PPPs fail the test in UK schools

PPPs off target
Duncan O'Leary

As the role of the private sector in the provision of public services takes on increasing profile in Australia, all the indications are that the issue could become a central plank of the Labour government's necessarily radical third-term agenda in the United Kingdom. Several questions in this area remain unanswered however; can the profit motive be reconciled with needs-based provision, and even if this is the case, will genuine improvements result from the Labour government's willingness to embrace the private sector?

A particular area of controversy in the United Kingdom centres on the new role that the government is asking the private sector to play in the provision of services: the 'outsourcing' of whole schools to for-profit organisations. Whilst supporters of the policy argue that the private sector is already involved in contracts to supply administrative, maintenance and catering support throughout the UK, direct responsibility for students' learning takes the Public-Private Partnership in to uncharted territory. In this way, the increased responsibility that the private sector has assumed over the last three years has had two palpable effects; firstly to amplify existing concerns and secondly to produce a whole new set of issues to grapple with.

 The commitment of the government to this new approach was signalled by WS Atkins' takeover of Southwark LEA in 2001, and was deepened the following year when the first contract involving an individual school was also awarded to a for-profit company. Both contracts represented a response to a growing sense of helplessness - Southwark LEA had recently been judged by government inspectors to be "incapable of improving itself," 1 whilst Abbeylands school had just recorded the worst GCSE results in the country. In addition to the element of crisis management involved in each of these occasions, however, the contracts were also indicative of New Labour's willingness to engage with the private sector in a way in which previously had not been seen. Whilst the neo-liberal principles of an unrestrained free market have not been accepted, the government's approach has been at least partly informed by a belief in the innovative capacity of the private sector and the potential for the use of profit as an incentive.

The government's willingness to adopt this new approach has not been shared by many on its back-benches or by those in the Labour movement. Three different unions have passed motions in opposition to further 'outsourcing', whilst elements of the media have also been critical of both the underlying logic and the track record of such partnerships. In the same way that much of the criticism has come from traditional opponents of the involvement of the private sector in public services, it has also followed traditional lines of argument. Among these has been the insistence that PPPs do not transfer the 'risk' to the private provider to the extent that has often been argued. The exit costs of £2.2 million when WS Atkins pulled out of its contract with Islington have been used to evidence this contention, with critics maintaining that "For key public services the Government will always bear ultimate risk if the project fails" 2. In Australia the same arguments have been substantiated by different examples, with the losses incurred by the Sydney Airport Rail Link being drawn upon3. Similarly, debate has continued to around other areas of contention, including the degree of efficiency that the private sector can offer and the value for money that this may or may not provide.

In spite of the enduring attention paid to these debates, however, there are a set of issues that have been largely overlooked. These issues are particular functions of the new responsibility of the private sector to ensure that improved learning takes place, and that all learners receive an education in its broadest sense. At the heart of these new issues is the concern that the contracts that have been used to engage with the private sector have either failed to recognise the complexity of the services that they were intended to guarantee, or have simply ignored it. Since the inception of the new approach, the government has relied strongly on the use of performance indicators in its attempt to tie profit to tangible improvements in schools. Such an approach is an entirely understandable reflection of a the need to ensure that vast profits are not drawn at the taxpayer's expense without clear improvements in services, but it also reflects a very limited strategy.

As has been argued previously, "Educational processes are complex, affected by many variables, so the amount of improvement any single lever can effect is smaller than reformers might wish." 4To add to this, there is the tendency for excessive strain on individual levers to produce unintended consequences. This has been seen on a national scale in the provision of other services5, and is in danger of creeping further in to the education system. A long-recognised example of this is the tendency of schools to focus resources on children of a certain ability range in order to boost school-wide statistics. The net result of this approach has been that whilst the number of A* to C grades have often been increased, there are indications that this has been at the expense of attention to the needs of learners who are either unlikely to drop below a grade C, or to rise above it.

Perversely the response to this growing recognition that individual targets are at best limited in their effects has, in fact, been to stipulate more targets, not less; when CEA took over Islington LEA, the contract involved over 400 targets. Rather than accepting the limitations of targets as a driving force for meaningful change, the government has attempted to provide companies with a more comprehensive remit by adding further linear objectives. This approach belies the reality that a school system is more than the sum of its parts, and cannot simply be mechanically broken down in to neat subsections. School life - like school improvement - is inherently complex.

A second major concern which has arisen from the growing number of targets used in these contracts is the consideration that they may actually stifle innovation, rather than encourage it. One of the major drivers for the involvement of the private sector in public service provision is the perception that it will bring with it the capacity to be innovative. With the price of failure set so high and the number of penalties incurred by procurement contracts so numerous6, however, this is proving less and less likely in practice. Michael Fullan has argued that, "Governments must give active permission to schools to innovate and provide a climate in which failure can be given a different meaning as a necessary element in making progress" 7; when companies operate in a market that is so heavily regulated, this is simply cannot the case. Fear of failure is one thing, simply being unable to afford failure seems a certain route to the cautious, incremental change for which the state sector is often criticised.

The response of private companies to this problem has been to argue for deregulation of the market and less punitive contracts; however such an approach has its own obvious pitfalls. A report produced by MORI last year concluded that, "people often trust the public sector more because the service is accountable to the public, whereas the private sector is governed by the needs of shareholders" 8, and herein lies the conundrum: success requires the freedom to innovate, fail and progress, whilst the public needs to know that it is not being taken for a ride. The use of targets in contracts with the private sector has produced some positive results, but it has also contributed to some disasters; even the enthusiasts admit that the record of these partnerships is "mixed" 9, and until an accountability framework can be found which recognises complexity and guarantees value for money this is only likely to continue.

Duncan O'Leary is a researcher at Demos think-tank, based in London. He is the author of the Demos scoping paper Do for-profit companies offer better services, for better value, than those that are publicly run? and a co-author of a recent paper A fair go: public value and diversity in public education, which Demos was asked to produce for a symposium being held by the Education Foundation in Victoria.


1. http://news.bbc.co.uk/1/hi/education/2287934.stm

2. http://www.ippr.org.uk/press/index.php?release=150

3. http://evatt.labor.net.au/publications/papers/117.html

4. http://www.demos.co.uk/catalogue/educationepidemic/

5. http://www.demos.co.uk/catalogue/systemfailure/

6. CEA's contract with Southwark invoked a £600,000 profit cap per annum, with £75,000 fines for every operational target that was not met.

7. M. Fullan; Leadership and sustainablity (March, 2004)

8. http://www.mori.com/pubinfo/rd-trust.shtml

9. 'Privatising State Education has had Mixed Results'; The Economist (May 1st 2003)

See also:

The myths of PPPs, by Graham Larcombe & Paul Fitzgerald

An expensive lesson, by Phil Revell

PPPs in perspective, by Colin Crouch

Campaign against school privatisation, by Maree O'Hallaran

Do as we say, not as we do, by George Monbiot

Partnerships, privatisation & the public interest, by John Spoehr

PPPs & public schools, by the NSW Teachers Federation

'The bully's pulpit' & 'Sums starting to dig in', by Paul Krugman & John Quiggin, respectively

The trouble with PPPs: An un-holy alliance, by Christopher Sheil

The public good & public services: What role for the public sector? by David Hayward

There are other ways: PPPs & public policy, by Sharan Burrow

News of the world: PPPs are a disaster, By Kenneth Davidson

PPPs: A policy in search of a rationale? Private finance and 'value for money' in Britain's public hospitals, by Allyson M Pollock, Jean Shaoul & Neil Vickers

Suggested citation
O'Leary, Duncan, 'PPPs fail the test in UK schools', Evatt Journal, Vol. 4, No. 2, June 2004.<http://evatt.org.au/papers/ppps-fail-test-uk-schools.html>