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Part of Redbridge’s education department is to become an arms-length business in an attempt to generate funding by “trading on the borough’s reputation” for good schools.
The council is planning to sell educational services that it already provides to local schools, such as training and special needs support, through a new company called Six Five.
The hope is that Six Five will generate extra income from schools inside and outside of the borough, in a “more financially viable” way because it is not a “democratic decision-making body”.
Explaining the plan to councillors at the education scrutiny panel earlier this week, director of education Colin Stewart said three quarters of Six Five will be council-owned and the remaining quarter owned by Redbridge schools that opt in.
Redbridge schools that are shareholders in Six Five will be able to buy education services from the council “the same as what is costs [the council]” other schools will pay more.
Mr Stewart added: “We’re doing it because we think it would be more financially viable… inevitably, when you are an education service within a council, you are a democratic decision-making body.
“Sometimes from a commercial point of view you want to make decisions and have a particular flexibility with things that are more challenging to do.”
Giving an example, Mr Stewart said it will be easier for Six Five to process payments and refunds through an app than through the council’s accounting system.
The education director also cited research which appeared to show that schools are more likely to buy services from companies than local authorities.
He told the committee there is a “fair level” of support from the 560 staff who would be transferred to the employment of Six Five, and that “about 40” of the borough’s approximate 65 schools have indicated they want to be shareholders.
When the business plan for Six Five was approved in 2019, the council accepted that there will be “risks and uncertainties” to the move and that its leadership would have to “manage [its finances] tightly”.
At the time, it feared a “downward spiral” of falling income from the government, the declining popularity of its own education services and growing competition from “external competitors with no local democratic mandate”.
When asked how Six Five will be controlled, Stewart said the council will have a “client relationship” with outside directors, who will bring their expertise from a “commercial background”.
A similar arms-length education company, Cognus owned by Sutton Council was set up by Mr Stewart and one of Six Five’s two current directors, William Clapp.
Cognus has come under criticism from local parents of children with special needs, who in 2020 told Ofsted inspectors the company’s service is “flawed” and recently complained of a lack of face-to-face sessions.
Mr Stewart admitted Cognus has had some “challenges” but claimed that, from a commercial perspective, it has been “very successful”.
Sutton Conservative councillor Neil Garratt told the Local Democracy Reporting Service that Cognus has failed to save money and that the arms-length nature of the company meant “inconvenient facts can be hidden behind the veil of commercial confidentiality”.
Education scrutiny panel member Linda Huggett said she was “very concerned” about Six Five being set up, given the “previous failure” of the council’s housing company Redbridge Living.
She added: “Members don’t know who the directors will be and again will not be involved in either the formation or running of the company – an absolute travesty but that is the way this Labour council works!”
Meanwhile, Conservative leader Paul Canal said: “It makes sense to pay for services and I think a trading model has some benefits.”
Redbridge Council declined to comment further.