Adam Smith Institute calls for profitmaking in State schools

Free schools initiative needs help


The Adam Smith Institute published a report last week authored by James Croft, an Education consultant,  which backs profit making state schools to meet the challenges set by the choice agenda, shortage of capital and  demand for new school places, particularly at the Primary level.

The message is that involvement of profit making companies will breathe new life into the Free schools programme which shows signs of stalling. The report also  looks at the untapped potential offered by Proprietorial (for profit) schools that have delivered outstanding results where they have been allowed to operate.

The idea behind Free Schools is a good one, says the ASI report but the restrictive nature of the policy has led to disappointing results so far.

Just 41 Free Schools are  in the pipeline  with only  a handful starting in September this year. (only one has so far signed a funding agreement)

The Secretary of State, Michael Gove has said that he ‘wants to give the idealists a chance, but idealists need capital too.’

The report says ‘There is no reason why brilliant and innovative educationists cannot effectively partner with able businesspeople, for-profitThere is every reason to believe, to the contrary, and on the evidence, that for-profit incentive will in fact work to lift pupil attainment. ‘

However as things stand  far from bringing about systemic change ‘Free schools look set to have only a ‘statistically minor’ impact unless ministers are prepared to facilitate the contribution of profit-making businesses.’


The ASI report ‘Profit-Making Free Schools: Unlocking the Potential of England’s Proprietorial Schools Sector, assesses the gains that would come from opening up the Free Schools programme to profit-making schools. It looks too at  the challenges facing the government and the excess capacity currently available in the for-profit schools sector.

The paper considers the case for new schools in the context of these challenges (Part 1), examining in particular whether fears an extension in the private sector’s remit in schools are justified and revisiting the question of whether profit necessarily compromises educational outcomes. Building on other studies scrutinising the performance of for-profit education management companies overseas, Part 2 investigates the little known English proprietorial school tradition and offers a profile of these schools for the first time as constituting a sector in their own right. Concluding the report, Part 3 considers ways of unlocking the sector’s spare capacity and harnessing its entrepreneurial energy in service of wider policy goals

The author looks at Ofsted and Independent Schools Inspectorate reports of the profit-making schools sector in detail, and determines that these schools deliver results that are equal to or greater than all independent schools. In other words, there is no evidence that profit damages outcomes. Crucially, this holds true even in profit-making schools that charge fees roughly the same as the state’s per student education expenditure. The report concludes that the excess capacity in the profit-making schools sector can be unlocked by liberalizing the requirements for Free Schools.

The Free schools project has the potential to be this government’s most lasting legacy, but for this to happen Free Schools must be given exactly that – freedom, says the report.

Government hostility to the profit motive has confused many in its own ranks. The ASI   does a service by reminding readers that the commissioning of private sector organisations to assist with public service delivery in hospitals, prisons and care homes is nothing new in the UK. There are, furthermore, precedents in education, notably in early years and Special school provision, for entrusting private providers with the care of the youngest and some of the most vulnerable individuals in society. ( So,  profit making companies can look after  the most vulnerable pupils  but not  mainstream pupils- work that one out! )  For-profit nurseries now account for approximately 74% of market provision.   Proprietorial independent special schools have focused their efforts on catering for pupils with acute SEN, more complex (including medical) needs and/or those displaying more challenging SEBD requiring specialist services.

In respect of academies and new schools, however, the government has sought to maintain a delicate political compromise by insisting that these be governed by trusts operating as companies limited by guarantee, on a not-for-profit basis. This means that educational management organisations are limited in practice in the role they can play.

The report claims  that this is an artificial construct: ‘ there is no evidence to suggest that trust governance guarantees solid educational outcomes, neither for that matter is there evidence to suggest that for-profit management necessarily compromises standards.’

The report explores the untapped potential offered by Proprietorial (for profit) schools that have delivered outstanding results where they have been allowed to operate.  These schools show how schools in the market respond effectively to demand.  The 480  Proprietorial schools educate over 80,000 pupils and  include those run on more traditional sole proprietor and family partnership models as well as those owned and operated by chains.

ASI concludes that the government should unlock the for profit  potential in order to meet growing demand in the coming years, with a view to introducing a steadily greater degree of choice for parents and increasing competition among schools. The requirements of the new free school applications process are altogether too prescriptive. If choice and competition are indeed inherently beneficial, as the Conservatives have consistently argued in and out of office, then audited accounts showing sound financial management, together with evidence of demand, ought to be sufficient criteria for existing schools not in need of capital investment. Providing such schools have some spare capacity to bring to the equation, they should be automatically approved on a value for money basis every time.

The report recommends that the government remove any requirements relating to corporate or legal structure from free schools legislation. Schools would no longer have to be run via a charitable vehicle or operate under a trust framework. Private companies, partnerships and sole traders should all be able to participate in the Free Schools programme.


Goves resistance to allowing companies to profit from state schools precedes the Coalition. It is emphatically not a result of a compromise hammered out with the Liberal Democrats. Indeed some Liberal Democrats including Julian Astle of the think tank Centre Forum have no problem with the profit issue. Nor do those think tanks traditionally closest to Goves thinking – Policy Exchange and Reform. His resistance seems to be informed  by a  fear of upsetting unions and others in the education establishment including some senior civil servants. He doesn’t want to open another political front although ironically  unions already argue that he has privatised the  school system

‘Profit-Making Free Schools: Unlocking the Potential of England’s Proprietorial Schools Sector; ASI James Croft 2011


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