New research shows for-profit schools vital if Britain’s education system is to be transformed



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The IEA's latest publication released for money.pdf
New research shows that for-profit schools must be an integral part of Michael Gove’s education reforms if they are to work. Schooling for Money: Swedish Education Reform and the Role of the Profit Motive, looks at the role of for-profit schools in Sweden and for the first time provides quantitative evidence regarding how these schools perform. The competition that drove improvements in the Swedish system was only possible because of the high number of for-profit schools that were established.

This research clearly shows that:

  • Under a system where profit is allowed more children have access to schools that will improve their educational achievement.

  • For-profit schools make the competition that drives up standards possible by increasing the supply of new schools.

  • Importantly the impact of for-profit schools tends to be greatest on those from low socio-economic backgrounds.

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 (measured in terms of average school GPA, which measures pupil achievement across a broad range of subjects).

Not-for-profit schools did marginally better on average than for-profit schools (raising the GPA by 5.7 points compared with the for-profit schools’ impact of 4.5 points), but among schools with pupils from lower socio-economic backgrounds, for-profit schools performed better (increasing the GPA by 11.6 points).

In the English education system there are around 24,600 schools; back in August this year only 62 free school applications had been made. This highlights the desperate need to encourage new schools to start up. The case of Sweden shows that increasing the supply of new schools to create sufficient competition in the system to raise standards requires encouraging schools to start up with a profit motive, yet at present this is being excluded by the coalition. In Sweden during 2008/2009 13% of schools were for-profit, while only 6% were non-profit schools. If England encouraged for-profit schools we could see a similar take up which could mean around 3,200 new schools.

Commenting on the report’s findings, Mark Littlewood, Director General of the Institute of Economic Affairs said:

“It is hardly surprising that we have seen such a low uptake in the free schools initiative when the profit motive has been excluded. The case of Sweden shows that it is a vital component of education reform. This is especially the case in providing access to good schools for those from low socioeconomic backgrounds.

“For-profit companies provide all kinds of wonderful services across many areas of our lives, from hotels to restaurants and car manufacturers. What this research shows is that they also provide a good service, better in fact than state run schools, in terms of education. Increasing competition by allowing profit must be at the heart of the coalition’s education reforms.”

Notes to Editors

To arrange an interview with Mark Littlewood, IEA Director General, please contact Stephanie Lis, Communications Manager, 077 5171 7781, 020 7799 8900, [email protected].

The full report Schooling for Money: Swedish Education Reform and the Role of the Profit Motive by Gabriel H. Sahlgren can be downloaded here.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.