Low cost private schools: any appetite?

Some of you may have come across the magazine that exists for those interested in investing in education. From time to time its journalists ring me up to ask about issues relating to the private sector in education As a business operator, albeit with TeachVac (www.teachvac.co.uk) using disruptive modern technology, I understand their need to assess opportunities and I happily share my thinking with them.

Recently, the magazine hosted a conference in London. Mostly, the topics discussed were in the higher education realm, an area of less direct interest to me at present than schools. However, there was a session about low cost private sectors schools and possible opportunities in England. Now that’s a topic of more direct interest to me, although they may not know that fact. Many years ago I undertook a piece of research for a client about the possible opportunities in the private school market for a low cost model at a time when school fees were rising sharply. My conclusion was that such a school might well struggle as it offered neither exclusivity nor the small classes that were both the trademarks of many private schools.

Has my judgement changed? Well, I haven’t done any in-depth analysis, so this is very much my first thoughts, but my hunch is that if anything the market is less propitious for new entrants than twenty years ago. With an expansion of selective state schools on the horizon, there may be opportunities in the primary sector, but less so in the secondary. Why pay for what you can achieve for nothing? Paying for tuition is also a cheaper option than paying for a school with some parts you won’t need.

Much could depend upon where the bar for entry to selective schools is set if the Conservative were to go down that path where they to be re-elected. Too selective and they will have little overall impact on existing comprehensive schools in most areas. Too low and we really have a return to the two-tier system of yesteryear. In that case, there might be an appetite in urban areas for fee-paying schools for those pupils that just missed out on a selective school, especially in a period of growth in pupil numbers. However, the existing fee-paying schools should be able to cope with that demand, especially if there were the transfer of some traditional entrants from these schools to the selective schools as parents feel they no longer have to shell out on school fees. You only have to look at what happens in areas with sixth form colleges with a high reputation and the distribution of fee-paying schools.

So, I think that I would be wary of thinking the future holds significant opportunities for the low-cost private school market. There might be some specific groups of parents still wanting to exit the state system but, while there is the chance of a free school paid for by the State, surely that would seem like a cheaper option for them.

Where I have always thought there might be a market is in the vocational skills area for the 14-18 age-group, especially if an institution is closely linked to the local job or apprenticeship markets. Even better, if you can persuade employers to subsidise the cost of the school in return for a fast track into the challenging sections of the labour market. The armed forces have historically understood this section of the market with their apprentice training colleges of yesteryear.

A school offering direct entry into the hospitality or travel industries, where the local further education college isn’t doing a good job, is one possibility. This section of the market also comes with less need for expensive building requirements associated with teaching the full range of curriculum subjects. So, find a niche that can be taught in traditional office type accommodation near a park or other outside space and in an urban area with good transport links and it might be worth creating a business plan; especially if the wages for lecturers can be low, but still better than when working as an experienced professional in the sector and you might have something worth taking further. But, there may well be some other opportunities in the education world for many investors.

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Profitable education

Where do we draw the line at making money out of state funded education? This is a topic this blog has considered before, and a return visit has been promoted by a new pamphlet from the TUC. file:///C:/Users/John/Downloads/14.03.14%20Education_Not_For_Sale_Repor_Report%20(1).pdf   Written jointly by a union employee and an education journalist who spent part of his career at the Times Educational Supplement it is entitled ‘Education not for sale’.

The authors acknowledge that schools and colleges have always bought goods and services from the profit-making private sector. In the case of schools, they say that until the early 1990s local authorities acted as purchasing agents, increasing purchasing power and providing contract compliance expertise; but they maintain that there is a clear distinction between selling rulers and roofs, on the one hand, and core professional duties of teaching and leadership, on the other. The authors of this report find that this boundary is being crossed, with the clear possibility of the flow becoming a flood. I wonder with the recent announcements from the Labour Party front bench at Westminster, whether there must be a concern that nothing will change after the next election whoever forms the government.

My view is that profit, or a surplus made by a not-for-profit organisation, must not reduce the purpose of spending the largest amount possible on education outcomes that secure maximum performance and learning for those being educated. But, it is not an easy task to disentangle where the boundaries are. However, by accepting rules and roofs as legitimate, but not teachers and leaders, the authors of the pamphlet have made clear their dividing line

I agree with the Public Accounts Committee that procurement by government at all levels has been far too amateur a process, and small local firms often don’t get a look in. I do think that under the funding expansion of the Labour government large firms often saw government contracts as a route to riches, and the authors of the pamphlet might have had more to say on both Labour’s PFI schemes as well as their establishment of the academy programme. They also don’t seem to have noticed Paul Marshall’s links to the Lib Dems when considering the DfE Board. Sadly, the big is beautiful in business seems to have been one policy carried over from Labour into the coalition.

For me, as I think for the pamphlet’s authors, an interesting issue remains the pay of workers in schools, whether they are leaders or casual part-time employees delivering the vital services that keep a school functioning. Perhaps because I have never earned more a middling income at any point in my life, I wonder about the ethics of the widening differentials between those earning the least and those who are earning the most. Supply and demand plus a return on human investment by individuals, have both undoubtedly played a part in deciding salary levels, as does the reward for risk. Where I invest in a risky new business I expect a greater return because some of my investments will go bust. Companies on secure contracts should receive a reverse premium that factors in the security of the contract. But alongside the economic strictures, in public service there must surely be a duty on all who purchase goods and services to ensure that profit or surplus isn’t being created by the refusal to pay some  workers a ‘fair day’s wage for a fair day’s work.  The position of trade unions is probably just as complicated, unless you accept that their sole duty is to fight for the best deal for their members. .

I recently looked at the 1961 pay settlement for teachers. That year, the head teacher of the largest school could earn less than three times the salary of a new entrant to the profession.  What, I wonder should that differential be now?

Education icon goes to overseas buyer

The news that the TSL Group, publishers of the TES and The Higher, is to be sold to TPG a leading global private investment firm currently with $US56.7 billion of assets under management, will come as no shock to those who have been aware that the existing owner of the Group, Charterhouse, has been looking to sell the titles and associated on-line presence. This sale will see these iconic British titles taken into foreign ownership. It will also no doubt see the profits from the TES recruitment business flow overseas to support the development of a global brand. TPG are big in technology, and have held positions in some other British companies in the past, including Virgin Rail and Debenhams. However, this seems like a new foray for them directly into the UK education market.

I worked for the TSL Group between 2008 and my retirement in 2011. This sale does raise the issue in my mind about whether there should be a new attempt to create a low-cost vehicle to serve the UK teacher recruitment market, perhaps owned and operated by a consortium of interested parties such as the professional associations, governor organisations and teacher trainers, along the lines of say the NfER.

I have pointed out before that the system I use to track vacancy levels could be applied to school web sites as a low cost recruitment tool and, providing schools and teacher training providers cooperated, could reach the vast majority of teachers seeking either their first appointment or to change jobs much more cheaply than the present profit-making concerns. The fact that the last time the government tried such an initiative with the School Recruitment Service it failed doesn’t mean the idea was wrong, just perhaps that it was badly executed at the time.

Unlike the sale of companies such as Cadbury, of some utility companies, and many of the rail franchises to overseas buyers, the school recruitment market can stay in UK hands, and the cost to schools can be reduced if there is a will to do so. A recruitment business can also offer the platform for other services to teachers and schools, but with a UK on-line focus.

How to make a profit out of education

Yesterday Nick Clegg quite rightly slapped down the idea that state-funded schools could be run for profit. It is doubtful whether any Liberal Democrat would go along with the idea of mainstream schooling as a business venture based on government funding. That’s not to say that you cannot make money out of schools. Of course you can, as textbook suppliers, purveyors of examinations, facilities companies, bus and coach operators, and a myriad of other service providers including in these days of academy conversions lawyers, accountants and insurance brokers, not to mention those architects who designed the ‘Schools for the Future’ under the Blair government, have all demonstrated. But, as a society we bulk at anyone operating the essential learning experience as a profit-making enterprise.

But that isn’t the experience everywhere. Especially in locations such as The Gulf, where schooling isn’t provided by the State for the children of expatriate workers, there is a flourishing and profit-making private sector in education. No doubt in many cases you pay for what you get. And, this is where the defining line is drawn. In Britain the State has determined both the price and the expected standard of schooling it wants. The fact that thinking is muddled about both these points doesn’t obscure the view that as the investor in education the State doesn’t expect anyone who hasn’t taken a risk to benefit from the spending on education.

Now there is nothing to stop anyone setting up a private school that makes a profit, and there have been examples through history of such schools, especially in the vocational and training fields. Since State Education is not compulsory in England, and is only the default position, any parent can elect to pay a private company to teach their children. Indeed, it can be argued that many do by paying for both tutoring services and for revision classes ahead of GCSE and ‘A’ level examinations. In practice nobody knows how much of any schools exam performance is down to parental spend on such activities. Indeed, it might be worth Osfted asking parents about the steps they take to supplement the school’s own efforts at educating their offspring. In some areas something of a mixed economy might emerge.

There have long been questions about the different cost per pupil of services provided under different arrangements between schools and their suppliers and, as academies in their many different guises proliferate, this is an area that will need tightening up if governments are to achieve value for money with taxpayers’ funds. I don’t expect schools to be the next ‘expenses scandal’ because there are too many potential whistle-blowers around, but a canny Minister might establish a Value for Money Unit at Sanctuary Buildings that can review funding agreements ahead of the creation of a national schools funding formula before the Public Accounts Committee tells him to after uncovering some excesses.

More interesting in its outcome than the debate about ‘for profit’ schools will probably be the effects of the de-regulation of teachers’ pay. Anyone who has read the conclusions in the 22nd Report from the School Teachers’ Review Body may well decide that making this change at a point where the wider economy seems to be reviving, and demand for graduates is increasing, especially in London and South East, might have the opposite effect to what Minsters may have intended, by increasing pay not cutting it.