Simon has written about the ESF, something I have previously mentioned a few times myself. I won't repeat what he has written, which is a mostly fair summary of the history and more recent problems. Something has to change.
However, I think it's important to remember that the ESF was set up and given government money in order to provide education for children who couldn't survive in local schools because their native tongue was English rather than Cantonese.
What has happened since has tended to obscure those fairly laudable aims. Nowadays, the majority of the children attending ESF schools are locally-born native Cantonese speakers. Their parents choose an ESF school because they want their children to be fluent in English and also because the facilities and quality of the education are superior to local schools (or at least the vast majority of them). The fees are also more affordable than international schools (which don't receive any subsidy from the government).
The ESF have made great play of these points in seeking to defend the subvention (the money paid by the government to the ESF). However, surely what it really demonstrates is that there is strong demand for the education that the ESF offers, and therefore a cut in the subsidy would not do much damage. Presumably the ESF would be forced to increase fees, but most parents would be able to afford this and if a few could not afford to pay more, there would be no shortage of parents willing to take up any spare places. So the ESF would survive.
However, there is a risk that some children whose parents could not afford to pay would find themselves with a problem because their children would be unable to cope in the local system. It's easy to assume that we are talking about a bunch of rich expats who could easily afford to pay increased school fees - whereas we are actually talking about a bunch of rich locals and expats who could easily afford to pay more. No, that's unfair - there are certainly a significant number of less wealthy parents who may be struggling to afford current ESF fees and who probably couldn't pay much more. And why should they, when they are taxpayers as well?
My understanding of the subvention is that it is mean to represent the cost to the public purse of educating a child in the state system. So, rather than spending the money directly itself, the government gives this sum to the ESF, and it pays for a delicious lunch at dot.cod for senior management. Therein lies the real problem - the ESF is seen as arrogant and wasteful, and the government wants to do something about it.
In this regard, the ESF has already started to put its own house in order. The old chairman and his associates were forced out when their attempt to install a redundant insurance company boss as CEO was thwarted by a group of concerned parents. Professor Felice Lieh-Mak seems to have been a good choice as chairman, and the newly appointed CEO seems to have the right background (having worked in education rather than being chairman of the West Island School PTA and a member of the selection committee for the post).
I am not an expert on the history of the ESF, but it is clearly a success story, and the irony seems to be that its very success may have created these problems. As the organization has grown, hubris has set in. The way that it was run has not really changed, and the people at the top ended up with too much power without true accountability. Being accountable to the "stakeholders" is all very well, but they each have their own interests at heart, and as long as parents were happy with the education provided by ESF schools and teachers were satisfied with salaries, no-one was likely to challenge the status quo.
What has changed more recently is that the education sector is under pressure because of falling birth rates. Schools are closing and teachers are being made redundant. In that environment, it becomes harder to justify paying such a large sum of money to the ESF to create a "world-class" education system and to bring in highly-paid expat teachers. If the ESF was a small organization catering exclusively to expats, probably no-one would give it much attention, but it's now much bigger and more significant. More politically astute and sensitive leadership might have helped the ESF to head off this confrontation, but now it seems that it's too late and it will become a political issue. The signs are that the Secretary for Education and Manpower (Professor Li Kwok-cheung) will not be fighting very hard to defend the subvention.
However, I think it's worth getting back to the fundamental logic underlying the subvention. Children in Hong Kong are entitled to a free education, paid for by taxpayers. Most ESF parents are taxpayers. If the ESF closed down tomorrow and every child attended government schools instead, the taxpayer would not be any better off (in fact, they could be worse off, depending on which figures you believe).
The ESF was set up as a non profit-making organization to provide education in the English language, and there is general agreement that it does this very successfully. It has to sort itself out, and the government is fully entitled to insist on changes to the way it is run, but I don't see anything illogical about parents being allowed to choose an ESF school over a government-run school and for the funding to follow accordingly.
UPDATE: Interesting comments from a former ESF pupil over at Simonworld.