should be taken so that:

• Government funding of a charity or other non-profit organisation is not used to promote the organisations’ interests in the policy sphere. Campaigning and education around such interests should be entirely privately financed.

• The government is not financing charities in such a way that there are people working  within that charity whose interests might be strongly aligned with the continuation of    government funding and who have an ability or incentive to campaign in favour of more    government funding.

• Politicians and bureaucrats who wish to pursue unpopular – or even popular – political causes should not be able to do so by setting up a charitable or NGO-front that gives the veneer of independence.

One possible solution to the problems outlined in this paper, says Snowdon ‘ would be for the UK to adopt the US approach which bars organisations from charitable status if they spend more than an ‘insubstantial’ proportion of their resources on lobbying’.

It is true that a number of ‘Charities’ look as though they are nothing of the sort and exploit their status. The clear danger is that bona fide charities, and the sector as a whole, are damaged by the activities by these organisations, some of whom have not only been tolerated by the government but have been actively  encouraged .It is also the case that as more transparency is forced on the government and its executive agencies, charities working for the government are not subject to the same levels of transparency and accountability. Charities   do not come under the  Freedom of Information Act and some statutory bodies have Charitable status. The British Council,  though not a statutory body is a quango that    promotes  British culture  abroad and purports to represent UK education interests abroad (a pigs ear for some reason   springs immediately to mind! ) ,is heavily funded by both the FCO, and DfID , and is a registered charity, yet competes aggressively  in the markets against  British education companies. .  The waters  are, indeed, muddied.

The temptation for Charities to pitch for government contracts is strong .But  there is a danger that in doing so they lose sight of their core purpose and mission, all in pursuit of  much needed new income streams.

It is obviously the duty of Trustees to ensure the respective charity remains focused on its raison d’ etre and can demonstrate public benefit   And for the regulator to keep a  close eye on this.   There is little doubt, though, that some are guilty of mission creep. And charities that do not merit their status serve to crowd out genuine charities.

Sock Puppets: How the government lobbies itself and why, by Christopher Snowdon IEA



The BC has a funny way of representing British culture and values? Kow Towing to the Chinese for starters


Parliament has given the British Council the right to take public money to “promote cultural relationships and the understanding of different cultures”. The Observers  Nick Cohen  worries that it is now in breach of its Charter.

At The London Book Fair at Earls Court last month organisers said that this year’s “focus”  would be on China.  Nothing wrong with that .However, the problem was that   in order to keep Beijing sweet, claims Cohen, the organisers  refused to invite writers – as “visiting authors” – who might upset the   Chinese regime.  Cohen says  ‘The event’s managers struck me as cheerful capitalists. They want to help publishers strike deals and make money. No harm in that, particularly when they can argue that the promotion of propaganda and suppression of free thought have not been arranged by the commercial arm of the fair but by the cultural bureaucrats at the British Council. Ma Jian, a Chinese novelist, who was not invited to Earls Court, listed the ways in which the British Council was working against cultural freedom. “These big events give China’s Communist party the international face it craves and helps normalise its repression of free speech back at home,” he told Cohen .Cohen continues ‘ He went on to make the unarguable point that the British Council was harming the British public as well as the cause of the Chinese reformers. “By excluding all genuinely independent and critical voices,” he said, “the book fair has allowed the Chinese authorities to export their censorship to a western democracy. Instead, the literary world is being asked to applaud 31 state-approved authors the book fair administrators and the censors at China’s General Administration of Press and Publication have invited to speak on the glories of their nation’s literature.’

Cohen is not alone in finding this all decidedly odd, although seasoned  British Council watchers  are  more used  to such shenanigans and counter-intuitive behaviour from the BC. One of Britain’s leading authorities on China told Cohen that an editor instructed him to not make unflattering remarks about the Communist party in a piece to accompany the fair. Cohen continues ‘ Others described a seminar at the British Council in September on how the British should think about freedom of speech in China. It was chaired by Claire Fox, of the Institute of Ideas, the successor organisation, it transpires, to the British Revolutionary Communist party. Cohen continues ‘This sinister clique moved as one from the totalitarian left to the corporate right without stopping at any worthwhile point in between. Observers in the audience predicted that China’s combination of communist dictatorship with capitalist exploitation would appeal to Fox. They were not disappointed. We should stop talking about human rights and freedom of expression, she said. We should hold our own government to account rather than engage in “China-bashing”. Writers, she concluded, have always benefited from the creative stimulus of censorship. By her logic, there was no need to protest when oppression was good for them. It was “worse than risible”, Jonathan Heawood, director of the free expression charity English Pen, told me. “I was surprised that no one from the British Council was prepared to rebut these absurd assertions.”’

David Blackie, of International Connect, though  is unsurprised by these revelations. He writes on his blog  ‘The bottom line is, of course, that the British Council’s commercial ambitions in China are far more important than the defence of freedom of speech, or an ethical foreign policy, or the representation of any residual British values.’

The British Council, though nominally a charity, contrives to  compete in the markets  through at least eight limited companies and is encouraged to do so by Ministers. Being a ‘Charity’ it is not subject to the Freedom of Information Act, so  much of what it does with taxpayers money, lacks transparency.  It is hard to know exactly what it does   do although mission creep, writ large , is a charge laid at its door .  It is an aid agency, teaching agency, cultural agency and  a private sector commercial   operator  all rolled into one. Its allowed to get away with this because the political establishment allows it to.  Parliamentarians many of whom have benefited from BC hospitality in the past  form up to support the BC when asked to without at any point challenging its hybrid status, or asking some basic questions about its efficacy.

We know, for example , little of   how effective it is, and whether or not it provides value for money  although it routinely makes unsubstantiated  claims   that it gets a marvellous return from its activities . If its so good, then  how come it  needs to be so  heavily subsidised, or ,indeed ,subsidised at all?  There is strong suspicion  in the markets that  what it does could be better done by other providers, whether for profit or not for profit, and, importantly in these austere times , at no cost to the taxpayer.

The British Council has also come under criticism recently for its closeness to the ousted  Gadaffi regime. It is a fact that Gadaffis officials were being educated by the British Council, using British taxpayer’s money. These ‘educated’ officials then upheld the values and protected the status of what was, demonstrably, a   totalitarian and repressive regime, somewhat out of kilter, one would have thought, with any popular conception  of  British values.  But the self-serving elite who run the BC, protected by the FCO, seem to think that they are the guardians and representatives  abroad of our values. Not mine.

Our former Ambassador  to Kabul ,Sherard Cowper-Coles was  clearly  surprised during his tenure that the British Council was  distributing books of dubious quality to an Iranian backed Mosque, throughout his time there, including  that classic‘Chemistry for Dummies’. Why are we taxpayers subsidising Iranian backed Mosques one might wonder, let alone with silly books?

Having been funded by the FCO, the BC now, in addition, draws funds from our aid programme (DFID) so purports to be an aid agency too now, much to the annoyance of bona fide aid charities.  The BC also, apart from representing ‘British culture and values’ abroad, claims to represent UK education interests.  If this is the case then how come it has managed to alienate most UK education service providers by its anti-competitive  behaviour in these markets(and the poor quality of its service).  They complain to the government, with some justification, that the subsidised BC competes against them for the same contracts abroad, while concurrently claiming to represent them. Unfair, and a conflict of interests? You bet. And does the government do anything about it? No. Yet HMG rates education as one of its top export priorities . Joined up thinking, and government? I think not.


Commissioning Childrens Services


A report published on 9 August by Ofsted, the schools inspectorate, has found that local authorities are not always considering the voluntary and community sector, charities, or other arms of the public sector, when commissioning services for young people.  The report states ‘Alternative approaches were not always being considered and poorly informed views among local authorities and providers about the potential of competitors to provide an improved service remained unchallenged. Insufficient consideration had been given to engaging alternative providers from the voluntary and community sector, charities, or other arms of the public sector such as social landlords. Only three local authorities had worked collaboratively with neighbouring authorities to carry out joint commissioning.’  No surprise there then. Ofsted however fails to mention the private sector in the supply mix, which is perverse.  A 2006 report by PricewaterhouseCoopers on the Children’s Services markets, commissioned by the last Government, reached pretty similar conclusions, recommending a fundamental re-think on local commissioning and the removal of barriers to allow in new suppliers, from private and not for profit sectors, noting that some authorities were better at pursuing value for money than others. However, there was no fundamental change to the approach to LA commissioning practice in the wake of that report. The Government will have to think about how this might impact on their proposals in the White Paper on Opening Public Services which anticipates a more diversified supply market, with more accountability and  better access to information.

And if Local Authorities are not considering alternative providers, then what hope is there for the Big Society?



Suppliers are being ignored by the Government


The last government (DFES) commissioned PWC to look at the childrens services market and to come up with some ideas about how it could be better managed. The Labour Government wanted Local Authorities to move towards becoming commissioners rather than providers of services.  The PWC report (see link below)made recommendations as to how the supply market could be opened up so  for profit and not for profit providers   could deliver more  services( sounds familiar?). Indeed this is an aim shared by this government.  PWC concluded that:

“We have identified a number of barriers that exist to effective market operation.  The barriers that exist in the fostering market are typical of these markets and include: a lack of transparency  on costs; limited visibility of markets; a shortage of experienced commissioners; limited  dialogue between suppliers and commissioners; inconsistent application of overall national  frameworks; and potentially conflicting roles of local authorities acting as commissioner and  provider.  These barriers need to be addressed to improve the operation of the markets.  The DfES can play a significant role in removing the barriers and encouraging effective and strategic commissioning.”

Ministers agreed but then not much happened. Local Authorities largely continued in the way they had  always done in providing most services in-house, some even reducing the number of their  outsourced contracts. Of course, there were some contracts outsourced but certainly not on the transformative  scale the Government intended.The message had clearly not trickled down to the commissioning and procurement  staff in LAs.  The result was  that with no government intervention the supply market failed to develop here and companies went in search of  new business and income streams abroad.  But abroad these  companies  found, as they still do,  that they  they had to  compete  against grant funded  education quangos  who are not transparent with their costs and who who do not compete on an equal basis with other for profit and not for profit suppliers.

This government, like the last one, has failed to engage with  these market issues. Indeed, as Education Investor revealed last month five senior managers,   all exporters of education services, wrote to Francis Maude ,the Minister responsible  for public services reform and procurement issues, highlighting the problem of education  quangos and  unfair competition, (British Council, SSAT, NCSL etc)  helpfully recommending too,  ways in which the Government might  help create a level playing field and an enabling environment in which the market might expand. The Minister took five months to reply to this letter , (only replying with a backdated letter when the editor of Education Investor contacted his office), refused to acknowledge there was a problem and , to add insult to injury, ignored their recommendations . The recommendations, by the way, included a number of steps that the BBC has taken to address competition and transparency issues  following complaints about its market activities from its non-subsidised competitors. So what were these five senior managers’ recommendations?


Detailed supplier agreements should be drawn up to ensure that the commercial arms of quangos charge appropriately and are fully transparent on their costs.


Quango staff should be trained on fair trading and competition principles; and a governance structure for fair trading matters overseen by an impartial body (National Audit Office).


There should be separate accounting for commercial activities, with a certificate by the External Auditor that there is no material cross-subsidy of commercial activities out of public funds.


There should also be a recognised process and provisions to receive complaints and appeals by competitors claiming a grievance against subsidised entities.


An annual report for each quango should be published in searchable format with clear performance benchmarks and measurement of outputs and value added.


All quangos should be subject to the Freedom of Information Act.


There should be a range of penalties and sanctions for anti-competitive behaviour and the possibility of compensation to deter anti-competitive behaviour.


Parliament should take a view on how best it can hold Quangos regularly accountable for the way they manage and account for public funds.


These, as you can probably see, were constructive recommendations, from companies trying to export UK education services, in an area where we potentially have a competitive advantage and whose efforts can help our balance of payments too.

We know this government wants to make life easier for profit and not for profit suppliers  and SMEs in the market place. So why on  earth are they not prepared to engage with these suppliers or to address the  obstacles to a fair and transparent market. I think that they deserve an answer.. and not in five months time.


The SSAT will tell you its not a quango and has never been because its a ‘ Charity’.  So being a Charity  means you avoid the dreaded quango label, does it? I think not. Using this argument  the British Council is not a quango either,  as it, too, is a Charity.If it looks like a quango, behaves like one, and is supported by grant funding… then err.. thats  exactly what it is,  a Quango.




We should all be grateful to Education Investor (June) for exposing the grave problems in the education market.

The latest edition highlights the escalating tensions between private sector suppliers and education quangos (British Council, SSAT, TDA (on the way out), NCSL).

Quangos are competing here and abroad, head to head, with private and not for profit suppliers, using their public funds, inside knowledge and political top cover to steal an advantage over other non-subsidised suppliers.  The charge is that these organisations use taxpayer funding to subsidise their activities, and can exploit “captive audiences” contacts and databases (which can’t be accessed by competitors) built up over time, while fulfilling their regulatory roles and use them  to market their self- serving commercial activities. In contract bids this information is exploited by them but   is not accessible to others, because it is deemed ‘commercial in confidence’.  If anything, in the wake of funding cuts, the activity of quangos in  the market is greater now than it has ever been.Neil McIntosh ,Chief Executive of not for profit CfBT Education Trust,  told Education Investor “Grant aided organisations are most dangerous to independent ones at the moment  when they are told that their grants are being cut’.

Not all though can dip into the Aid Budget, as  the British Council has done, to make up its shortfall (the BC is funded by the FCO-but the FCO has seen it budget cut, unlike the DFID).  The National College for School Leadership, as Education Investor has pointed out, irritates many providers as its role in delivering the professional qualification for head teachers affords it ‘an iron grip on the UK market for school leadership training’.  It is now busy marketing itself abroad where it now competes with both for profit and not for profit providers.

The SSAT is signing up schools abroad too to its Inet school improvement service. It remains something of a mystery, though, to other suppliers, that an organisation responsible for supporting state schools improvement here, with 90% of maintained schools signed up, is qualified to support state schools abroad.  Our position in international league tables might  suggest that  we are hardly regarded as stellar  international  performers, as Ministers are at pains to  keep reminding  us (PISA etc-OK I know Pisa has its limitations but the Government regards it as a benchmark) Nick Gibb, the schools Minister put it as follows in a recent speech “We’re failing to keep pace with countries with the best education systems – falling back in the PISA international rankings, from fourth to sixteenth in science; seventh to 25th in literacy; and eighth to 28th in maths – meaning our 15-year-olds are two years behind their Chinese peers in maths; and a year behind teenagers in Korea or Finland in reading.  We’re still not meeting the expectations of employers – with the CBI’s annual education and skills survey just last month finding that almost half of top employers had to invest in remedial training for school and college leavers.”  The SSAT manages to rise above such awkwardness. Nobody has ever claimed that we have one of the best state systems in the world, although that is the aim of this government which wants our performance to compare with the very best in the world, a laudable aspiration. But we certainly haven’t got there yet. So it’s a  little perplexing   that a quango  which is at the heart of our underperforming system, in support of schools, finds  itself in the position that  it does-  telling  others  how to improve.  Pots and black kettles spring to mind.

The SSAT also won a contract,  a couple of years back ,financed by us taxpayers, to help ‘coasting’ schools ie those schools that should, based on their intake, be performing better. Yet these same schools had been, for some time, paid up subscribers to the SSAT. Its called incentivising failure.  Of course some of these quangos work closely and in partnership with private sector providers and will tell you that their relationship is sound. But they are always the dominant partners.  And talk to these providers and you will find that they believe that the benefits of such relationships do not remotely off -set the damage done to the market, more generally, by quangos presence and anti-competitive activities-in terms of lost contracts and the high costs of participating in a market that  is demonstrably neither fair nor transparent . These activities clearly raise the risks and costs of participation in the market for other suppliers.  And one wonders whether we as taxpayers benefit from these quangos activities. They are not transparent in the way they operate, and measure inputs rather than ouputs.

Of all the quangos cited, the British Council is by far the most unpopular and most damaging to UK commercial interests. Often co-located with British Embassies  abroad and the darling of diplomats and many an MP and Peer, who take advantage of all expenses paid trips abroad  to visit its projects, the BC has considerable political patronage and cover.  But as one supplier pointed out to Education Investor “You have got to go some to compete with an organisation called the British Council that’s operating out of the ambassadors office”.

David Blackie MD of International Education Connect will tell you of many contracts awarded to the British Council without any competition-which cannot possibly deliver value for money either for the client or the UK taxpayer. Kevin McNeaney, now managing Orbital, who is probably the most successful UK education entrepreneur of the last generation, nurses many bruises from encounters with the BC. He told Education Investor, obviously with some feeling, that “the British Council exists to continue the success of the British Council rather than as an enabler for the industry”. The BC continues, though, to pretend that it represents concurrently both cultural and educational interests abroad. Yet it competes with UK companies ie those it purports to represent for the same contracts.  Like other quangos it peddles the fiction that it doesn’t cross subsidise and that it maintains ‘Chinese Walls’ (-What? You ask- like those that operate so brilliantly in the city?)

But clock this. In a recent British Council publication it gave the game away. Expressing the hope that the BC would rapidly expand its commercial operations it said ‘The aims are for the British Council to be seen as an important player in our priority markets and sectors… and to present our contracts business as a fully integral part of our cultural relations programme.’  A prize- for anyone who can spot the wall, chinese or otherwise!  If the British Council, the DFE and the BIS are not supporting  UK education companies abroad (which they are not) then who is? It’s a very good question-if you know, could you let me in on the secret, so I can pass the message on to providers)?

Five senior executives of leading UK education companies wrote to the Government in December of   last year complaining about the conduct of the British Council and other quangos in the market outlining the issues affecting the education market here and abroad , providing  some recommendations to ensure that there is a level playing field in the market and that  the referee isn’t wearing one sides colours. It took the Government five months to reply, presumably because Ministers needed to think long and hard about it, more of which later.

For more on Quangos and the Market look at this months  Education Investor Vol 3 No 5  ‘Hitting the Wall’ -Firms brand quangos barrier to new business

For more on the British Council look at



Private sector confidence threatened, while not for profit sector suffers too

Mixed signals from Ministers perplexes  many managers


Is the Coalition Government against profitmaking?

It seems a ludicrous question on the face of it. But some in the private sector are now beginning to ask it.  The Coalition Government is dominated by the Tories. Central to Tory thinking is the paramountcy of  regulated free markets ,enterprise  and wealth creation ,with a  small state and low taxes ,all tempered by a belief in strong local communities. In practice it doesn’t always work out that way, particularly with respect to a small state and low taxes.   Liberal Democrats too want wealth creators to thrive, (although  are keen to limit profitmaking to prescribed areas)  with a focus on a fairer tax system and more equal distribution of wealth, throughout  society .But talk to businessmen and entrepreneurs, the wealth creators, and you might get a surprise. Many actually believe that this Government is hostile to the private sector and the profit motive. Does this perception stack up?  You have got to look at the Governments main big idea to begin to understand why some hold this perception.  So keen is this Government in promoting the Big Society that its rhetoric is almost entirely focused on championing the third sector, social enterprises, co-ops and mutuals.  Phillip Blonds ideas about mutualisation and localism  have not only caught their eye but are integral to many of their policies.

Indeed even when it talks about business models its not Marks and Spencer or Virgin, for that matter, but the John Lewis Partnership it references. Successful though this Partnership clearly is, it has an almost unique ownership structure and is hardly mainstream. More co-op, than bog standard corporate.

Its worth asking what profit is, as its become  something of a  dirty word for some  politicians (look at the polarised  debate over the NHS).  A profit  is financial benefit that is realized when the amount of revenue gained from a business activity or enterprise  exceeds the expenses, costs and taxes needed to sustain the activity. Any profit  that is gained goes to the business’s owners, who may or may not decide to spend it on the business.  So a profit is actually a surplus. Any sustainable business, or indeed any enterprise including a charity, has to aim to generate a surplus or ‘margin’. Not to do so over time is unsustainable. One American charity head involved in Healthcare summed it up succinctly as ‘No margin, no mission’.  What happens to that surplus and how it is managed and distributed is what differentiates the private sector from the charity sector (although not obviously the only difference).  However, regardless of the type of service provided or goods sold or traded, all companies, enterprises and charities, whether pursuing public benefit or not,   have as their goal making a surplus (profit).Indeed if you look at the way charities are structured and operate  they,  to a considerable extent, imitate the way a profit making company operates, although there are clear differences in governance. They have to project manage, control costs, plan ahead, invest in research, train and assess  staff, recruit experienced managers, bid for contracts, market their services and  above all compete.

All the public services we cherish depend on profitable enterprises. If they don’t make a profit there is nothing, or rather not much to tax to fund services. Indeed it is strange for this Government, which is relying on profit making companies and an export led recovery,  to get us out of the economic mess we are in,  remains so ambiguous  in its attitude to the private sector, when market confidence is so important and by the same token  so low.  It suggest a lack of strategic nous. A weak private sector, self- evidently, also means a weak charity sector. It is perverse in the extreme that the governments mood music is perceived as so hostile, therefore, to profitmaking. The private sector offers important skills, innovation, creativity, and capital. It also exerts a downward pressure on costs and prices, if it operates in a competitive market and responds quickly to shifting demand. Clearly profit companies are already delivering many high quality support services in health, education, prisons and other public services.

The Cabinet Office is the Department driving, overall, Public Sector reforms. It is  supposed to be rationalising procurement, cutting red tape, cutting contract costs,  culling quangos, encouraging more public service delivery from the private and not for profit sectors,  encouraging SMEs to have a greater share of public  sector contracts,  ending  late payment    and, of course, crucially  it  is also championing the Big Society. The Tories  and particularly so under Camerons leadership, stress  that individual freedom is only half the story. Cameron has said “Tradition, community, family, faith, the space between the market and the state: this is the ground where our philosophy is planted.”

The Cabinet Offices Business Plan says that ‘ We will change structures so that public sector provision is more  open to voluntary organisations, social enterprises and small businesses.’ Certainly the third sector can make a strong case to be given a greater slice of the public sector pie.

However, according to Education Investor,  Francis Maude, a Cabinet Office Minister,  was sent a letter last year  by five  leading education  companies which expressed concerns over the fairness of the education market and the anti-competitive conduct of subsidised education  quangos ,  offering constructive  recommendations about how to make the market fairer and more transparent. It took the Minister almost five months to reply, (Cabinet Office guidelines encourage reply to letters within 20 working days) . Was his reply worth waiting for? Apparently, not. In his reply (only secured after the journalist rang his office) he was entirely dismissive of the managers complaints, implying that everything was hunky-dory while failing to address a single  one of   their recommendations. These are companies, by the way, seeking to make inroads into the international education market, which will help UK Plc. Clearly they can expect little support in this from HMG in the future. They certainly haven’t in the past.  Why, one has to ask, would they have bothered to write to Maude in the first place  if there were no  legitimate issues to address. These were competitors agreeing that there were substantive issues of shared  concern, and which merited a response and action from the Government. Such cavalier and discourteous behaviour from a Government Department responsible for important reforms hardly inspires confidence. No wonder the private sector (and in this case not for profit too) is miffed. The fact that Maudes Department sent the letter initially to the Health Department, for answer, rather suggests a Department in some disarray and under- resourced. One hopes for the reforms sake that this is not the case. But this episode surely reveals three truths. A considerable degree of complacency from Ministers and senior officials  , a lack of concern or interest in   issues affecting our exporters  in the education market and   a lack of willingness to engage with  key stakeholders on matters of crucial concern to them.

A white paper on public-service reform that Mr Cameron said would lead to a “range of providers competing to offer a better service” has now been delayed. According to a leaked memo of their meeting acquired by the BBC ,  Francis Maude, recently told John Cridland of the Confederation of British Industry that there was to be no “wholesale outsourcing” of public services. The note was marked “strictly private and confidential” and was drawn up by the CBI as a record of the meeting. It said: “The minister’s messages were clear cut… the government is committed to transforming services, but this would not be a return to the 1990s with wholesale outsourcing to the private sector – this would be unpalatable to the present administration. “The government was not prepared to run the political risk of fully transferring services to the private sector with the result that they could be accused of being naive or allowing excess profit making by private sector firms.” Private sector involvement would be limited to joint ventures with not-for-profit groups.

The note adds: “Government is very open to ideas for services currently provided within the public sector to be delivered under a private/government joint venture. Government is committed to new models of partnership, and private sector organisations need to offer joint ventures – joint ventures between a new mutualised public sector organisation and a ‘for profit’ organisation would be very attractive. “Government… was very interested in turning existing services into government companies. These would avoid the downsides of ‘hassle’ and adverse political reaction.”

The third sector and not for profits clearly have an important role in public service delivery and indeed arguably   deserve a greater role. But we need a diversified supply side bringing each sectors strengths into play. The Private Sector has access to capital and capacity that the not for profit operators could only dream of .The Governments job is to provide an enabling environment within which there is a diversified, fair, regulated  supply market but  does  little  to deliver this ,ignoring among other things , the  market activity of  subsidised quangos which increase the risks and costs to other suppliers, while  obstructing the development of the market both here and abroad. (and yes  they do cross-subsidise!)


Michael Gove the Education Secretary, at the forefront of public sector reforms introducing “free schools” inspired by the Swedish system and US Charter schools has rebuffed suggestions that education companies should be able to make a profit from them, as firms can in Sweden and the United States.  Some  advisers have even briefed against profit making Charter schools in the States suggesting they were less impressive than not for profits, while studiously ignoring the fact that the most successful Swedish Free schools tend to be privately operated. Its a desperately naïve and counterproductive approach. Its not either or, but both sectors that are needed in the supply mix. Nobody would claim that the private sector is a panacea for public service delivery but the best in the private sector has much to offer  public services.   He insists that he has enough not-for-profit providers: “We don’t need the profit motive,” Mr Gove has said. . He obviously hasn’t clocked yet that the state education system relies on companies driven by the profit motive whether its building the schools, providing ICT,   school books, inspecting the schools, providing specialist support, training and improvement services, running local education departments  managing special schools and so on. Indeed isn’t it distinctly odd that there is no need of ‘profiteers’  managing state schools   but there is a need for them apparently   in managing our most vulnerable pupils  in special schools .  The mood music if not hostile to the private sector is decidedly lukewarm.

So, given this policy backdrop you would have thought, wouldn’t you, that not for profits are optimistic and gung-ho about the future and their role in support of the Big Society and looking forward to more public service contracts.   Well no, actually they are not.  The truth is its pretty cold out there .Not for profits are having a hard time of it. Many are restructuring or merging, income and donations are reducing, there are much fewer big ticket contracts available and those that are left are subject to increased competition   with contracts smaller in scope and value, while many fine charities are haemorrhaging capacity and manpower.


The Economist recently pointed out that Britain is unusual among rich democracies not in how much private involvement there is in its public services, but how little.


It also pointed out that profiteers are cold shouldered when it comes to education but welfare…. now that’s a different matter. In welfare there are no such qualms about profitmaking. A new scheme, the Work Programme, offers payment by results to providers for placing the long-term unemployed in jobs and keeping them there.


There is much muddled, incoherent and contradictory thinking going on which could well derail the reforms. The Government needs a long hard look at what it wants to achieve against the backdrop of straitened economic circumstances and work out how both the private and not profit sectors can deliver reforms for them. It is managing to upset large numbers of stakeholders (whom it needs to keep on board), and for no conceivable gain. Its spending too much time listening to policy wonks and woolly, pie in the sky theorising about the Big Society and too little time working out the practicalities, and the change drivers including the provision of incentives   to harness both the market and the third and voluntary sectors to deliver its public reforms, focused on raising productivity and improving efficiency. And time is running out.





Giving  a clear idea of the vision, aims and action plans  of each Department


The Spending Review 2010 set out the Government’s policy and financial priorities, and a spending framework requiring significant cuts to most departmental budgets. Subsequently, the Government published 17 Departmental Business Plans which focus on the priorities set out in the Coalition Agreement and are designed to provide a basis for accountability for delivery of those actions. The Business Plans provide detailed coverage and accountability for implementation of the Coalition Programme. The plans set out a policy intention to shift power from central government to local communities and locally based public, private and voluntary bodies. The Government wants to empower local people and embed local accountability by making more data more freely available so that people can assess value for money and services providers can be accountable. However, the planning to support the implementation of the reforms and new models of service delivery is at different stages in different departments with much of the detail under development or not yet in the public domain.  Clearly of particular interest to those involved in education, skills and training are the Business Plans of the DfE and BIS. But you should also note the Business plan of the Cabinet Office which is driving reforms overall in the public sector, relating,  for instance, to quangos, public sector procurement and contracting and the relationship with SMEs. It is also vigorously pushing the ‘Big Society ‘agenda , amid concerns among its supporters that the initiative is losing its momentum. Many references here to the  anticipated  role of the third sector in public service delivery.



Need to ensure that autonomous schools are accountable


In January, this year, the Commons Public Accounts committee  found that academies, the independent state schools that are central to this Governments education  reforms,  have improved pupils’ educational achievements and life chances in some of the most deprived communities in the country. Around 17% of state secondary schools are academies and the government has made no secret of the fact that by the time of the next election it would like half of all secondary schools to be academies.  This certainly seems possible at the current pace of conversion.A study by Stephen Machin and James Vernoit at the London School of Economics found  that academy status tends to raise pupil performance and improves the performance of neighbouring schools. The Government takes some pride  in what it sees as the academy success story. But the rapid expansion of the scheme raises other important accountability issues that were picked up by the PAC.   Many academies, it found, have inadequate financial controls and governance to assure the proper use of public money. It said that the DfE and YPLA have not been sufficiently rigorous in requiring compliance with guidance. It added that it  should be made  compulsory for all academies – sponsored and converter – to comply with basic standards of governance and financial management. This should include ‘segregation of key roles and responsibilities, and timely submission of annual accounts.’  It added that  ‘as the Programme expands, there are increased risks to value for money and proper use of public money’ so ‘ the  Department needs to develop sufficient capacity and adequate arrangements to provide robust accountability and oversight of academies’ use of public funds.’ Until very recently Academies were not subject to the Freedom of Information Act which was an absurd anomaly, given the amount of taxpayers money  tied up in these schools.(The SSAT quango which supports Academies is  still not subject to the FOIA-work that one out)

What is clear is that while Academies appear to be performing relatively well against   educational benchmarks (although some  have complained including the Civitas think tank  that there has not been full transparency over what exams their pupils sit) the pace and scope of Government reforms leaves it open to criticism that the administrative and regulatory tail is playing  catch up. The  proposed  abolition of the YPLA which has responsibility for Academies may serve to complicate accountability issues.  Part of the attraction of setting up these schools is that they are autonomous and because they are freed from local authority control they have less bureaucracy and red tape to contend with, which is seen as a real positive. But some are concerned that the regulatory framework within which these autonomous schools sit is not robust enough. Policymakers have tended to focus on the imperative of  freedom of choice rather than the regulatory implications of supply side reforms  and in working out how to put in place an enabling environment that  safeguards the public interest  and  minimises the chances of these  new schools failing  and indeed ensuring  that  a system is  in place to manage  failure and its consequences. The Government has recently tightened up the vetting of Free Schools bids which suggests that  it has its own concerns.  The challenge of course is to strike the right balance between real autonomy and accountability to the Government.

Other countries have introduced supply side reforms, including autonomous state schools and there may be lessons that we can learn from their experiences.  CfBT Education Trust has been investigating  international practice in the area of school reforms and will be publishing a report this summer. The timing could not be better. Watch this space.



Legal case will test Charity Commissions stance


The dispute about charitable status of private schools has been simmering for several years. The 2006 Charities Act removed the presumption that all charities providing education also automatically provide public benefit. The then (Labour) government swiftly offloaded the task of explaining what that meant in practice to the Charity Commission, which was required to issue statutory guidance.

The Commission’s new public benefit test ruled that people in poverty should not be excluded from the services of these “charities”; that their benefits should be made available to a “sufficient” section of the population, be quantifiable and reported on annually.

Many believe that the Commission has handled the issue poorly. On the one hand it has left the independent sector confused about what they have to do, specifically to satisfy the public benefit criterion. On the other hand they have been dropping hints that increasing bursaries might be viewed sympathetically. This has been interpreted by the independent sector  as the Commission not being prepared to give sufficient weight to other activities undertaken by schools which have a charitable purpose. Nearly all independent schools, after all, undertake a range of charitable activities-whether in sharing teachers or facilities or through various community links  and activities  and local school partnerships. A handful (not enough according to Lord Adonis and Anthony Seldon-see Times 11 May) are   even directly supporting Academies, in what is seen  by those involved as a mutually beneficial arrangement .Meanwhile state heads are miffed because they feel that awarding more bursaries will serve to encourage the independent sector to cream skim their best pupils. It seems that nobody is happy.

In 2009, the Charity Commission put a sample five schools to the test. Two failed the test because they provided too few bursaries. Far from clarifying the situation this caused greater confusion and uncertainty. How many bursaries is a small school for instance supposed to award? With tight margins some might be forced out of business (and the taxpayer would then have to pick up the tab). The Independent Schools Council was given leave to judicially review the commission’s guidance.

This case  has now started.. The ISC argues that there should be return to the pre-2006 status quo because charitable private schools already educate a “sufficiently wide” section of the public to a very high standard while not explicitly barring entry to anyone else.

Michael Gove, when he was Shadow Education Secretary, seemed to suggest that he would help knock heads together to relieve the impasse if in power, but  has kept  out of the fray so far , probably to await the findings of the legal case. ISC lawyers seem to think that the Commission has been making it up as it goes along. This is hardly helped by the fact that the Chair of the Commission is seen as uncomfortably close to the Labour party. The ISC however has its own problems with a number of schools unhappy with its structure and the services it provides. A failure to win this legal case will add to its problems. One weakness of the sector is that it speaks with several voices.,represented by a number of organisations that dont seem to agree on much which has served to reduce the sectors political clout.

This is,  of course, just one stage in a long running battle that has a political dimension  as the left want the independent schools to lose their charitable status which they believe would make the sector ultimately   wither on the vine.

What would be more likely to happen is that smaller schools would largely disappear and those that are left would become even more expensive, and so  more exclusive and would shrink from ‘expensive’ engagement with local state schools. Who, one wonders, would benefit from that? Over to the Charity Commission on that one..