APPENDIX 4
Memorandum from the Local Government Association
(RPS 09)
1. The Local Government Association (LGA)
was formed from a merger of the Association of County Councils,
the Association of District Councils and the Association of Metropolitan
Authorities on 1 April 1997. Currently the LGA has just under
500 members including 260 shire district councils; 36 metropolitan
district councils; 35 county councils; 27 new unitary authorities;
33 London authorities and 20 Welsh authorities. In addition, the
LGA represent Police authorities, Fire authorities and Passenger
Transport authorities. The LGA provides a national voice for local
communities in England and Wales; its members represent over 50
million people, employ more than 2 million staff and spend over
£65 billion a year on local services.
2. The local authorities have a long history
of trading services both within education and more generally.
The LGA has drawn on this experience in developing this evidence.
3. Within local education authorities (LEAs)
the term "externalisation" includes contracting out
services to truly private companies, not-for-profit organisations,
charities, and the voluntary sector. Each has merits but each
contract issued or service level agreement agreed has been arrived
at as a result of much work and considered debate at the local
level. LEAs, and local authorities more generally, have been developing
partnership models of working for a number of years and in contracting
out education services LEAs have tried to build on this experience
and work in partnership with external providers. This has often
taken the form, for example, of negotiated contracts or jointly
developed service specifications, particularly where services
are to be provided by the voluntary sector. There has not, however,
been any national evaluation of the effectiveness, either financially
or in terms of raising standards, of externalisation of education
services and therefore no guidance on how individual LEAs, or
the DfEE in the context of intervention, should approach contracting
out.
4. Contracting out education services has
not been without difficulty. One LEA which felt it desirable to
externalise its inspection and advisory service through developing
funding for schools to purchase advice on the open market has
now, after three years, re-established a central advisory service
having discovered that private consultants employed by schools
did not provide sufficient challenge to the schools. Another LEA
who contracted with a not-for-profit organisation to provide education
services to excluded and disaffected pupils did not renew the
contract at its conclusion as pupils were not re-engaging with
education. The contractor was not, in short, meeting targets.
In contrast, however, is the experience of another authority who
contract with a National Health Trust to provide education for
non attending and disaffected pupils based on family learning
principles. The LEA is satisfied that targets are met, schools
appreciate the service and contracts have been renewed. Each of
these cases is different and the LGA feels that if the successes
are to be replicated an analysis of what leads to success should
be undertaken and that decisions on contracting should be made
at a local level.
5. The LGA believes the cost of contracting
out of education services should be taken into account in any
consideration of the value of private provision within state education
services. Even if a contract is awarded to the voluntary sector
there is still a cost. Voluntary organisations typically employ
staff to run school based projects, using volunteers to deliver
the service. There are overheads such as premises costs and the
training of volunteers—an often costly business. The contract
itself has to be drawn up and subsequently monitored, a cost in
terms of LEA officer time. Where the contract is with a not for
a profit organisation the LEA is typically paying not only for
the direct provision, which it had previously provided in-house,
but also the management costs of the organisation, typically 12
per cent. Contracts often lack flexibility; for example a contract
for provision for excluded pupils would be for a specified number
of places. If fewer places are required then the unit cost increases.
LEA directly provided services are usually able to cope with fluctuations
by being multi-purpose and thus more flexible.
6. Where a contract is with a profit making
organisation costs inevitably increase. Where an individual LEA
contracts individual education services it has done so in full
knowledge of the impact, locally, on the education budget. It
has taken account of all possible service delivery options and
followed the local democratic process in making its decision.
Where the Secretary of State has decided to intervene in LEAs
following poor OFSTED reports, no such local process has been
followed. The LGA is very concerned about the lack of democratic
accountability of intervention in LEAs and the costs of intervention
and the impact on local services and local synergies within and
across services.
7. Interventions in Hackney, Liverpool,
Islington and Leicester, albeit with local agreement, have been
costly. The local authority has had to bear part of the cost of
consultancy from resource which would otherwise be used on service
delivery in the locality. The consultants' brief has largely been
to prepare service specifications for contracting out. There has
been little consideration of the synergies between services which
might be undermined by contracting some of the services. This
is particularly pertinent where Local Authorities are working
to be "joined up". There appears to have been little
distinction drawn between service delivery and strategic planning
of services, thus undermining the democratic role of the local
authority. The service specifications drawn up are based on current
service provision with scant consideration of whether the service
was, in any case appropriate to current needs within the locality
or reflecting recent educational developments. In Liverpool, Islington
and Hackney OFSTED identified inappropriate political leadership
as one of the barriers to the LEA supporting schools as effectively
as possible. Modernising Local Government is causing all local
authorities to review political structures and processes. This
process in itself might well have addressed many of the problems
of the authorities identified by OFSTED as having problems. The
emphasis on externalisation of services has not addressed the
political issues identified by OFSTED in the cases referred to.
8. Letting contracts in education services
is not like commercial contracting or, indeed, in other local
authority areas such as waste management or even school meals.
In most contracts there are service specifications which identify
service levels or targets. If the service is not delivered there
are default clauses and the possibility of termination. There
is a ready market and replacement contractors are easy to find.
None of this is the case with education services, with the exception
of teacher supply. Take services for excluded pupils as an example.
A contractor providing support to these pupils may fail to re-engage
the pupils but a loss of income, the only realistic remedy within
contract default, is unlikely to improve the company's ability
to fulfil the contract. Equally, the LEA is unlikely to terminate
even when the company is clearly failing to deliver, as there
is no competitive market for services for excluded pupils and
the LEA has a duty to provide education for these young people.
The LEA cannot cease to provide education while it seeks to encourage
a market interest or, indeed, create an in-house service. Once
awarded an education service contract, therefore, a provider has
greater security and less incentive to improve than she/he would
in a purely commercial environment.
9. The LGA feels there should be some regulation
of the private sector organisations which provide education services
as there is potential conflict between commercial and public interest.
In July this year "Select Education" advertised, through
the Times Educations Supplement, for Newly Qualified Teachers
(NQTs). A newly qualified teacher, finishing their course in the
summer of 1999, must complete three full terms work by December
2000 if he or she is to become fully qualified. It would be difficult
to fulfil this requirement as a supply teacher. There is no certainty
that a supply agency would point out to individual newly qualified
teachers that they may be jeopardising their careers by not fulfilling
the three terms work requirement. More importantly, from a wider
perspective, is that public money spent on training teachers is
lost if individuals do not complete the requirements to qualify
and the potential supply of teachers is thus reduced. Further,
supply teaching is not the best way to induct new members to the
profession. Good induction is an important aspect of raising standards.
10. There is also a level of secrecy surrounding
private sector companies which is not compatible with public accountablility
but which, with a small amount of regulation, could be overcome.
The careers service was contracted out some while ago but neither
the DfEE nor the Careers Service Inspectorate knows how much profit
the individual careers services are making. This information is
not, apparently, collected because of commercial confidence. Whilst
one can understand commercial confidence in respect of individual
organisations it is nevertheless in the public interest for aggregate
data to be available. Public money is spent on the careers service
yet there is no information nationally not even in percentage
terms, about how much is spent on service delivery, how much on
profit and how much on monitoring and evaluating provision.
11. Finally, in the context of regulation,
the LGA has a concern about the employment practices of commercial
and not-for-profit organisations as it is not always easy for
these organisations to carry out police and other checks on their
employees who will work with young people.
Local Government Association
November 1999
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