The Profit Motive in Education:
Continuing the Revolution
S ummary
• The criticism of the ‘profit motive’ in education is unjustified:
we should not be concerned about the corporate structure of
organisations that provide educational services. Furthermore,
while people are disparaging about the profit motive they
ignore other self-interested motives operating within the
education sector, such as those within teachers’ unions,
government educational bureaucracies, and so on.
• The school reform debate currently focuses to too great an
extent on ‘school choice’. Instead, we need to focus on the
supply side. By liberating the supply of education, we will see
radical new ways to deliver education, including new ways of
bundling education services. Those models that are successful
will be scaled up rapidly if the profit motive is allowed to
work.
• The UK government is wrong to exclude profit-making
schools from its free-school programme and it might fail as
a result. Allowing profit-making free schools would draw
more capital into the sector; allow people who wished to take
financial risks to do so while reducing risks for parents and
other groups involved in setting up free schools; help ensure
that the necessary site and buildings can be obtained and
financed; and radically reduce the cost of regulation.
• Non-profit foundations generally do not have the ability or
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s u m m a ry
incentives to scale up successful practices and roll them out
widely. They are therefore not the answer to promoting highquality education available to all.
Profit-making schools in Sweden have raised standards and
provided a competitive spur to state schools. One chain of
schools has increased teacher contact time by 50 per cent
through developing curriculum materials that can easily be
adapted by teachers.
The UK lags behind the UN in terms of developing good
practice in education policy – despite the fact that the UN
tends to lag behind best practice by many years itself. The
UN has taken an empirical approach and has decided that,
if profit-making schools can raise educational standards,
they should be welcomed. If the UN’s success is to be spread
more widely so that the profit motive is accepted by national
governments in developed countries, those supporting the
profit motive must choose their language prudently. Words
such as ‘inclusive’, ‘diverse’ and ‘open’ can be applied to an
education sector that is not limited to state institutions and
can be helpful in winning the political debate.
For-profit higher education institutions in the USA have
opened up universities and colleges to groups in society that
have previously been excluded. More than half of students
at for-profit institutions in 2007 were over 25 years old and
ethnic minority enrolments comprised nearly 40 per cent of
the total. Furthermore, a greater proportion of students at
for-profit institutions were ‘first generation’ students whose
parents did not have a degree.
There are, however, important lessons from the USA for
UK policy. Mechanisms of government financing can
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t h e p r o f i t m o t i v e i n e d u c at i o n
distort incentives and lead to lower completion rates than
is desirable. The UK government seems to be repeating the
mistakes made in the USA by directing greater subsidies
towards those former students who do not make best use
of their degree courses. The advantages of profit-making
institutions should not be forgotten, however, and it would
be better to correct the distorting systems of government
financing than to undermine the for-profit sector.
• UK business schools are not entirely the success story that is
often claimed. Graduate unemployment from UK business
schools is higher than the average for all graduates. Reform
is needed. Business schools operating in the ‘mass market’
for business education should be profit-making. This would
bring stronger customer focus, cost control, expertise from
other service areas, links with other businesses and new
sources of capital.
• In general, private capital and the profit motive are needed
to create widely replicated, low-margin, low-cost methods of
education. Such innovation will lead to the development of
entirely new personal learning formats and services and move
the sector away from the ‘batch processing’ of children in
classrooms where children of the same age progress through
material at the same pace.
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