Tuesday, 13 January 2009

The economics of education: "Independent" versus "Private"

The Daily Telegraph's splash that "Parents turn to 'no frills' private schools due to fears over recession" [12/01/09] is sensational:
Parents are turning to "no frills" private schools as the recession hits middle-class families.

Schools with fees set at a fraction of the national average are reporting increased demand during the economic downturn. Some cheap and mid-market independent chains are even preparing to open new schools despite fears of falling interest elsewhere.

The New Model School Company - linked to the Civitas think-tank - is opening two new prep schools in London charging around £5,000-a-year. Its one other existing school in West London is also expanding.

Robert Whelan, Civitas deputy director, said: "The demand is fantastic. It is a question of finding buildings."

Talks are under way for a school to join the Alpha Schools Group, which has four "affordable" schools in the capital.
Independent School fees are undoubtedly expensive: the average school fee is £11,253 per annum which is a significant amount of money for all but the ultra-rich. Now that money is more scarce parents are right to ask exactly what they are getting for their money.

It obviously sells newspapers to complain about the amount that independent schools charge. However, we are charities and we do not exist to generate profits for our shareholders or investors. The fee levels are there for a reason. When you analyse the balance sheet of any independent school you will find that any surpluses are ploughed back into the school.

Now it might be argued that schools have invested too much in recent years in new buildings and facilities - now we all have sports halls, swimming pools, theatres, art and design centres and so on. However, it should be noted that this particular arms race was fuelled by parents [advised by school guides and newspapers!] going around with a check-list to compare schools. But this world is changing - I suspect the years of infrastructure expansion are over and the age of Foundations to fund bursaries has dawned. This is not only a very positive thing for our schools, but also for the country. Whether reinvested in plant or pupils, all independent school funds go back into the organisation.

When parents send their sons and daughters to an independent school, they are benefitting from years [and, in some cases, literally centuries] of prior benefaction. When a pupil comes to Berkhamsted they benefit from literally millions of pounds worth of investment. Their parents are not paying to service a debt - the fees simply cover running costs, and an on-going maintenance and investment programme that enables us to be the best school that we can be. The same is true of most independent schools in the country.

The irony is that the same is not true of "private schools". For those not familiar with the subtlety of the terminology, I will explain. "Independent Schools" usually refers to those schools who are charities and are Governed by Trusts; as opposed "Private Schools" which are owned either by a proprietor, or, as is increasingly common, by a company. Private Schools operate for profit and their approach is driven fundamentally by an ethos of business rather than of education.

The Daily Telegraph article provides us with a fascinating case study. Ten minutes' research reveals that the 'Alpha Plus Group' comprises some thirteen schools and nurseries and five sixth form colleges. The Group was acquired by Sovereign Capital in June 2002, who developed the group and sold it in December 2007. According to Sovereign Capital, they achieved an 'Exit money multiple' of 5.5x, with which their investors were no doubt delighted. The new owners, Delancy, outline their aims on their website and will no doubt be equally successful:
We look to deliver higher returns without sacrificing security. Our approach provides the optimal balance between risk and reward and consistently delivers success. Indeed over the years our clients have seen highly competitive returns on their investments.
I have no problem with schools being run as efficient business. Indeed, it is important that those of us who run independent schools are good stewards of the inheritance that we have received from previous generations. But I am concerned that parents are sometimes unable to distinguish between those schools which are charities and those which are being run for profit. I believe that we need greater transparency. One way for this to be achieved might be for the Independent Schools Council [ISC] to distance itself from schools that are not charities.

This is not just an issue of profit versus surplus. There are other important factors at work here too. Because family wealth is often tied up in proprietorial schools, they can can simply be here one day and gone the next: Wolborough Hill School in Devon was a case in point. Worlborough , founded in 1877, was a thriving Prep School, with good numbers and a strong reputation in the area, before the owners sold up in the summer of 2004.

Parents can easily determine whether a school is a charity by consulting the Charity Commission website. Parents can access school accounts posted there and thus see how their money is spent and how much surplus is being generated each year. They can also research the financial health of a school and identify schools with significant debt, or, alas, schools that are in trouble.

So "why pay more?"
Well, as far as education is concerned, you tend to get what you pay for. I use the word 'education' advisedly. It is possible to 'school' a boy or girl of prep age for £5,000 p.a. Whole-class teaching in the younger years is much cheaper and easier to provide than secondary education, where a number of specialist teachers are required. Education becomes much more expensive when it comes to GCSE and A-level, where schools need to offer a diversity of subjects. This is why large schools are able to offer more A-level subjects than smaller schools. Independent schools are able to provide suitably qualified specialist teachers - and you get what you pay for here too. Salary levels in independent schools are higher than in maintain sector schools, but so are expectations of what is required of them.

But there is more to an 'education' than just teaching and examination results. Independent schools set out to develop the whole person, be that on the games field, in the concert hall, on the stage, in after-school clubs, in the CCF, on Duke of Edinburgh Award expeditions, on trips and tours. It is these co-curricular aspects that complete an education.

In the current economic climate, not all parents will be able to afford an independent education and it is a sad reflection on maintained sector provision that "private schools" are filling the gap.

"Private" versus "Independent"?
"No frills" Schools - perhaps; "No frills" Education - never.


  1. It crossed my mind that Private schools will be very 'picky' about their choice of location - presumably in areas where state education is pretty dismal so as to gain from the many dissatisfied parents, and yet not able to afford traditional public/independent school fees.

    If true, then Berkhamsted should be relatively safe from this newer form of competition. But the 'border-line' parents (those that are wavering between state and independent - presumably a larger number than usual this year) work the system to get their offspring into their preferred state school. For many this will currently be a grammar school in Bucks. A boom time perhaps for private tutors at 11+ stage? And a difficult time ahead, presumably, for the maintained sector - all those extra students to educate!

  2. I wonder if it is fair to say that school improvements were driven by parent demand? If a school offers a broad curriculum, has excellent pastoral care, strong extra-curricular provision and so on, has it truly been the case that in order to maintain its standing vast sums must be spent on shiny new buildings? I suppose what I'm trying to articulate is the thought that if a school such as Berkhamsted has a tradition going back hundreds of years then why has this 'arms race' been necessary at all? I think it's fair to say that most people who think about sending their children to the school know what they will be getting; the rounded education that you describe in your post.

    Of course, neither you nor I were in post when the various 'new' buildings were constructed at school, so we were not privy to the decisions and rationale adopted by the Governors and then Principal. Presumably, there would have been extensive discussion about the pros and cons. I find it hard to believe that parent power was the main driver for change and improvement. However, I should confess my own ignorance by saying that although I am a former pupil of the school, my previous teaching experience, prior to starting at Berkhamsted in 2007, was in the State sector, where funding is a very different affair.

    On the one hand there is no doubt that the new Chadwick centre provides an outstanding environment in which the teaching of Art and Photography can be taken to new heights. On the other hand, I don't suppose I would have swum any faster as a boy whether I was in the marvelous pool at the Knox-Johnston centre, or the original Victorian pool at the Castle campus; but I would have benefited from better gym and indoor sports facilities. And that makes me think that the rationale was improved learning opportunities, rather than a case of keeping up with other schools.

    Lastly, to pick up on the other thread in your post, do you think the Government et al should re-introduce the assisted places scheme? How would you see this tying in with the announcement yesterday that the Government has re-prioritized social mobility, and is offering £10,000 golden hellos to teachers who offer three years in the toughest schools?