Social Enterprise UK slams Newsnight as think-tank publishes social enterprise schools report

Social Enterprise UK slams Newsnight as think-tank publishes social enterprise schools report
Charity Times, by Andrew Holt
22.02.12

“John Lewis” style, social enterprise schools should be piloted in some of the most deprived areas of the country.

A report published today, Social Enterprise Schools, by think-tank, Policy Exchange, says that the government should consider allowing private companies to set up and run schools under a social enterprise model.

Teachers should be encouraged to take a stake in the school which would create strong incentives to drive up standards.

The report says that allowing private providers to take over the running of publicly run schools will create new places at a time when there is a severe shortage in many parts of the country.

Much of the opposition to private provision ignores that fact that profit making already exists in large parts of the state education system:

Private companies already provide education to some of the most vulnerable children – those with special needs and those who have been excluded from mainstream school. Brent and Medway both spent 31% of their special educational needs 2010/11 budget on services provided by private companies

Over half of all free nursery education is delivered by the private and voluntary sectors. 87% of Middlesbrough’s 2010/11 spending on nursery education, for example, went to for-profit providers in that sector

Private companies have been involved in school improvement programmes for a number of years. Following direct intervention from the Secretary of State in 2000, Cambridge Education secured a £105m contract to run education services in Islington from 2000-07

The private sector also provides all kinds of services in schools. In 2009/10 school spending on “other professional services” – IT, facilities management, catering – was £572million

The report notes that in both Sweden and the USA, 100% profit making companies are allowed to operate publicly funded schools.

Recent figures indicate that 64% of Free Schools in Sweden are operated by for-profit companies. 56% of Charter Schools in the US are managed by for-profit providers.

The report acknowledges that full on profit making in schools would be politically difficult to introduce immediately.

Instead the government should set up pilot schemes across the country to test the effectiveness of social enterprise schools, initially in the most deprived areas of the country.

These schools would be set up and run by private companies. 50% of any surplus could be distributed as a dividend to shareholders on an annual basis while the remaining 50% would have to be reinvested in the school.

New schools providers should, if they wish, be encouraged to operate outside of the traditional structures which apply to teachers’ pay and conditions.

The pilot schools would operate under strict conditions:

A social mobility test. Any social enterprise pilot must operate within areas of greater deprivation and ensure that enrolment includes at least 20% of students eligible for free school meals and hence the pupil premium

A performance test. A rule could be introduced such that the operators of a social enterprise secondary school would receive no share of any surplus unless a certain proportion of their pupils made the expected level of progress

An “asset lock”. Free School buildings and facilities procured by government could not be sold off for private gain. An exception to this principle would be made in those instances where the providers are prepared to invest their own capital to build a new school from scratch

James Groves, head of education at Policy Exchange, said: “Given the huge challenges which our education system faces in the coming years, the government should continue to push the boundaries of the status quo.

“This report challenges the idea that there is simply a choice between for-profit and not-for profit schools. A “John Lewis” model of school where private companies, including teachers and school staff are encouraged to personally invest offers one such innovative alternative.”

Social Enterprise UK on Newsnight coverage of the report
Last night, BBC Newsnight’s covered the Social Enterprise Schools report, which has led Social Enterprise UK’s chief executive, Peter Holbrook, to slam the coverage.

Holbrook said: “The story blurred the lines between the private sector and social enterprise, which is an important concern for our sector. Private companies exist to make a profit for their owners and shareholders, whereas social enterprises exist and make a profit in order to tackle social issues.

"The social purpose is enshrined in a social enterprise’s governing documents and takes precedence. A private company simply reinvesting 50% of its profits back into the business does not make it a social enterprise.

“Social enterprises have a number of other characteristics.They have a clear social mission in their governing documents, are majority controlled in the interests of the social mission, are accountable and transparent, and reinvest the majority of their profits – 50% is the minimum expected. The sector is made up of companies, co-operatives, Community Interest Companies and trading charities.

“The way in which the programme was edited did not reflect the difference. The London Early Years Foundation is a charity – not a private company wanting to use social enterprise model as outlined in the Policy Exchange report and its social mission has always come first. It has evolved into a social enterprise. It was not set up to make a profit. It was set up to make a positive difference to the lives of children.”

“There’s a danger that the social enterprise term will be hijacked by businesses that aren’t social enterprises, but keen to say they are in order to play a greater role in the future delivery of public services.

“Social enterprises have an excellent track record on public service delivery – bringing localism, community development and empowerment to many areas. We are very concerned when large private sector providers badge themselves as ‘social-purpose’ companies and we work hard to guard the good name of the social enterprise movement.

“We need to be very clear about the difference between the private sector and social enterprise. Many charities and not-for-profits are now badging themselves as social enterprises and our sector is growing. It is a real asset to the UK.

"It would be dangerous for our sector if social enterprise was adopted by the private as a convenient badge to take advantage of current trends.”