The recent decision by the Office of National Statistics to label colleges as being in the private sector doesn’t change things much. Government is no doubt relieved at confirmation that colleges are part of the wealth creating ‘real world’ rather than public sector layabouts, and colleges are relieved not to be dragged back into the rigid constraints of Whitehall accounting, but by itself it has little direct impact on day to day practice.

Suggestions that colleges might take a further step and be fully privatised however are potentially more serious and deserve greater attention.

Some have suggested that the involvement of companies run for profit, perhaps through the involvement of private equity houses might be the next big step in the ‘liberation’ of FE. What might be the costs and benefits?

The first duty of a private company is to its shareholders”

Many of the advantages claimed for privatisation just don’t hold for FE. In the case of public utilities for example it is claimed with some justification that breaking up monopolies and introducing competition sharpened practice and produced a better deal for consumers. Competition however is already pretty fierce in the FE market place and a change of ownership would have little effect. College managers already have to be good to survive.

Another argument, advanced for example in relation to rail or telecommunications is that private ownership brought much needed capital investment that the public purse could not afford. This may be true in other sectors but a lack of capital investment is not top of FE’s problems; much more pressing is the threat to the revenue stream needed to support the capital investment already made. Why would a college want more debt?

Privatisation it is said can transfer risk from the public to the private sector. The theory is elegant but, as the Work Programme is showing, the transfer is hard to effect. If government, as so often, agrees a price that is too generous companies make windfalls; if the price turns out to be tough contractors cry foul or threaten to pull out. Transferring risk means being prepared to let the risk takers fail.

A further reason for privatisation might be to help pay down debt. At first sight selling colleges at a market price sounds rather less daft than giving away schools to cranks and crazies for free. The benefit however would all accrue to the Treasury (apart from the large percentage extracted by the army of consultants needed to set the deals up, and who are probably lobbying feverishly for the change) It is not at all clear what benefit would accrue to the users of FE from such a transfer.
Would there be any downsides of such a move however if colleges are to all intents and purposes already private? There would seem to be two. The first is that while profit should not be a dirty word if it results from making wise investments, taking risks or injecting a new dynamism into an enterprise there seems very little scope for such beneficial actions to take place.

Profit is far more likely to be found, as in many privatisations, from reducing the wages and benefits of the poorest paid and cutting corners on quality. The first duty of a private company is to its shareholders.

The more important concern though is that currently colleges see themselves and are seen as public assets, dedicated (in both senses) to education and training for the long term. A private company simply seeks to maximise shareholder value wherever it can. Because colleges are public assets they enjoy a privileged relationship with government funders, receiving grant in aid.

As private companies this could not continue. All FE would have to be put out to tender with the attendant instability, rigidity, gaming behaviour and threat to quality that the most privatised parts of the system currently exhibit (look for example at prison education) Government would then have to choose between maintaining quality and having light touch regulation since experience shows that in a privatised system it cannot have both.

Mick Fletcher is a Further
Education Consultant