Private companies should be allowed to set up and run schools under a social enterprise model, say the conservative Policy Exchange thinktank
Teachers should be encouraged to take a stake in John Lewis-style partnerships to run state schools as profit-making enterprises, according to proposals outlined by the conservative Policy Exchange thinktank.
Private companies would be allowed to set up and run schools under a social enterprise model that would give employees a share of ownership and re-invest a portion of any profit back into the school.
The Policy Exchange report enters politically risky terrain. The deputy prime minister, Nick Clegg, ruled out profit-making in state schools in a speech last year. However, the education secretary, Michael Gove, a former chairman of Policy Exchange, has approved a free school in Suffolk that will out-source management to a commercial company.
The report urges ministers to pilot social enterprise schools in some of the most deprived parts of the country. Schools would be allowed to distribute 50% of any surplus as a dividend to shareholders. The remaining 50% would have to be reinvested in the school.
Teachers and other school employees should be given the option of holding shares in the parent company or in the school itself, the report says.
The thinktank argues that allowing "for-profit" provision would provide extra capital to create more school places at a time when there is a severe shortage in parts of the country. Successful private providers able to keep a share of their surplus might also have a stronger incentive than charitable trusts to set up new schools. At present, local authorities are required to take back surpluses, but academies are permitted to carry over 12% of their budgets annually.
Policy Exchange suggests the proposed schools would operate under a "social mobility test" requiring at least 20% of pupils are eligible for free school meals.
They would also be prevented from selling off government-procured buildings or facilities, and payment of dividends would be tied to the school's performance. For-profit firms are allowed to run publicly funded schools in Sweden and the US.
James Groves, the head of education at Policy Exchange, said: "Given the huge challenges which our education system faces in the coming years, the government should continue to push the boundaries of the status quo. This report challenges the idea that there is simply a choice between for-profit and not-for profit schools. A John Lewis model of school where private companies, including teachers and school staff are encouraged to personally invest offers one such innovative alternative."
Earlier this month, the former top civil servant in the Department for Education told the Guardian he sees "no principled objection" to profit-making companies taking over state schools and believes they will "probably" be allowed to do so eventually.
A spokesman for the Department for Education said: "There are no plans to allow organisations to run schools for profit. The success of many academies in raising standards is built on philanthropic organisations using their expertise to turn around underperforming schools.
"We're more than doubling targeted investment at areas facing the greatest pressure on school places, to over £4billion in the next four years. Parents want to send their child to a good local school - that's we are building free schools, letting the most popular schools expand to meet demand from parents and driving up standards right across the system."