Education vote

Tony Blair could still be forced to rely on the support of Conservative MPs to get his contentious school reform plans through the Commons despite signs that a Labour backbench rebellion against them is crumbling.

Rebel leaders have suggested that 45 Labour MPs could vote against the bill on Wednesday, despite a string of concessions from the government earlier this year.

Mr Blair has made the school reforms a litmus test of Labour’s readiness to grapple with changes to public services that go against the party’s traditional instincts for uniformity and fairness. But the reforms have also become a test of his political authority and of the viability of the government under the final months of his leadership.

The original proposals

The school reforms outlined in a white paper in October are intended to do in primary and secondary education what the government is already doing in health: separate the commissioning of services (in this case by local education authorities) from their supply with competition between a diversity of providers to drive up standards.

The centrepiece of the white paper is a new breed of “trust” schools giving headteachers more control of their assets, staff and admissions policy, subject to a national admissions code. Like business-sponsored city academies, the trust schools would be expected to form partnerships with local companies, universities, community groups or other bodies.

The aim is to encourage all schools to acquire their own culture and identity, and with the help of outside partners, forge a stronger educational ethos to improve performance.

Local education authorities were to be banned from setting up new community schools, the traditional form of comprehensive under their control. LEAs would become the “champion” of parental choice but would, vaguely, retain a “strategic” role over local provision. No-one would be able to stop parents from setting up new schools.

How radical are they?

The reforms were billed as a “historic turning point” by Mr Blair, a pivotal moment when the government would abandon once and for all the left’s “old levelling down mentality which kept us in opposition so long”.

He described trusts as “independent self-governing schools” in a break with the “deadening uniformity” imposed by some local authorities. The role of LEAs would “change fundamentally”.

But in reality the reforms are incremental rather than revolutionary.

As the Commons education select committee pointed out in a report in January, trust schools would not enjoy any more freedoms than those already granted to existing foundation schools. Critics add that schools are already able to take on external partners, although ministers argue these arrangements could be more stable under a trust.

Neither can the prime minister claim to be instigating a radical split between commissioning of schools and their supply. Schools will not be forced to become trusts, so LEAs will continue to “run” traditional community comprehensives for years to come. In any case, as the select committee observed, for nearly 20 years local authorities have not had close control of schools “in the way the white paper implies and some of its critics believe”.

The objections of Labour critics

Nevertheless, the white paper and the way in which the reforms were spun, have infuriated many Labour backbenchers. More than 90 signed an “alternative white paper” criticising Mr Blair’s plans. Several more felt that critique was too soft and refused to lend their names to it.

Their primary concerns are:

- that oversubscribed schools that have more freedom over their admissions policies will resort to covert forms of academic selection (such as parental interviews or point systems) to skew the intake away from less promising pupils.

- that trust schools are unnecessary, would be unaccountable to local communities and could involve unsuitable partners or businesses

- that local authorities need to retain a co-ordinating role over admissions and supply of school places to prevent a “free for all” among competing schools

- that the expansion of popular schools could force others to contract, leaving children stuck for years in failing institutions with falling rolls and diminishing resources.

On top of the specific complaints, many Labour MPs are fundamentally unhappy with the concept of making schools compete with each other for pupils and want to see collaboration rather than rivalry.

Government compromises

Facing a massive backbench rebellion, Mr Blair has offered a series of concessions but has denied that they water down his original plans.

- further safeguards against academic selection. Interviewing will be banned, and schools will be forced to act “in accordance with” a national code on admissions, rather than simply “have regard” to it.

- local authorities will still be allowed to set up new “community” schools, although the decision would be taken by an independent adjudicator with the approval of the education secretary

- admissions forums, comprising local authorities and local schools, will monitor admissions policies and take complaints to the adjudicator

- further reassurances on trusts, with the adjudicator ruling on disputes

Will the concessions be enough?

These changes are likely to win over some of Mr Blair’s more moderate critics. But others intend to press for further concessions and are waiting to see the fine print of the schools bill, expected in mid-February, before deciding whether to vote for it when it comes to the Commons in mid-March.

Even if Labour MPs do vote for it at second reading, ministers are bracing themselves for a series of battles over rebel amendments during later parliamentary stages.

Can Mr Blair rely on Conservative votes and survive?

The prime minister took Britain to war in Iraq with the support of the Conservatives after 139 Labour MPs rebelled. He survived and won re-election in 2005. This time, his fate could be different. He has already announced his departure at some stage during this parliament. A defeat on his flagship public service reform would probably convince even his most loyal supporters that the time had come for a change of leader.

The atom bombshell that is splitting opinion

The atom bombshell that is splitting opinion
By Robert Matthews
Published: March 9 2006 18:41 | Last updated: March 9 2006 18:41

Psychologists call it cognitive dissonance: the mental torment that comes from being confronted by two fundamentally opposed propositions. Deciding between them often provokes powerful emotions – just ask Dr Randell Mills, whose claims have a habit of triggering severe bouts of cognitive dissonance among otherwise perfectly rational people.


And no wonder: this medical student turned physicist claims to have debunked the textbook account of how atoms are put together – and in the process discovered a new source of clean, cheap energy.

By itself, that would provoke little more than eye-rolling boredom from scientists all too familiar with the grand pronouncements of cranks. The trouble is that not many cranks have had their radical new theories about atoms published in dozens of peer-reviewed papers in serious research journals, and the implications replicated in independent laboratories. And fewer still have won the support of big hitters from A-list corporations and hefty financial backing to match.

So which is it: is Dr Mills a crank or a genius? Faced with making up their minds, many scientists have shown the classic symptom of cognitive dissonance: spluttering rage (it is a safe bet that some are even now tapping out letters of complaint to this newspaper). They simply refuse point-blank to believe that Dr Mills could have found a form of atomic energy missed by the likes of Albert Einstein and Ernest Rutherford.

But – again in line with psychological theory – those with rather less investment in the current scientific paradigm tend to have fewer problems countenancing the other possibility: that Dr Mills really is a genius. Some have even gone as far as investing a total of $50m in his New Jersey-based company, Blacklight Power, whose board members include Neil Moskowitz, the chief financial officer of Credit Suisse, and Michael Jordan, chairman of Electronic Data Systems.

Not that Dr Mills cares about what mainstream scientists think about his ­theory: he is too busy extracting ever more insights from it – most recently, formulas describing the properties of molecules, something that has proved beyond the powers of quantum mechanics, the most successful scientific theory ever devised.

But then Dr Mills regards quantum mechanics as fundamentally flawed. Devised around a century ago in response to some baffling discoveries about heat, light and atoms, quantum mechanics is notorious for its counter-intuitive implications, such as the inherent fuzziness of atoms and the ability of energy to appear out of nowhere.

Dr Mills first came across quantum mechanics after graduating in medicine from Harvard and taking up post-graduate studies in electrical engineering at the Massachusetts Institute of Technology. Struck by the weirdness of the theory, he set about devising a radically different account of the sub-atomic world, based on ideas from Victorian physics.

In a series of papers published in academic journals, he argues for a new picture of the hydrogen atom, with the lone electron whizzing around a central proton replaced with a spherical shell of electric charge.

According to Dr Mills, this simple modification utterly transforms the physics of the atom. While all the successes of conventional quantum mechanics are kept, a whole raft of solutions to previously insoluble problems emerge – such as the predictions of the properties of molecules.

But most excitement – and controversy – surrounds Dr Mills’ prediction of a whole new source of atomic energy lurking within hydrogen. According to his theory, if atoms of hydrogen are heated and mixed with other elements, they can be persuaded to release over 100 times more energy than would be generated by combustion alone.

The implications are astonishing. For if Dr Mills is right, the water covering 70 per cent of the world could become a virtually limitless source of cheap, clean energy. Not surprisingly, many scientists are deeply sceptical, pointing to all-too-similar claims made for so-called “cold fusion”, another supposedly miraculous energy source whose existence was revealed by this newspaper in 1989, but which has failed to deliver on its promise.

Yet most of Dr Mills’ critics have probably never bothered to read any of his research papers. Some have, however, and have gone on to attempt the acid test of any scientific claim: replication by independent researchers. Among those to test Dr Mills’ ideas is a team led by Professor Gerrit Kroesen at the University of Technology in Eindhoven, the Netherlands. So far their results have confirmed that hydrogen atoms do indeed behave strangely in the presence of certain elements, in line with Dr Mills’ theory, and they plan to test the key claim of net energy output later this year.

While many scientists express doubts off the record, the fact remains that no one has published a knock-out argument against Dr Mills’ basic theory (though some claim it is so silly it is not worth a rebuttal).

Whether his theory is right is ultimately irrelevant, however. What really matters is whether hot hydrogen can be persuaded to give out more energy than it takes in, making it a viable power source.

The whole controversy will be resolved one way or the other by independent researchers either confirming or refuting Dr Mills’ claims. Or at least, that is what most scientists believe. In practice, things are not always so clear-cut. During the 1960s, many scientists claimed to have confirmed reports of the existence of “polywater”, a new form of H2O, which everyone now agrees does not exist.

On the other hand, many genuine breakthroughs have initially prompted outraged scepticism from experts.

What Dr Mills has already proved beyond doubt is that outsiders who threaten long-held beliefs can expect a rough ride – no matter how great the potential pay-off.

The writer is visiting reader in science at Aston University, Birmingham

THE ONES THE EXPERTS THOUGHT WOULD NEVER GET OFF THE GROUND... BUT DID

Some of the biggest technological breakthroughs were ignored or ridiculed by the scientific establishment when they first appeared:

■ When two American bicycle repairmen claimed to have built the world’s first aircraft in 1903, they were dismissed as cranks. Newspapers refused to send reporters or photographers to witness any of the flights. More than two years later, Scientific American magazine was still insisting that the story was a hoax. By that time, the Wright brothers had completed a half-hour flight covering 24 miles.

■ The claim of Irish engineer Charles Parsons to have developed a radically new form of marine propulsion was scorned by the Admiralty, until his steam turbine vessel made an unauthorised appearance at the 1897 Spithead naval review going at 37 knots – faster than any other vessel in the fleet.

■ The idea that atoms could be a source of energy millions of times more potent than coal or oil was dismissed by the Nobel Prize-winning physicist Ernest Rutherford as “moonshine”. Even Albert Einstein struggled to accept the technological potential of his famous equation E=mc2.

■ During the 1950s, self-taught American physicist Stanford Ovshinsky found a way of creating materials lacking a regular crystal structure – an achievement dismissed as impossible by scientists. They are now standard components in devices ranging from flat-panel displays to solar cells.

■ While developing the technology behind the laser, American physicist Charles Townes was approached by two Nobel-Prize-winning colleagues who told him he was wasting his time and threatening their funding. Even after the first laser was built in 1960, it was described as “a solution looking for a problem”.

■ The Scanning Tunnelling Microscope (STM), invented by scientists at IBM in Zurich in the early 1980s, now plays a key role in fields ranging from biology to nanotechnology. But many scientists remained deeply suspicious of the claims made for the STM until its inventors won the Nobel Prize for physics in 1986.

Hedge funds’ love affair with exchanges

Several prominent US and European hedge funds have been aggressivebuyers of the publicly traded shares of the world’s stock exchanges. These investors, such as Atticus Capital and Lone Pine in the US and The Children’s Investment Fund in London, have been among the prime beneficiaries because the relatively young category has ranked as one of the best-performing sectors of the past half decade. Archipelago Holdings has more than quadrupled in the past year, while Deutsche Börse has tripled in the past 18 months and Euronext and the London Stock Exchange have more than doubled.

The marriage of the New York Stock Exchange and Archipelago Holdings, (set for completion on Tuesday March 7) which will result in the NYSE Group, marks an appropriate time to ask the question: why do hedge funds love stock exchanges so much?

First, it is a fixed-cost business. Once an exchange has earned enough revenue from tariffs on trading, the additional cost to it of handling ever-larger volumes is marginal. The additional revenues are therefore almost pure profit.

Second, the companies are huge generators of cash. Third, the explosion in derivatives trading is driving growth across the board, not just for exchanges that specialise in derivatives products but also exchanges focused on stocks, bonds and cash equities that are often used in hedging against derivative bets. Even the LSE, which is essentially a single-product exchange, has benefited from the derivatives explosion as a residual benefit from investors buying underlying equities as a hedge.

While multi-security exchanges such as Deutsche Börse have benefited most from the growth in the derivatives business, an analysis of margins on separate business segments shows that the margins on cash equities come up trumps. Margins have exceeded 40 per cent in this area

Fourth, the industry is rife for consolidation, which has buoyed many of the exchanges’ stocks.

Last, there is some confusion in the marketplace about how to properly value exchanges – and hedge funds exploit uncertainty for potential upside.

One US hedge fund manager sums up this philosophy in describing his fondness for Deutsche, in which he has a stake. “To own Deutsche Börse is to harness the most powerful innovation in human history, the capital markets.” This manager also likes Deutsche as a broad-based play on a recovering Germany.

The exchanges’ ability to generate cash has proved especially compelling to hedge funds, since cash generative activities have made them ideal candidates for the use of gearing to enable even greater returns of capital to shareholders.

The LSE, fighting off a hostile bid led by Macquarie Bank, announced plans to double its return of capital to shareholders to £510m and said it would finance that through £350m of additional debt. Macquarie’s own plans for the company implied gearing of 10 times the company’s earnings before interest, tax, depreciation and amortisation (ebitda).

Mamoun Tazi, analyst at Man Securities, calculated the gearing at two times the company’s forecast 2007 ebitda, and notes that the LSE is the first exchange to begin to use leverage in any significant way.

Indeed, several hedge fund investors in Deutsche Börse were urging precisely that approach last year as the exchange piled cash on its balance sheet. One, Atticus Capital, calculated that Deutsche Börse could return as much as €2bn to shareholders using both the cash it was piling on its balance sheet and funds raised through borrowing.

Moreover, it is likely to remain under pressure to borrow in order to speed the return of capital to investors, a prospect which analysts say has increased the appetite for its shares.

In a recent report on Deutsche Börse, analysts at Morgan Stanley pointed out that even after the company’s recent return of capital to shareholders, about €715m of cash remained on its balance sheet.