Debate: Local councils are paying off debts by selling school fields. Should education make a profit?

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What's going on?

Holland Park School has just made a profit for its local council by selling off a former playing filed for the development of 72 new homes. The money has gone to a complete re-fit of the schools building, and there was enough money left over for the council to fund projects in other schools in the area. The scheme received criticism, which the local council answered by saying the decision to build new schools upwards has freed up space on the ground for new green spaces. Money has been made, but at what wider cost?

Case For: For the kids

The principal argument in favour of introducing an element of for-profit activity into education is around capacity in the system, says Lucy Lee, of Policy Exchange. "According to the recent London Councils report [released in September] we've got a predicted shortfall of around 28,000 primary school places by 2014/15 in London alone – how are we going to meet that capacity?"

"One way to do it is to introduce additional providers in schooling," says Lee, suggesting that social enterprises are an attractive option. "They are more ethically and socially focused models. You would need to ensure that there are very clear principles and a framework around which they operate."

According to Lee, a community interest company is a more realistic option, because it's difficult to "promote a fully for-profit entity within education". Instead, she argues the case for a social enterprise with greater financial transparency and a duty to reinvest all or a portion of any surplus made into the school, while also paying a proportion of any surplus as a return to the shareholders or co-owners. "Social enterprise is a much more beneficial way of adding a modicum of surplus profit into the system, which can then be invested back in to build capacity."

Lee cites Sweden as an example of a system where a for-profit model has shown positive results, referring to the recent Institute for Labour Market Policy Evaluation report on independent schools and long-run educational outcomes. "The study showed that there's been an expansion not only in the capacity to meet the demand, but also in the quality of provision across the system as a whole."

She also points out that some parts of the education system already have a for-profit provision, such as in nursery education. "It's not a new idea. These are vulnerable children who already have such a provision."

Finally, she says putting a for-profit or social enterprise model in place might enable authorities to increase capacity quickly, which could be particularly effective in poorer urban areas with acute shortages of school places. "It's all about recognising and targeting a specific need rather than taking a blanket approach."

Case Against: People, not profit

Ian Hunt, managing director of educational consultants Gabbitas, sees a clear difference between existing independent schools and a for-profit model. "Independent schools make a profit, but they would argue that they make a surplus: there are no shareholders or dividends, and all the money goes back in to the development of the school for the benefit of the children. There's a big difference between that and setting up a school to make as much money as you can for your company or your shareholders."

For education journalist Fiona Millar, the risks to pupils are simply too high for experimenting with for-profit models. "Education is about much more that simple performance indicators, which would inevitably be used to justify whether schools should make more or less money," she says. "There would be a lot of perverse incentives for schools to behave in ways that wouldn't help with wider issues like inclusion, child wellbeing, community cohesion and so on."

The bottom line, says Millar, is that some things don't lend themselves to profit and loss.

"Children aren't tins of beans, they're human beings. If a shop closes it doesn't really affect anybody but the owners; if a school closes it has a massive impact on everybody in the local community."

Stephen Ball, the Karl Mannheim professor of sociology of education at the University of London, has concerns based on evidence from overseas. According to Ball, data from Sweden, the US and Chile suggests that overall for-profit providers "do no better in terms of performance than existing state schools. They tend to increase social segregation between schools and rely more heavily than state schools on ITC-based teaching and learning."

He points out that the Swedish government is reviewing for-profit providers following concerns over their performance and over the role of private equity companies. "Sweden now has a large minority of its students being educated in schools owned and run by a foreign investor," he says, arguing that the Swedish education business model relies on driving down costs by replacing teachers with learning software, and by not providing specialist learning facilities.

"The tendency is that advocates of for-profit provision both ignore the evidence and romanticise business," says Ball. "What we're debating is what happens when, as is the case now in Sweden, the public interest and the business bottom line come into conflict."

To continue this debate, visit the London Festival of Education this Saturday

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