Staff at Colchester Academy in Essex received a letter in the post last June. Cleaning, catering and building maintenance at the struggling school were to be outsourced to a private company.
The academy had been taken over 11 weeks previously by Bright Tribe Multi-Academy Trust, a government-favoured academy chain established by venture capitalist Mike Dwan, which has ambitions to run more than 200 schools.
Bright Tribe had always intended to review auxiliary services at the school, staff were told. Now the takeover of the academy had been completed, a company with the right “resources and infrastructure” had been selected. The winner was a “national facilities management company” called Blue Support.
It was not necessarily a surprise that a profit-making business was being brought in. Outsourcing has become increasingly prevalent in the education sector and Bright Tribe had boasted of being a “new breed of academy trust … which brings together expertise from the education field and the professionalism and influences of commercial partners”.
But in a meeting between union officials and Blue Support executives shortly after the letter arrived, a diligent, if overworked, Unison official admitted to being puzzled. Sitting with her back to the window in one of the new-build school’s soulless rooms, Hazel Corby wondered why the lucky company had the same Stockport address as Bright Tribe’s headquarters. She asked how the company had been so swiftly selected after Bright Tribe’s takeover? Who else had a chance to bid for the contract?
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The school’s principal didn’t know. An answer wasn’t forthcoming from those representing the company that afternoon, or in the days to come. Bright Tribe later said the question was irrelevant as the contract with Blue Support was made on an interim basis.
But an exchange of business cards between Corby and Blue Support’s human resources manager, Sally Jarvis, gave rather more away. “Sally’s card said Equity Solutions on it,” said Corby.
ES Management Services – where the ES stands for Equity Solutions – is the parent company of Blue Support, of which Dwan’s brother, Andrew, is managing director. Equity Solutions is also Mike Dwan’s main business interest, among 90 other companies of which he is, or has been, a director.
Bright Tribe insists that it has always been transparent about its commercial partners. But, for Corby, Jarvis’s business card was a loose thread that, once pulled, unravelled what she felt was a worrying complex of interconnected commercial and charitable interests.
Here was a financier who had quietly moved into sponsoring academies and with ostensibly philanthropic ambitions. Dwan’s spokesman said that he had donated £3.5m “directly or indirectly” to his academy empire, which included 11 failing schools desperately in need of his resources. The spokesman added that, while Dwan is aware “some will seek to find some ulterior motive for his actions”, he is “involved in the provision of school improvement services for a sole single purpose, to promote better outcomes for our children”.
Yet in 2013-14 alone, it was to emerge, there were nearly £1m worth of payments not recorded in the publicly available accounts by Dwan’s academies to his own private businesses. In 2014-15 another £1.9m in such payments, known as “related party transactions”, were made, albeit this time reported in publicly available accounts following pressure from government regulators.
The Department for Education said all the payments should have been declared in their accounts at the earliest opportunity to avoid a perception of a conflict of interest. Dwan continues to insist that, as he is not a trustee of the academy trusts, no such requirement exists. The regulator has validated claims that all the companies working with the academies charged only the cost of their work. And the majority of the costs to academies were incurred when staff were transferred over to Dwan companies, at which point the charges to the trusts were not discretionary but laid down in law. The services fees paid to Dwan companies, as opposed to payments for staff costs, amounted to just £192,000, it is said. And the services were moved in-house in January.
However, the Observer has learned that the entrepreneur’s commercial and charitable empire has become the focus of a review by the National Audit Office, the independent body that scrutinises government accounts for parliament, which has forwarded concerns to the government’s regulator.
And the NAO’s findings, so far, have prompted wider questions about the government’s academisation juggernaut, and whether ministers have a tight enough hold on the billions of pounds of taxpayers’ money swishing around the new system. Is the corporate world supporting the academies through sponsorship, or are we in danger of allowing state schools to become subsidiaries in business empires, critics ask. As Corby wondered in that meeting room: what on earth is going on?
The story of Mike Dwan is the story of an English state education system that has been thrown open to private business interests in unprecedented fashion. In his entry in the Sunday Times rich list in 2009, Dwan, then said to be worth £32m, was described as “a low-key northern property developer based in Manchester”. In reality, he is one of Britain’s private finance initiative multimillionaires: a businessman who reaped the rewards when government departments and councils went into deals with private-sector money men to build hospitals and schools, albeit at often ruinous long-term costs to the public purse because of high loan rates and huge management fees.
Today it is estimated that Dwan, from a Manchester working-class family, is worth £75m; he and his wife, Amanda, own Rusland Hall, the stately country house in the Lake District that was once home to the socialist Beatrice Webb’s family. Three of his five children are said to attend the £16,000-a-year private Windermere school where Dwan is chair of governors. In February last year the Charity Commission examined payments to Equity Solutions from Windermere because of concerns over the “number and value” of the related party transactions but, aside from some minor recommendations on disclosure and a difference of opinion on whether payments to governors were allowed under the school’s articles of association, it gave the governors a clean bill of health and took no regulatory action.
One of Dwan’s more lucrative deals has been a 2004 PFI project to deliver a new building for Parklands School, in Speke, one of the poorer parts of Liverpool. To Liverpool city council’s consternation, the deal still continues to replenish the coffers of a company, Education Solutions Speke, of which Dwan is a director and has a significant shareholding, even though the last pupils left in 2014 when the school closed down as a result of desperately poor academic results. In 2015-16 alone the taxpayer will pick up a bill for £1.36m in interest payments on Parklands. By April 2028, it will have cost taxpayers near to £90m. The complex – Parklands includes a public library, leisure centre and other council facilities – cost only £22m to build.
Dwan is undoubtedly a canny investor. He is a member of a “tax deferral” scheme run by the Invicta Film Partnership that has until recently been under investigation by HM Revenue and Customs over suspicion that it is a vehicle for tax avoidance.
It is perhaps not surprising then, given his commercial success with schools, that ES Management Services noted in its directors’ report for 2013: “In terms of expansion, one area of particular interest is the education sector. There appears to be great opportunity in this field which the procurement team are currently exploring.”
Bright Tribe Multi-Academy Trust was incorporated in July 2012, with two charities named as its founders: the Helping Hands Trust and the My World Trust. It has so far added seven schools to what is referred to as its “tribe” in Suffolk, Cumbria, Greater Manchester and Essex. The academy trust is also deeply entwined with another, the Adventure Learning Academy Trust (ALAT), based in Truro, Cornwall, which runs five academies (one secondary and four primaries). Both chains share Helping Hands as founding members and trustees. The core teams at the academy trusts are almost identical, sharing everything from director of schools to marketing manager.
Dwan, a trustee on both the founding charities, represents them on the academy chains’ boards. Cutting through all the complexity, Dwan is the person the staff at the academy trusts say they work for. Yet what struck Unison officials in the days after the Colchester Academy takeover was that Dwan barely existed in either of the academy trusts’ accounts in their first two years of operation, appearing only in attendance records for trustee meetings.
“It prompted lots of questions – but not many answers,” said Pete Challis, Unison’s national officer responsible for local government.
After Blue Support won the contract for Colchester Academy, Bright Tribe failed to provide the required details of the procurement process, prompting Unison to put in a freedom of information request on 14 August 2015.
The trust responded on 11 September confirming receipt of the request and on 18 September saying that it would charge a fee of £875 for dealing with the request, because the cost of responding would exceed the “appropriate limit’”of £450, and the search for information could only continue if a payment was received.
Hot on the heels of that move, Bright Tribe revealed that the school’s IT management services were also to be transferred to a private company, the Knowledge Network. That firm, Challis discovered, is also wholly owned by Dwan.
The websites of both Bright Tribe and ALAT, along with the individual websites of all the academies they run, showed that they were designed by Pure Creative, an Equity Solutions company that is owned by Dwan. A spokesman did not provide a response when asked whether money had passed hands but said that all payments would have been reported.
Dwan is also a founding member and chairman of governors at Greater Manchester University Technical College, in Oldham. Its 2014-15 accounts showed that, of £1.4m in income, a fifth (£277,000) was paid out to organisations in which he has an interest.
Meanwhile, concerns were being reported to Unison from staff in the schools. Sources close to schools run by ALAT and Bright Tribe said that headteachers were given “no choice” but to use support services provided by the trusts, and thus the companies that Dwan controls or in which he has an interest.
In one case, a source said, one small primary school had to pay more than £10,000 a month to Knowledge Network, and more than £3,000 a month for premises support to Blue Support. That “includes a weekly visit from a premises person who takes photos of work needing to be done and then says it will be too expensive”, the source added.
It is further claimed that a top slice of 8% is being taken by the trusts from the money set aside for schools by the Education Funding Agency – twice the typical 3-5% seen within other chains. A spokesman declined to comment.
Challis, who has long been concerned about potential profit-making in the academy system and the failure to get answers from the academy chains, turned to the authorities. “We went to the Education Funding Agency [the DfE’s regulator] and then the National Audit Office,” said Challis. “And the letter we got back from the NAO was very interesting. I have read a lot of correspondence from regulators over the years. And this one screams: we really don’t like what we have found.”
The National Audit Office is not an organisation prone to hyperbole. It has, however, long voiced concerns about the government’s decision to allow academy chains to pay related companies on the basis that they are “at cost”. The NAO described such a system in a 2014 report as difficult to audit and prone to failure because “at cost” (in other words, non-profit) is highly subjective.
Its letter to Challis dated 25 May is accordingly both revelatory and frank. Unknown to Challis, the EFA’s risk analysis division had reacted to his concerns, the NAO’s education director, Tim Phillips, wrote.
Following the EFA’s review, they had recommended that decisions made by the academy chains in the future should be minuted; clear explanations of procurement should be offered; that the Charity Commission’s rulings on trustees receiving payments should be complied with; and all financial transactions between the companies of trustees, directors and sponsors and the academy trusts should be declared.
Accordingly, the accounts for Bright Tribe published a few weeks ago – albeit very late, and following scrutiny from the EFA – bear little relation to the ones filed at Companies House in previous years in terms of the level of detail provided. Dwan emerges out of the shadows – as do his companies.
Payments to North Consulting (in which Dwan, his brother and two daughters make up four of the five directors), Blue Support Services, the Know ledge Network and North and Partners Technical are all disclosed, mostly for the first time. A rough and ready analysis (comparing the various companies’ turnovers in the latest financial year with the academy chains’ payments to them in the school year of August to September) suggest that money from academies amounted to as much as 20% of total revenues for North Consulting and Blue Support Services.
The academies dismissed the accuracy of the analysis, adding that a “major element” of the costs to academies related to the costs that were incurred when staff were transferred over to Dwan’s companies, and these costs were not discretionary. Yet, the NAO’s letter adds, there are still holes. “We note that, based on the information available to us, potentially not all related party transactions and conflicts of interest have yet been declared,” Phillips wrote.
The auditor added that there may be “good reasons” for the lack of reporting. But, Phillips revealed, neither could he find explanations for some of the discrepancies between the trusts’ accounts and those of some of the related charities and companies they do business with. The EFA and Charity Commission have been alerted and appropriate action recommended, he said.
“I will also ask the EFA to consider if the complex arrangements between the trusts and other public, private and charitable bodies are sufficiently transparent. More widely, I will remind the EFA of the findings of our report – on the oversight of related party transactions and conflicts of interest – and the need for transparent governance and accountability . . . We will continue to monitor progress.”
As will the staff and interested parents at the 12 schools, and counting, which form part of Mike Dwan’s education empire.
RISE OF THE ACADEMIES
2002 Tony Blair establishes the first “city academies” to drive up standards by replacing failing schools in struggling education authorities. The government eventually drops the word “city” to allow for academies in struggling rural areas.
2006 Des Smith, an adviser to the academy programme, resigns after it is revealed he had promised that wealthy individuals who agreed to make donations to the programme might be rewarded with knighthoods and even peerages.
2010 Michael Gove, the new education secretary, says he hopes academies that are autonomous from local authorities become “the norm” and urges all schools in the country to apply for academy status, including, for the first time, primaries.
2012 Jo Shuter, head of Quintin Kynaston Community Academy, and a government favourite, is found to have misused public money. Questionable spending included £6,957 on Shuter’s 50th birthday party, which was held at the school.
2014 Headteacher salaries soar. Sir Greg Martin, executive head at the Durand Academies Trust – which runs a primary school in Brixton and is planning a boarding secondary school in the Sussex countryside – is found to earn £229,000 as a head and a further £160,000 from a company set up to run the school’s sports and fitness centre.
2015 The chief inspector of schools, Michael Wilshaw, raises concerns about the governance practices in some academy chains and seeks powers to inspect their administration. His request is rejected.
2015 Ed Miliband criticises the lack of accountability of academies, claiming that Whitehall can’t provide the necessary oversight.
2016 The education secretary, Nicky Morgan, announces a U-turn on forcing all schools to become academies after a cross-party outcry. However, the government still aspires for all schools to convert.
Source:Are England’s academies becoming a cash cow for business?