The carpetbaggers have their eyes on free schools

We should be very suspicious Nick Clegg used the phrase “profits” in the context of free schools yesterday.

Schools should always budget to be in surplus, i.e. make a profit in accounting terms. And because most people think organisations should try and make a surplus – that’s sustainability after all – the use of this language is dishonest, because what we should be very worried about is whether free schools can pay dividends.

If they can, then they will unleash the kind of carpet bagging we last saw in the demutualisation of our building societies.

I was a school governor for four years in Hackney. I had volunteered through my bank’s CSR programme that teamed me up with a volunteer from a city law firm and sent us both into a school as co-opted governors. Following that special tradition in British volunteer management practice, at my very first meeting I was made chair of finance: “because you work in a bank”.

At the end of my four years, we had run a surplus for all the years, generated a good level of reserves and the governing board had plans for how to invest some of it in the school’s infrastructure. I said at the time of my departure that a lot of the financial pressure was taken off by Labour’s increasing budgets, but the leadership team felt I helped them by just keeping an eye on the numbers that allowed them to always budget for a surplus.

It was never my experience that schools regularly overspent nor that they always ran deficits. Schools nearly always ran surpluses. What I was surprised to learn was that there were lots of schools around the country that that had very large reserves.

So Nick Clegg’s speech about not allowing “profits” in schools is deeply concerning.

My concern here is that if our model of fighting back is the same as in the NHS we might miss something. We need to learn the lessons from the demutualised building socieites. We should be worried about the surpluses sitting in our schools; money that school governors have decided to put away for whatever reason; money that will now attract the carpetbagger who can dividend it out of the school once he’s changed the status.

The Tory model here is the Building Societies Act of 1986, which allowed the members of building socieites to vote to demutualise. Similar to some of our schools now, the building socieities had large surpluses, built up by prudent management over a century of serving their community.

These surpluses were spent on special dividends to members on demutualisation. And of course the Tories knew this. They knew the incentives would be too overpowering for people. The temptation of that dividend out of all that surplus, just pushed people over the edge, and their solidarity and community spirit was bought.

Co-operative schools or academies both have asset locks implicit within their structure. If free schools don’t, then the whisper from the would-be carpet baggers at the school fete will be “what’s the harm? The school will be more efficiently run now that they can make ‘profits’, and I as a parent get a £250 dividend!”

Against the argument “profit” we imagine we can use the language of public service to keep hold of our schools, but the reserves that have been built up over generations will provide the bribe that will convert schools up and down the country.