Academy trusts not living up to government governance ideals show up the weakness of regulation, and how these are effectively private organisations

The news, in my investigation published today, that some 39 academy trusts appear not to be living up to government ideals in terms of how their control structures operate appears highly significant.

The implications seem profound, first in terms of how we understand the (lack of) strength and (lack of) coherence of government regulation of the academies sector; and second, the repercussions of that for understanding whether control of a large portion of England’s schools has indeed been privatised.

Regulation

The first, and perhaps most obvious, conclusion to pop into my mind on charting how academy trusts have been set up to operate, and how the government seems now to want them to operate, is to marvel at the contradiction.

So, the government’s Academies Financial Handbook states that there should be separation between members and trustees, with the implication being that a majority of the members should not also be trustees.

This may seem arcane and technical, with perhaps few people outside the sector even being familiar with what an academy trust member means.

Yet the position of trust member is highly significant within a trust: the members – described by the government as holding a position similar to that of shareholders, ie owners, of a for-profit company – have key powers: the right to amend the organisation’s constitution, and to appoint and dismiss the trustees.

The philosophy behind recent editions of the Department for Education’s Academies Financial Handbook, then, seems clear: it does not want too much overlap between the members, with those hugely important background powers, and the trustees, who set the overall strategy of the organisation and carry out day-to-day governance.

For we know from the private sector, as well as from the academies sector, is that matters can go wrong if power is too concentrated in the hands of a few people.

In his own foreword to the 2017 version of the AFH, the then-academies minister, Lord Nash, wrote that the handbook “emphasises how having separation between those individuals who are members, trustees and employees promotes objectivity and reduces concentrations of power.”

But my analysis shows that, routinely, trusts have not been conforming to such expectations.

The AFH of 2017, which applied in the year to which academy trusts’ latest published accounts relate, states that “the Department’s recommendation is for a majority of members to be independent of the board of trustees”.

As only a “recommendation”, this implies that trusts not setting themselves in such a way will not have been breaking the law, or even any specific hard-and-fast rule.

But the contradiction remains: the DfE has set out an ideal, seemingly based on a philosophy which seems reasonably clear, and yet trusts can continue to operate seemingly in contradiction to this ideal, and still be backed and funded by the DfE.

I have found 39 trusts where their 2017-18 accounts suggest that at least half of their members were not trustees.

Trusts not only allowed to continue like this, but to expand

Trusts set up in this way can also be allowed not just to continue to be funded, but to take on more schools.

Perhaps the most obvious case, which seems to show up just how ridiculous this whole set-up is, concerns Lord Nash’s trust, Future Academies, itself.

For, as Education Uncovered has reported, this trust has had three of its four members also serving as trustees, while the fact there are only four members also falls foul of another DfE ideal as stated in the AFH of 2017 to which Lord Nash wrote the foreword: that the government would like academy trusts to have at least five members.

Yet Future Academies has been allowed by the DfE to expand in recent years, taking on two secondary academies in Hertfordshire – one the hugely controversial takeover of the Barclay School, Stevenage – with seemingly more on the way.

One major trust, E-Act, even states in its latest accounts that it does not believe in the separation of members and trustees, as set out as an ideal by the DfE, which funds it.

It seems, from the above, that regulation of the sector on governance is staggeringly weak, and something of a joke. Are the recommendations of the Academies Financial Handbook worth the paper they are written on*?

Incoherence

This may, however, reflect a deeper incoherence afflicting oversight of the academies sector, which may go back to the policy’s origins.

The idea that there should not be too much concentration of power within academy trusts, or other organisations, seems sensible to me.

We know, from corporate cases such as the collapse of the Royal Bank of Scotland, or Enron and Worldcom in the United States, that handing too much power to a few ambitious individuals can lead organisations to go astray. I think this has been at the core of most scandals in the academy sector, too.

And yet: concentration of power was at the heart of the academies model as originally conceived, seemingly be design. Arguably, it was its defining feature. And the legacy of that history remains, in the way some academy trusts continue to be set up.

To recap, the Labour government set up the policy so that incoming “sponsors”, often businessmen, would be given more or less complete control of the governance structure of state-funded schools.

The idea, I guess, was to try to harness the dynamism these businessmen – they were always men - were said to have brought from their business lives to try to turn around schools which had struggled in the past. They were supposed to donate money to support the school, though these donations did not always materialise and the requirement was later ditched entirely. In return they would be handed the power to control the strategy of the organisation, through control of the board.

That was central to the original architecture of the academies policy. But I have been reminded this year, in delving into academy trust constitutions, how it remains as the guiding principle against which some of them continue to operate.

So, at the Harris Federation, Lord Harris currently has the legal right to appoint up to 32 directors. So he is, ultimately, in complete control of the organisation via its board, as well as having his position as “principal sponsor” legally required to be passed on to his family when he dies.

That looks, then, like a concentration of power – effectively endorsed by the DfE which continues to sign off new schools for the chain - of the very sort that the 2017 AFH said it was against.

Yet Harris is not an isolated case. Other trusts with “principal sponsors” also imply such concentration: the very notion of having a single “principal sponsor,” of course, suggests exactly that one person should have a lot of power.

As this website’s investigation showed last month, in fact businessmen are in near-complete control of nearly 200 schools via the way their governance has been set up.

I have come across, for example, cases where the businessman David Meller had the ability to appoint the majority of his academy trust’s directors; or of another businessman, Irvine Laidlaw, being a member himself of the trust named after him and having the legal right to appoint other members, who in turn appoint 10 of the 13 trustees.

So, the incoherence of the DfE’s regulatory approach as set out in the AFH boils down to the following.

It says it wants to avoid concentrating power in a few individuals at the head of the governance structure of academy trusts. But the academies policy was designed to concentrate power in just such a way.

And the fact that the policy can continue to operate with such concentrations of power seems to underline, again, the chronic weakness of DfE attempts to  regulate it, if that is indeed what the government would like to do on behalf of taxpayers.

In other words, the DfE can seem to have a set of ideals, but then not do anything to ensure their logic is applied to all of the trusts it regulates.

My hunch is that the concern, as stated in the AFH, about over-concentration of power was the DfE’s attempt to address, retrospectively, a key structural problem which has emerged following academy scandals.

But the regulatory approach seems to have been to have done this in a piecemeal way, stating it as a principle in the AFH, rather than asking fundamental questions about a problem at the heart of the policy itself, and then seeking to address this weakness through more thorough reform which would have left it impossible for trusts to be structured with concentrations of power.

Implications for the debate about academies and “privatisation”

There has been much debate about whether the academies policy represents the privatisation of a large part of the publicly-funded schools sector in England.

Those who argue that it does not point to the fact that academy trusts are charities which are not allowed to make a profit.

But the fact that power can be concentrated in some of the ways described above seems to underline how trusts can be set up to be, effectively, privately-controlled** organisations.

Those arguing that this is not the case might want to argue that the Department for Education is overseeing this system on the behalf of taxpayers, and it is ultimately accountable, as it is led by an elected politician, the Secretary of State for Education (even if, in reality, detailed oversight has in recent years been delegated to un-elected academy trust founders from the academies world itself, via the post of Parliamentary Under-Secretary for the Schools System, otherwise known as the academies minister).

The DfE and its leadership are also answerable to Parliament through the select committee system.

But if the regulation on the behalf of taxpayers is this weak, then any democratic influence over the structure of academy trusts starts to look incredibly slight.

And thus, because any intervention on behalf of taxpayers by a democratic body seems so limited, academy trusts with major concentrations of power over their governance do really start to look like private organisations, to be run as their “principal sponsors” choose.  

Is this not “privatisation”? It is hard to think of another word, which is likely to resonate with the public, to use to describe what has happened.

*I think trusts may have been taken to task for failing to follow these AFH recommendations in investigation reports from the government’s Education and Skills Funding Agency, which are triggered when allegations of financial impropriety and other failings are made. But clearly, interventions in other cases of not following the AFH recommendations do not happen routinely. Are what the DfE might see as governance concerns, given the department’s ideals as stated in the AFH, only then addressed when ESFA investigations are triggered? Again, the public might be entitled to ask where the regulation is.

**Some academy defenders argue that the trusts by definition are not controlled by private individuals, because anyone serving on their boards are there in a public service capacity, with a duty to abide by public service ideals. But, if they are entirely public-facing organisations, why have they been allowed to operate with control structures which in some cases clearly centre on only one person, who is handed the effective ability of dismissing or appointing a majority of the trust’s board? Why give such power to a single “principal sponsor” at all? And why allow, in at least one case, it to continue in his family after his death?