Tuesday, 15 January 2008

Centre Forum nearly right about new Lib Dem education policy

Serendipity is a wonderful thing. Having written yesterday about how choice drives up standards in education, a new report landed on my desk today providing further support, and calling upon the Liberal Democrats to adopt education policies that see the money following the pupil.

A liberal education policy, from the think-tank Centre Forum, notes that

Choice is one of the key freedoms in a liberal society. It is also one of the
best ways of driving up standards. Opponents of choice based systems claim that
“people just want a good local school”. True. But that leaves unaddressed the
issue of how these good local schools are to be created. Advocates of choice
systems argue that the exercise of parental choice leads to the creation of more
good local schools by forcing poor schools to ‘up their game’ in response to
competitive pressures. But does this work in practice?

Which was, of course, exactly my point. The authors then go on to add the findings of the Institute of Fiscal Studies:

A recent IFS paper had this to say on the matter: “Is school choice a tide that
lifts all boats? The evidence from the USA suggests that it might be, as it
seems to increase school quality across all schools that face
reasonable amounts of competition
. This is what we would have
expected, given what economic theory tells us about the role of competition.
Evidence from the UK is much patchier. This may be because competitive pressures
are limited (school numbers and funding vary little from year to year).
Therefore, it seems to be the case that school competition can be a tide that
lifts all boats, but only if its effects bite financially.” (emphasis
added).

The report goes on to propose that “a greater proportion of education funding … ‘follow the pupil’, either through a system of vouchers or entitlements (the difference being purely administrative).” However, astonishingly it then throws a spanner in its own works by pandering to producer interests in the public sector, massively undermining the drivers that would generate improved quality, when it adds “So as to strengthen, rather than undermine, the state education system, such entitlements should not be redeemable at fee charging schools”.

As I made clear in yesterday’s post, any limitation by government on the freedom of parents to provide the best schooling for their children is iniquitous. As with any other industry or service, if the state sector is not able to provide the best product or service, users should be free to go elsewhere. To force parents to continue to use inferior schools in a misguided attempt to protect the state sector is as flawed as the 'infant industries' theory: rather than “strengthen… the state education system”, as Centre Forum would have it, such a policy would merely insulate it from competition from private, voluntary, commercial, charitable and other alternative providers, which would suboptimal standards and systems to perpetuate.

The only way to ensure that everybody has access to a “Good, local school” is to give everybody unfettered choice to educate their children wherever they see fit.

As Centre Forum themselves note, in Edmonton, Canada, the “the exercise of parental choice has so strengthened the public school system that there are now no fee charging schools left in the city”. Why Centre Forum does not trust the British public sector to respond as positively to competition as their Canadian colleagues, and why the authors think that we should therefore protect the state schools at the expense of the pupils whose choice Centre Forum would limit, is a mystery.

9 comments:

dreamingspire said...

Wonderful stuff in both those school posts. I'm cogitating, and with your permission will post a response ASAP.

Julian Astle said...

A clarification from CentreForum:

We are not in any way suggesting that parents in receipt of state funding be forced to use only state run schools as you suggest. What we are saying is that public money should not be used to buy places at fee-charging schools - a key difference.

Within the state funded sector, we are fully supportive of moves to liberalise the supply side , allowing new providers - be they parent or community groups, charities or businesses - to open new schools. But these schools must not be allowed to select pupils or charge parents. So long as they do not, they will be allowed to compete with all the other schools - state run and 'independent' - for the vouchers or portable funding entitlements that, under our system, would follow each pupil (with disadvantaged pupils bringing more money with them than their more advantaged peers).

Tom Papworth said...

Julian,

Thank you for the clarification. However, I am still unclear as to whether you are saying

1) State funding cannot be used to buy places at schools that charge a fee even if that fee is met by the voucher/ or tax credit that is paid to the parent, or

2) Schools may charge the state directly but not parents, or

3) The "fee" that schools charge must equal the state-fund, so that parents may not top-up the amount to create a true market in education, with excellence costing more, or

4) "Fee" is a euphamism for profit and it is profit-making that you object to, or

5) That you are trying to avoid deadweight costs by saying that schools already charging fees cannot benefit from state funding.

I would be very grateful if you would clear this up as I felt that your paper left it ambiguous.

Julian Astle said...

Tom,

I'm saying that the objective of policy here is to strengthen the state funded education system. A key measurement of success in this regard will be a decline in demand for private sector (fee charging) education, as has happened in Edmonton. To subsidise all those currently in the private sector would, as you suggest, lead to a hefty deadweight cost. It would also hugely increase demand, as a reduction of £5,000 per pupil would more than halve the average cost of a private education. This would weaken, rather than strengthen, the state funded sector.

For that reason, I want to see as much diversity of supply as possible within the state funded sector. This would lead to more competition between schools and more choice for parents. But those parents must never be faced with a charge over and above that which is covered by the entitlement/voucher. If commercial providers feel they can run a good and popular school without charging a 'top up' whilst still making a profit, I'm pretty relaxed about that. The key thing is the quality of the education provided.

Tom Papworth said...

Julian,

You say that “The objective of policy here is to strengthen the state funded education system” and that, I think, is its flaw. The objective of policy should be to provide children with the best education possible, and to that end the government should remain entirely agnostic about where and how that education is sourced. While the example of Edmonton is encouraging for the state sector, it should be a happy consequence rather than an objective.

There are real, practical problems here, too. To say that “to subsidise all those currently in the private sector would... lead to a hefty deadweight cost” but then say “If commercial providers feel they can run a good and popular school without charging a 'top up' whilst still making a profit, I'm pretty relaxed about that” is contradictory. Many private schools charge no more than the £5,000 you propose, and so would not need to charge top-up fees. Yet even if you simply ban top-up fees, you will still face an enormous deadweight cost as those previously paying to educate their children return to the state sector.

In fact, this deadweight cost is an inevitable result of success – even if a pure state monopoly suddenly began to provide education of the highest quality, it would draw in previous fee-payers and so result in additional cost.

Don’t get me wrong; what you are proposing is head-and-shoulders above of what we have suffered throughout my lifetime, and streets ahead of anything Labour or the Conservatives have come up with. But I still think that we would be wrong to stop parents topping up their children’s education if they see fit.

For one thing, a real market in education can only exist where differential fees are applied, as you correctly note in your paper when discussing university fees; this is how we distinguish excellence and what drives quality. We would not say to car manufacturers that they cannot charge over a set amount, but may compete on quality.

What is more, price controls always have perverse effects: schools charging marginally above the price cap will lower prices and therefore standards in the face of a potential mass exodus. Schools will also find novel ways of circumventing the regulations, as nurseries have done by charging for additional services (e.g. lunch) which were previously included in fees, because the “free entitlement” paid for by the government does not cover their costs.

Finally, parents – being resourceful – will inevitable find ways around the controls. Schools may provide fee-paying “after school” additional lessons, and if all these practices are banned, the formerly fee-paying parents will shell out thousands of pounds on extra tuition from private tutors.

Ultimately, there is nothing short of punitive legislation that can stop rich parents providing their children with superior education. Government should accept this, and concentrate on ensuring that poor parents can at least access the best education possible, which – as you rightly note – it is not doing by directly providing monopoly schooling. A free education market will benefit poor children the most because they are the one’s currently most insulated from the beneficial effects of choice.

Julian Astle said...

Tom,

Interesting thoughts all. I'll pick up on a couple.

First , if a private school which charges fees at or below the value of the voucher wishes to accept government funding instead of private payment, it effectively joins the state funded sector. It becomes just another 'independently run, publicly funded' school providing education free at the point of use. I would welcome this. It promotes diversity, stimulates competition and extends choice within the state funded sector - all of which should lead to higher standards.

But the key question here is whether those parents whose children go to schools, like Eton, that charge £20,000+ per year should be eligible for state subsidy. I would argue that they should not. But nor should they be prevented from paying to exit the state funded sector if they wish to.

On your general point, of course I agree that markets function better with the assistance of price signals. But I don't agree that compulsory schooling should be dealt with in the same way as non-compulsory schooling (like that provided by universities). Once the state has made non-attendence a legal offence, it also has a duty to promote access. This requires it to ensure that state funded schooling is free to use. It does not require it to ensure that expensive private schooling is cheaper to use. The market that I envisage for state funded education is one in which schools compete on the basis of quality - however they wish to define it - not on price.

One final point. I'm hugely heartened that liberals are addressing these questions again - inside and outside Parliament. We at CentreForum don't claim to have all the answers. But we're determined to search for them. In the process, I will bear in mind the points you have made. Do keep in touch with the think tank. We'll be publishing on these issues in the spring.

Tom Papworth said...

Julian,

I guess it boils down to whether you see making vouchers available to the very rich as an unnecessary subsidy or redressing a situation where people are taxed for a service they do not use.

Personally, I am not bothered by the rich, but I recognise that many (in both the Lib Dems and the wider electorate) are hostile to them and that it would therefore be more difficult to sell a voucher policy if it was going to benefit all citizens equally, regardless of wealth. For pragmatic purposes, therefore, it may be necessary to exclude those paying very high school fees.

Of course, they won't care; it is those in the middle, paying £6,000 to £8,000, who'll suffer, but it is not them upon whom the arguments will focus.

On the second point, be it free monopoly provision or a £5,000 voucher, the state will have done plenty to promote access. If some then want to pay extra to give their daughter's a better start in life, then why should we disapprove? As I say, they'll do it anyway with private tuition.

But I can now see a bunch of angels crowded onto the head of a pin, and they've stopped counting one another and are looking over at us reproachfully.

I largely agree with your proposal, and I completely agree that it is heartening to see the Lib Dems genuinely embracing these debates. One thing is for certain: the future is not with State provision of services.

I shall await your next publication eagerly.

Tristan said...

Any system which allowed choice would cause improvement, but I really think that excluding schools because they charge more or because they select defeats the point.

What we want is to give every child the best possible education that can be given.
That means we need freedom to experiment, including with selection and charging more than the government funding.

As I keep on trying to point out, schools which charge more will be open to poorer people under such a situation, even those who can't afford the top up fee since scholarship funds will go further. The richer could also be charged more to fund more 'free' places to the poor.

As for selection, since we're not talking about a rigid system of only certain types of school its advantages can be fully utilised without creating a rigid tier system.

dreamingspire said...

Nick Clegg, at the Manifesto Conference, quickly (in the printed text as found at libdems.org.uk) moved to a ‘public services agenda’, but soon narrowed his focus to schools and hospitals. So there is first a two stage response to both of your posts: still I see nothing that shows how the change to the central govt machine is to be engineered, and (as I have posted elsewhere) at the local level its not much good if the only choice we have at election time is between equally incompetent groups of candidates. Blair wanted to improve service delivery, but chose mainly the stick, plus a few carrots. My recent experience of local govt in my area is that both the elected representatives and the senior officers are failing us. How do we improve that? Its the ‘elephant in the room’ that needs to be tackled both behind the scenes and head on.

People do indeed want good schools. Of course some are able to choose where they live, as my parents, in the face of considerable difficulties, successfully did in order to provide my brother and I with excellent schooling. So it was we moved to the far south east corner of Manchester at a time when Manchester’s schooling was excellent. Much of my teens was spent in the company of my peers just over the border in North East Cheshire, where I soon learned that the secondary modern schools there were of poor quality – but there were a number of Direct Grant schools within easy reach, and good financial support. So secondary education in that corner of Cheshire languished for years. Competition didn’t improve it.

Julian Astle’s CentreForum paper that you quote only gets to competition between schools at the end. He tackles first the structural problems that he finds. Only when the structure of support and governance is right can competition give that final lift. And, in the particular case of schools, there is the problem that capacity in state schools is inelastic, so, as has been often commented on, most parents, even some of those who deliberately move to where there is an excellent school or three, don’t have a real choice at all. We have a divided society in many urban areas: those who can afford private schooling and those who cannot.

Tom: ambush the elephant, please, because Nick isn’t doing it.