IEA author Gabriel H. Sahlgren writes for ConservativeHome

In a fresh blow to the coalition’s free school programme, Nick Clegg has pledged that for-profit schools shall remain banned. This is unfortunate and does not make sense. By displaying continuing hostility towards profit-making schools, his ideological convictions are at odds with his progressive goals: without the profit motive, the prospect of a broad-based free school revolution – with the potential of increasing social mobility and improving educational standards for all – looks grim.

Consider the programme’s track record to date. By the end of September, over a year after the reform, only twenty-four new free schools will have opened up shop – of which four already existed as private schools. Unsurprisingly these schools will predominantly serve middle class pupils. The problem is that parents in less privileged neighbourhoods, unlike those in richer ones, rarely start or actively seek to promote new free schools. Currently, strong incentives to enter the education market, especially in poorer areas, are clearly absent – and these incentives can only be produced by allowing profit-making schools to operate.

What is the fuss about profits? The debate has focused much on Swedish for-profit schools – an integral part of the reform Education Secretary Michael Gove chose as a model for his own – which have been accused by various commentators of producing lower educational standards. Is this true? Up until recently, there was little evidence with which to back up ideological and anecdotal claims on both sides of the debate. My statistical analysis, published by the Institute of Economic Affairs, however, tells a story much different from the doomsday predictions. In the preferred model, Swedish for-profit schools perform 16.3% higher than municipal schools, and on par with non-profit schools, in terms of average grades. Also, the results suggest that for-profit schools especially benefit pupils from lower socio-economic backgrounds. In other words, I find no evidence that profit-making schools conform to the critics’ fears. The opposite is true.

Furthermore, whereas 13% of all Swedish schools are for-profit, only 6% are non-profit (with the remaining 81% being municipal schools). And while education companies start new schools and expand into new municipalities, non-profit schools remain small, selective operations. Without the profit motive, the incentive to scale up and replicate educational success is simply not there. There is nothing wrong with non-profit schools, but they are not reliable for the purpose of increasing choice and competition significantly – especially not in poorer neighbourhoods.
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