For-profit schools are the future
by Helen Disney
19 May 2011
Only the injection of real market incentives can save Europe's schools, argues Helen Disney
It has now become something of a cliché to marvel at how the social democratic paradise that is Sweden was able to reform its school system through a series of free market reforms. Yet the reforms, which are still ongoing and still being analysed by policymakers, nevertheless provide a rich seam of data and discussion points for other European Union member states - such as the United Kingdom - which are looking to radically improve their schooling.
To recap on exactly what happened, the Swedish school voucher programme was introduced in 1992 - by the then centre-right government. Since the 1970s, the Swedish school system had declined in quality. Only the rich, who could afford private schools which charged tuition fees on top of Sweden's already high taxes, had the ability to shop around for a good school for their children.
But then, as Thomas Idergard of Swedish think-tank Timbro explains: "The school voucher program was designed to create a market—with competition, entrepreneurship, and innovation — and yet based on the Swedish and Scandinavian tradition of social justice and equality: all families should be able to choose between public and private schools regardless of their economic status or wealth. This equal opportunity philosophy, taken into its full potential, created an education market".
More recently the British think-tank, the Institute of Economic Affairs, has completed an academic analysis of the results of Sweden's social experiment in education. The Schooling for Money report looks at the role of for-profit schools and provides quantitative evidence regarding how these schools perform. It concludes that the competition that drove improvements in Sweden was only possible because of the high number of for-profit schools that were established.
It argues that, under a system where profit is allowed, more children have access to schools that will improve their educational achievement since for-profit schools make the competition that drives up standards possible - by increasing the supply of new schools. Perhaps most importantly for those worried about the impact of such reforms on poorer families, they found that the impact of for-profit schools tends to be greatest on those from low socio-economic backgrounds.
According to the IEA's research, the educational outcomes of children going to for-profit and not-for-profit schools were significantly better than those of children going to state schools. Not-for-profit schools did slightly better on average than for-profit schools - but among schools with pupils from lower socio-economic backgrounds, for-profit institutions performed better.
The study has important implications for the UK at a time when Education Secretary Michael Gove is pushing forward reforms, which borrow heavily from the Swedish model as well as from the American charter schools movement. Gove's plan, as outlined in the Academies Act 2010 - which has now received Royal Assent - allows for the establishment of a new form of non-selective school that operates independently within the state system.
It receives public funding according to the number of pupils it attracts and, importantly, is independent from the local authority. It has the flexibility to innovate. Like all state schools, it is subject to inspection by the national inspectorate Ofsted. It is also held to account through the results it achieves and can be closed down if it underperforms.
Last autumn, it was announced that the first 16 proposals for free schools had been given a green light by the government. They are expected to open in September of this year. Overall, 328 applications have now been received, suggesting that the reforms are picking up pace and enthusiasm. Yet, this still represents a drop in the ocean among England's 24,600 schools. And the coalition's plans currently exclude schools being run for a profit. It, therefore, remains to be seen if a competitive market can be established in the same manner as it was in Sweden - without the impetus of the profit motive.
The overarching lesson from Sweden is that competition is a key factor in raising educational standards in the future. The two key success factors behind Swedish school voucher are giving parents equal opportunities to choose, regardless of their income and also offering equal opportunities for providers to offer and establish schools—so long as national quality requirements are met.
This magic combination of market principles and social equity has become known as being particularly Swedish – applying also to reforms to pensions and healthcare. So, perhaps, it is not so surprising that the success story of educational choice should spring from the home of social democracy after all. The rest of Europe must now start taking notes.
Helen Disney is chief executive and founder of the Stockholm Network, a pan-European think-tank
It has now become something of a cliché to marvel at how the social democratic paradise that is Sweden was able to reform its school system through a series of free market reforms. Yet the reforms, which are still ongoing and still being analysed by policymakers, nevertheless provide a rich seam of data and discussion points for other European Union member states - such as the United Kingdom - which are looking to radically improve their schooling.
To recap on exactly what happened, the Swedish school voucher programme was introduced in 1992 - by the then centre-right government. Since the 1970s, the Swedish school system had declined in quality. Only the rich, who could afford private schools which charged tuition fees on top of Sweden's already high taxes, had the ability to shop around for a good school for their children.
But then, as Thomas Idergard of Swedish think-tank Timbro explains: "The school voucher program was designed to create a market—with competition, entrepreneurship, and innovation — and yet based on the Swedish and Scandinavian tradition of social justice and equality: all families should be able to choose between public and private schools regardless of their economic status or wealth. This equal opportunity philosophy, taken into its full potential, created an education market".
More recently the British think-tank, the Institute of Economic Affairs, has completed an academic analysis of the results of Sweden's social experiment in education. The Schooling for Money report looks at the role of for-profit schools and provides quantitative evidence regarding how these schools perform. It concludes that the competition that drove improvements in Sweden was only possible because of the high number of for-profit schools that were established.
It argues that, under a system where profit is allowed, more children have access to schools that will improve their educational achievement since for-profit schools make the competition that drives up standards possible - by increasing the supply of new schools. Perhaps most importantly for those worried about the impact of such reforms on poorer families, they found that the impact of for-profit schools tends to be greatest on those from low socio-economic backgrounds.
According to the IEA's research, the educational outcomes of children going to for-profit and not-for-profit schools were significantly better than those of children going to state schools. Not-for-profit schools did slightly better on average than for-profit schools - but among schools with pupils from lower socio-economic backgrounds, for-profit institutions performed better.
The study has important implications for the UK at a time when Education Secretary Michael Gove is pushing forward reforms, which borrow heavily from the Swedish model as well as from the American charter schools movement. Gove's plan, as outlined in the Academies Act 2010 - which has now received Royal Assent - allows for the establishment of a new form of non-selective school that operates independently within the state system.
It receives public funding according to the number of pupils it attracts and, importantly, is independent from the local authority. It has the flexibility to innovate. Like all state schools, it is subject to inspection by the national inspectorate Ofsted. It is also held to account through the results it achieves and can be closed down if it underperforms.
Last autumn, it was announced that the first 16 proposals for free schools had been given a green light by the government. They are expected to open in September of this year. Overall, 328 applications have now been received, suggesting that the reforms are picking up pace and enthusiasm. Yet, this still represents a drop in the ocean among England's 24,600 schools. And the coalition's plans currently exclude schools being run for a profit. It, therefore, remains to be seen if a competitive market can be established in the same manner as it was in Sweden - without the impetus of the profit motive.
The overarching lesson from Sweden is that competition is a key factor in raising educational standards in the future. The two key success factors behind Swedish school voucher are giving parents equal opportunities to choose, regardless of their income and also offering equal opportunities for providers to offer and establish schools—so long as national quality requirements are met.
This magic combination of market principles and social equity has become known as being particularly Swedish – applying also to reforms to pensions and healthcare. So, perhaps, it is not so surprising that the success story of educational choice should spring from the home of social democracy after all. The rest of Europe must now start taking notes.
Helen Disney is chief executive and founder of the Stockholm Network, a pan-European think-tank
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