Examination of Witnesses (Questions 1
- 19)
WEDNESDAY 21 JULY 1999
MR NEIL
MCINTOSH,
MR KEVIN
MCNEANY
AND MR
STANLEY GOODCHILD
CBE
Chairman
1. I welcome everyone to this first session
of our inquiry into the role of private companies in the management
and supply of state education services. May I apologise for the
fact that we are starting late. It would be helpful, for the record,
if each of you could briefly introduce yourselves.
(Mr Goodchild) Thank you very much indeed.
My name is Stanley Goodchild. I am the Managing Director of Three
E's, which stands for education, education, education. (We know
where that came from). It is education: the community. Education:
business and commercial. Education: schools and colleges.
(Mr McNeany) Kevin McNeany. I am the Chairman and
Founder of Nord Anglia Education.
(Mr McIntosh) My name is Neil McIntosh, Chief Executive
of CfBT.
2. We would find it helpful if we started off
by asking you, again in turn, to tell us something, albeit briefly,
about your companies and your own background or those of your
senior staff in education.
(Mr Goodchild) Thank you very much. May I do the second
part first. I am Stanley Goodchild. Previously I was the Chief
Executive of Berkshire County Council before it was dissolved
into six unitary authorities. Before that I was the Chief Education
Officer of Berkshire County Council. Before that I was the head
of a school which had been considered failing. The term was not
available then but it was mainly to do with the fact that it did
not attract pupils. That was Garth Hall School. Before then I
was Chief Education Officer in the London Borough of Bexley, and
before then I was a schools inspector. I will stop it there. As
far as Three E's is concerned, it is a wholly-owned subsidiary
of the City Technology College, Kingshurst, in Solihull, on the
border of Solihull and Birmingham. It was up to provide services
for local business and the community. The school, being a charity,
could not make a profit. Therefore, it set up a company which
would allow it to do that, call it profit or surplus. All that
money, which it made, was then ploughed back into the college
and also the local community.
(Mr McNeany) I am by profession a teacher. I taught
in my native north of Ireland and in Yorkshire. Then I taught
for some time in further education as well. I founded this company
in 1972 and for many years it was engaged almost entirely in teaching
English as a foreign language. The company now has a quotation
on the official list of the London Stock Exchange. It is probably
the first education company, as such, to have done that. As a
company, our policy is to be involved in a great many areas of
education. We are involved in the provision of day care nurseries,
for instance. All the way through the ownership and operation
of schools in the United Kingdom and overseas; through accountancy
tuition in a fairly substantial way; to the provision of British
accredited degrees in the United Kingdom and elsewhere—indeed,
providing MBAs. We have about 2,000 employees, most of whom are
professionals in education. The largest part of the company, at
the moment—and indeed the area which is of greatest significance
possibly to the discussions today—is education services:
out-sourcing in education. The company provides the career service,
under contract, from the various regional Government offices.
This is about 10 per cent of the United Kingdom. We are very substantially
involved in providing OFSTED inspections. We are involved in the
delivery of training to potential head teachers, to newly appointed
teachers, and indeed to serving head teachers. We recently won
a very large PFI to provide the vocational and other support for
the Army Foundation College in Harrogate. That was in partnership
with a construction company, Jarvis. We also were recently identified
as the contractor to be involved in the support of schools and
the Ethnic Minority Achievement Service in the London Borough
of Hackney.
(Mr McIntosh) CfBT also started in teaching English
as a foreign language. It did that for 20-odd years, starting
in 1968. Therefore, it has in any one of the last 30 years employed
at least 300 teachers, so understands teachers and teaching pretty
well. Most of those are EFL teachers but not all. Most of the
staff tend to have a background in education. Most have been teachers
at some point. I was not, in fact. I was Director of Shelter and
then Director of VSO, so I have run voluntary organisations over
the last 20 years. I got involved in education because I was interested
in overseas development and aid funded educational development.
Therefore, I drifted into the domestic education scene. CfBT does
many of the same things that Nord Anglia does. Indeed, we find
ourselves competing a good deal. It is also additionally worth
mentioning that we have our own PGCE programme. We run after-schools
clubs. We manage the national literacy and numeracy centre and,
therefore, support the Government in the delivery of the literacy
and numeracy strategies, which is probably our single biggest
contract at the moment. I just reiterate that CfBT is a charity.
It is a charity which raises all of its income not through shaking
tins but by providing services. We think it is sensible to use
commercial disciplines in the delivery of those services. Therefore,
we attempt to and generally do generate a surplus. That goes to
my trustees. One budget I have no control over is their million
a year budget which they hand out in educational grants or for
research and purchase of services.
3. One of the things we are trying to do, as
a Committee, is to explore what the agenda is here. We are aware
of developments—Hackney, Islington, Kings Manor, education
action zones—but we are trying to understand what the role
of the private company is. May I ask each of you this rather broad
question. Is it your judgment that in the future we are going
to see a kind of privatisation of more of the education system
and, if so, what do we understand by private companies in this
context?
(Mr Goodchild) I certainly think that under the previous
Government, and the current Government, there is a trend to find
ways in which one can improve education. We all know that. I do
think the private company does have a role to play. Although we
are only some five months into the Kings Manor project, there
is no doubt that by involving a private company into the regeneration
of Kings Manor, it is not only benefiting that school but it is
benefiting, in my opinion, education in the whole area. I think
there are things which you may want to explore later on where
I can identify, where I believe the private company, in this case
Three E's, has been able to achieve things which even a very good
local authority could not. As I say, I am not quite sure how much
you want me to go on about it.
4. We will come on to detail later.
(Mr Goodchild) So I do believe this is a way, another
method, of improving the education of the children of this country,
because they only go through the system once and we cannot afford
to get it wrong. I think everyone would agree with that.
5. Can you tell us what the difference is between
for-profit organisations and not-for-profit organisations. You
are called Three E's but some might say you should be called Three
M's: money, money, money.
(Mr Goodchild) That is a matter of opinion. Three
E's does say what we do. Unlike my two colleagues, I did not actually
explain all the services we offer, but we do offer a range of
services for a community. Now Kingshurst is in a very deprived
area and the surplus or profit, whatever you like to call it,
is accounted for and is actually ploughed back into the education
of children in that area and also the community at large, not
only the children but the adults. Once the costs have been taken
out of the exercise, then the money does benefit not the shareholders
but the actual community in which Three E's finds itself. We hope
to continue that and obviously expand that. In the case of Kings
Manor, if I may give an example: the surplus or profit, whatever
you like to call it, is going to be divided between Kingshurst
in Solihull and also the new school, Kings College in Guildford.
(Mr McNeany) The privatisation of the education system,
I do not see it happening. I would make the point most strenuously
that the education sector is a very small one; how could you cast
your net more widely to find other representatives? It would be
very hard pressed to do so. To some extent, the whole industry
is confronting you today. We are a very small industry, in other
words. It is most unlikely, we could take over the education system,
had someone a mind to offer it to us. I do not think there is
a question of there being mass privatisation in education. The
capacity is simply not there. Neither is the appetite. Companies
like mine have an agenda to participate in the private sector
as partners delivering contracts where the opportunity arises,
but for the foreseeable future we do not see mass privatisation
of education. I suppose that the amount, which is currently available
to the industry, is a fraction of 1 per cent of the schools' budget.
6. Do you have shareholders?
(Mr McNeany) Yes, we are a public company.
7. You are there to make a profit?
(Mr McNeany) We expect to make a profit and a return
for our shareholders, yes.
(Mr McIntosh) Funnily enough, I think privatisation
might go rather further than Kevin thinks, albeit in time. The
role of the state is to ensure that all children have access to
decent education. I do not think it is necessarily the role of
the state to provide that education. That distinction will become
clearer as time goes by. I also think that the dichotomy of public/private
is in some ways a misleading one, a politicised debate. It needs
to be looked at in a more sophisticated way. Other dichotomies
are equally important: the dichotomy between competition and monopoly,
and the dichotomy between centralisation and bottom-up change.
It is actually quite difficult to get the degree of competition,
which is desirable. It is also extremely difficult to get the
degree of local community control—if you like, consumer
control—that is desirable, without the inclusion of the
private sector. It is not impossible and there are, of course,
some natural monopolies in education in rural schools. Therefore,
the private involvement in the education sector will happen because
of other forces, which are not to do with the desire for profit
making.
8. Let me ask one more question. Supposing Government
said one day that a particular local education authority had totally
failed its children: "We are going to throw out the whole
thing for tender, we welcome bids." Would any of you bid
for it?
(Mr McIntosh) In a sense, we are doing so.
(Mr McNeany) We are about to do so, I suspect.
(Mr McIntosh) That is right.
9. Where are you going to do that?
(Mr McIntosh) Islington is certainly talking about
it.
10. The whole service?
(Mr McIntosh) Pretty much. They are doing it, following
their OFSTED inspection, co-operatively with the Government. One
of the oddities is that the role of local authorities is still,
I believe, pretty ill-defined in school improvement. I hear from
people where they are saying it is quite clearly defined but they
do not define it. It is a problematic area. In some ways what
people will do if they are taking over local authorities, where
they will seek, (at least in part), to work themselves out of
a job. One of the guiding principles of this government is intervention
in inverse proportion to success, so if you are successful there
is less room for intervention.
11. How many of you are likely to bid for Islington?
Two of you?
(Mr McIntosh) I imagine there are certainly no more
than half a dozen.
(Mr Goodchild) There are ten companies, what we call
consortia, which are actually in the Framework where they can
bid. That has already been set up by the DfEE.
Mr Willis
12. I thought you might also say Liverpool,
where clearly this is going to be on the cards. I just wonder
how you accommodate democratic accountability, particularly within
the with-profit sector. I do not understand how you can accommodate
both.
(Mr McNeany) I think we are subject to the greatest
accountability of all. It has never happened that a local education
authority, however suspect its performance, has been sacked. Clearly,
if my company and any of the contracts that it undertakes fails
according to the contract, our contract can be terminated. So
the greatest accountability is in ensuring that we perform to
a high standard because if we do not we are out. That is a very
important point.
(Mr McIntosh) The other really important point is
that all the trends have been away from local democratic control,
not because of privatisation but because of centralisation. I
often say to local authorities that we are less of a threat to
them than centralisation. I am very much in favour of the literacy
and numeracy strategies, which are probably the most important
single Government programme at the moment, but those of us in
the numeracy strategies do not give one local councillor in one
council in this country the slightest smidgen of discretion. These
are central issues.
Charlotte Atkins
13. Apart from the fear of losing your jobs,
what do private companies bring to the management of education
services that local authorities and governing bodies cannot?
(Mr McIntosh) I think the honest answer to that is
that, in some respects, I do not know. I think that we will be
better than many local authorities and we would manage schools
better that many schools are managed, but we would not be better
than the best local authority and would not be better than the
best school. What we bring is variety and competition. Therefore,
you cannot actually look at an organisation and say, "Ah,
that organisation has these qualities in its staff." I do
not say, for a moment, that the public sector does not have absolutely
first-place people. Of course it does. What I am saying is that
a monopoly provider has a tendency to atrophy over time. Moreover,
a monopoly provider that is providing a mediocre service is incredibly
difficult to do anything about, and one sees a lot of examples.
14. If LEAs were seen then to compete with each
other, that would not be a problem? You would be out of a job.
(Mr McIntosh) That raises a whole range of difficulties
in public administration. The idea of Birmingham bidding for Liverpool
would probably be less attractive to Liverpool than Nord Anglia
bidding for Liverpool, frankly.
(Mr Goodchild) I would like to take up the point about
the involvement of the private sector as opposed to the local
education authority. As a person who has spent 33 years in a local
education authority, I like to feel that I am going to give you
a balanced answer to this. Basically, as a local education authority,
you have a group of staff whom you have inherited and, quite rightly,
have gone through that organisation all their lives. The actual
movement of a staff in a local education authority is not particularly
great; in other words, because people are very localised. If you
take the Guildford experience, we have been able to go into Kings
Manor School with a very precise team of people, whom we know
will help that school in a very specific way. If we were to go
into another school, we would have a different team with different
expertise, because we are able to pull people from various walks
of life. So if there is a problem or failure, in any way, we can
rectify that very quickly, as a private company. The other thing
is that if you take Kings Manor, which was a failing school—and
I believe was the result of the actions of other schools in the
area, because they used it as a way of getting rid of their "undesirable"
pupils so it became, (I am not saying it was), but it was considered
a sink school—if the local authority had said, "Right,
we are now going to focus on Kings Manor," the other schools
would say, "That's unfair. We are part of the LEA. You should
be looking after us as well." Whereas, as a private company,
we can come in and say how we are going to deal with Kings Manor.
The local authority can still act as the broker: you know, the
person who is looking after everybody. So we are able to be much
more effective with that particular part of a failing school rather
than what a local authority can do.
Chairman
15. We are going to come back to Kings Manor.
Does anyone else want to pick this up?
(Mr McNeany) Just to say that what Neil has said I
agree with almost entirely.
Charlotte Atkins
16. Stanley was mentioning staffing. From the
staffing that we presently have in schools and LEAs, where do
you draw your people from? Are they from different backgrounds?
You said yourself that you had worked for a LEA for 33 years.
The staff you employ, are they drawn from LEAs? Where are they
drawn from?
(Mr McIntosh) May I give you a very specific example.
We were running the careers service previously for Oxfordshire
County Council. They had contracts with staff which required them
to work from 9 am to 5 past 5, Mondays to Thursdays, and 9 am
to 5 past 4 on Fridays. We said: "That is profoundly irrelevant.
We are not remotely interested whether you are clocking in or
clocking out at five past four or five past five. We are interested
in outputs." We are using the same individuals. They are
perfectly good, these people running the careers service in Oxfordshire
now, but they have been set free by the management culture that
applies in our organisation. That is not a product of our being
private sector. It is a product of our being in a competitive
situation and having to be, therefore, more rigorous.
17. Are you trying to imply that your staff
are better paid and have better conditions of service?
(Mr McIntosh) They may be better paid, though it will
be fairly marginal, to be honest. They will be better motivated
because they are, to some extent, (I hate to use words like this
because they are jargon I know) now in an empowered culture, where
we have devolved responsibility down to the local office level
and give them much more authority than they were perhaps able
to have.
(Mr Goodchild) There is more risk taking. In a private
company you are able to take greater calculated risk. You can
take more calculated risk because you have not got the same constraints.
There is the old hackneyed phrase which says that when a civil
servant or a local government officer buys IBM computers, he will
not get the sack for that because it is a well-known company.
But if he goes and buys some peculiar computer and it all goes
wrong, then he might find himself in deep water. What I am trying
to say there is that I think there is much more scope for personal
initiative in a private organisation, where what you do is viewed
in a much keener way than perhaps in the public sector.
Chairman
18. What happens if you go bust? A lot of private
companies go bust every year. What will happen then to the children?
(Mr Goodchild) In the contract that is drawn up between
the local authority and the DfEE it is made sure that this cannot
happen. Certainly in the case of Kings Manor that was true. I
know that in the DfEE contracts, part of the business of sorting
out the contracts is to make sure that this eventuality does not
happen.
Charlotte Atkins
19. So are you saying that people are queuing
up to come and work for your companies then from LEAs and schools,
beating down the doors?
(Mr McNeany) I think you are overstating it when you
say beating down the doors, but clearly a lot of people do feel
that they may have greater scope to exercise their initiative
and their latent entrepreneurialism in the structure of a private
company than they would within a local authority. I have noticed
a trend, certainly within the last six months or so, for people
to approach us with a view to employment—coming along with
their extraordinarily sound and innovative ideas about the way
that local authorities could address their responsibilities, change
them, and how they could effect that through a different structure—because,
to some extent, I think they feel thwarted within the confines
of their existence.
(Mr Goodchild) To give you a very simple example.
I have seen an advert for him (turning to Mr McNeany) in
the Times Educational Supplement asking for consultants
of specialisms to come forward and work with Nord Anglia. Therefore,
he has a pool far bigger than any local authority has. When he
has that list he can pick the best, and he can employ them not
necessarily where they live but in various parts of the country.
That is something a local authority does not have.
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