Following the decision to close top-performing Sulivan Primary School last month, I wrote about serious questions that two leading councillors had to answer about potential conflicts of interest in closing Sulivan. One of the councillors has now responded.
Following the controversial decision to close top-performing Sulivan Primary School last month, I wrote about serious questions that two leading councillors had to answer about potential conflicts of interest in closing Sulivan.
One of those councillors is Nick Botterill, leader of the council.
Botterill is director of a company called Active Learning Childcare (‘ALC’) which runs a chain of nine private nurseries in London. The Fulham branch of ALC is a short walk away from Sulivan Primary – and Sulivan has an extremely popular nursery. In 2011 and 2012, the council had also twice refused Sulivan’s applications to expand its nursery.
Nick Botterill’s Reponse
Botterill has now responded. In relation to the council’s decision to refuse Sulivan’s extension applications in 2011 and 2012, he says that he had no role in or knowledge of either decision.
His response to the charge that he did not declare his business interest in closing Sulivan was, “I do not have any interest to declare in relation to Sulivan.” The reasons he gives for this are cited below in full:
“The Sulivan nursery school is within a maintained primary school and is not in any competition with the ALC [Active Learning Childcare] day nursery. This is because they both serve very different needs and different users/markets. ALC, along with a number of other private providers in the borough, offers fee paying day care services for children aged 3 months and over, open for 51 weeks per year between 7.30am and 6.30pm and is typically used by parents as an alternative to a nanny or some other form of comprehensive child care.”
Comparison of Sulivan’s nursery and ALC
Sulivan’s nursery has a mixture of full and part-time places for three and four-year olds which are all free of charge. At the moment, there are 21 full-time places and 10 part-time places. Full-time encompasses the hours from 9.05am to 3.25pm, 38 weeks a year. There are 29 children on the waiting list.
Sulivan is an exceptional, award-winning primary, with a very rare thing in London – beautiful grounds. There is an orchard, a large garden with a vegetable patch and a pond, all of which are incorporated into the children’s learning and play.
Now turning to ALC. In April 2013, the nursery had 99 spaces and 80 children on the roll: that figure may have since increased or decreased. The nursery is rated ‘Good’ by Ofsted with no outstanding features.
One of ALC’s selling points, which they include under the ‘Why we are different’ tab on their website, includes ‘garden play’ in ‘natural play environments.’
You can’t get more ‘natural’ play environments than Sulivan’s grounds. But, unlike Sulivan’s nursery, for ALC you have to pay; fees currently range from £67.76 to £103.30 per day depending on age and frequency of attendance.
It is certainly true that Sulivan does not provide the same set of services as ALC, but both provide childcare for three and four-years-olds.
It is important to note here ALC doesn’t just offer full-time places from 7.30am to 6.30pm – it also offers part-time spaces and half-day sessions.
There will be some parents who need their children looked after outside school hours and who want that care to be in one place – Sulivan is not a competitor to ALC in this regard.
However, for those parents who do not need childcare outside school hours for their three or four year olds but who do need some daytime care, Sulivan and ALC provide comparable services.
Yes, there will be some such parents who could never afford private nursery fees, but there is no reason why Sulivan wouldn’t also attract parents who could afford to pay and who would be prepared to do so for the right nursery, but who see no need to spend thousands of pounds a year if their child can attend a free nursery in an exceptional school with beautiful grounds. Such parents could well decide to move to ALC on Sulivan’s closure.
Similarly, parents who could afford to pay ALC’s fees and who need extended daytime childcare for some or all of the working week may still find it more appealing and cost-effective to send their child to Sulivan and have a child-minder or other form of childcare before and/or after nursery and, if necessary, in the school holidays. They too could switch.
Botterill writes that parents who choose ALC are “typically” those who want an alternative to a nanny or some other form of comprehensive childcare. However, without an excellent nursery nearby providing free childcare in school hours, there is a good chance that ALC would have a greater demand for the type of service provided by Sulivan.
Finally, both Sulivan and ALC provide assisted places – 15 hours a week free childcare – and, like all such providers, both are paid by the government for doing so.
If Sulivan closes, supply of assisted places in the borough will decrease because Sulivan’s pupils will be transferred to another school, New Kings, and the combined capacity of the two nurseries will be reduced by 20 per cent.
Definition of a market
The basis for Botterill’s claim that Sulivan is “not in any competition with ALC” is that Sulivan and ALC serve different markets.
The comparison above suggests that is not at all obvious. More rigorously we could consider the application of the test the Competition Commission uses in its definition of a market:
“The willingness of customers to switch to other products is a driving force of competition. In forming its views on market definition, the CC will therefore consider the degree of demand substitutability.”
The general test for demand substitutability is the following hypothetical test: if there was a ‘small but significant non-transitory increase in price’ (‘SSNIP’) in Product A, would consumers switch to product B? And would this result in a decrease in profit for the producers of product A? The increase in price considered for product A is typically 5 to 10 per cent.
When applying the SNIPP test to define a market, there is particular emphasis on whether the increase will cause some consumers to switch from product A to product B.
The Competition Commission also states that “other producers from which firms face competition need not be simply other commercial firms but might include, for example, government”.
Applying this test to Sulivan and ALC, we have to imagine the effects of ALC increasing its fees by between 5 and 10 percent. Would that result in some parents – now or in the future – switching from ALC to Sulivan’s nursery? For this we have to imagine that Sulivan’s nursery has capacity.
From the description of both nurseries’ services, I can see no reason why some parents would not switch to Sulivan in this scenario. But Botterill is certain that they wouldn’t.
I have asked him to explain the reasons for this certainty; so far I have received no response.
Another way of looking at whether ALC and Sulivan’s nursery are in the same market is to consider whether any of Sulivan’s parents, now or in future, would move their children to ALC if Sulivan closed or didn’t exist. The question of whether demand for ALC’s services would increase on Sulivan’s closure is particularly relevant when considering possible conflicts of interest.
Again, I can see no reason why some parents wouldn’t move their children to ALC in this scenario.
As Botterill did not declare his interest in ALC when voting to shut Sulivan, it is now incumbent on him to show that no Sulivan parents would move their children to ALC’s nursery, either to take advantage of assisted places or as fee-paying customers.
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