Deloitte gagged by Government over academy insolvency

20 March 2019 4 min. read
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Big Four firm Deloitte is subject to a so-called gagging clause with relation to its work to close the multi-academy trust WCAT. According to reports from the UK media, the clause prevents Deloitte from saying anything that would “embarrass” the Department for Education.

The UK Government initiated its flagship policy of pushing for the academisation of state schools in 2010. An academy trust is an exempt charity regulated by the Department for Education. The belief of the Conservative-led coalition at the time was that by bringing in an outside source to oversee the financial side of the school – such as a business as a sponsor, or a larger academy chain – the pressure of keeping a school afloat as well as increasing results is lessened, and the existing school body can focus on education standards, whilst the sponsor keeps an eye on the budget.

Since then, the number of children in state-funded schools in England taught in an academy or free school has risen to more than 50%. The incumbent Conservative-led Government has made it a policy to see all schools in England become academies in the next two years. Education Secretary Damian Hinds has cited standards rising faster in many sponsored academies than in similar council-run schools as a reason why state schools should consider the switch.

Deloitte gagged by Government over academy insolvency

However, while the Government remains keen to extoll the supposed economic virtues of becoming an academy, 2017 saw one of its keystone academy trusts collapse into administration. Wakefield City Academies Trust (WCAT) was a multi-academy trust that managed 21 schools across West Yorkshire, South Yorkshire, and East Yorkshire. The board of the trust of seven secondary and 14 primary schools announced that, just days into the new school term, it did not have “the capacity to facilitate the rapid improvement our academies need and our students deserve”. Deloitte was installed to oversee the insolvency process.

Over the course of the following year, Deloitte was paid £198,570 to support the Department for Education (DfE) for 12 months to shut WCAT, according to a freedom of information request obtained by Schools Week. The department needed financial and insolvency expertise to put the trust into insolvency and transfer its schools to other trusts, a process which concluded in November 2018. However, in order to undertake that work, Deloitte was required to agree to a contract banning it from saying anything that would “embarrass” the Government or any other crown bodies, including the office of the Prime Minister.

This is of particular interest, as it has also emerged that the DfE gave the beleaguered academy trust £500,000 in 2015, despite serious concerns about its finances. Education news platform Schools Week found that at the time, then-Education Secretary Nicky Morgan had announced WCAT as one of five “outstanding” sponsors to share in £5 million under the government’s Northern Powerhouse scheme. This occurred despite Government officials' awareness of concerns at the trust, including potential irregular payments and poor financial management and governance.

A copy of Deloitte’s contract to oversee the winding up of WCAT reportedly included a clause preventing the Big Four firm from distributing facts which could “cause, permit, contribute or is in any way connected to material adverse publicity” relating to the DfE. Under the header “publicity, media and official enquiries”, the contract stated that it could not bring the DfE into “disrepute by engaging in any act or omission which is reasonably likely to diminish the trust” which the public has in the department.

In 2018, UK broadsheet The Times revealed that about 40 charities and 300 companies similarly leveraged such “gagging clauses” in Government contracts, totalling £25 billion. The DfE has since told the press that it puts publicity clauses in place to “protect commercially sensitive information”, and that these do not stop organisations from fairly criticising government departments or policies. While this was echoed by Theresa May, however, the Prime Minister also promised to review the wording in such contracts – something which suggests that the gagging details may be more comprehensive than the DfE might admit.

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