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Should we incentivise the best schools to replace the worst?

Variably priced educational vouchers would create a competitive market, transforming the UK’s economy and society

By Jules Goddard and Alex Hill 18 October 2018

UK education

In the last 15 years, the UK has spent £550 billion running and improving its secondary schools. During this time, our research shows, it has closed 1,500 schools (35%) and opened 1,900 new ones. But little has changed. A third of English students still graduate with less than five GCSEs, reducing their projected lifetime earnings by £140,000. More worryingly, the number of schools where no students graduate with five GCSEs has doubled, as other schools use them as dumping grounds to improve their own results.

The current strategy seems to be increasing bad practice, rather than creating good. Why is this? Perhaps the issue is not how much is being spent, but who it is being given to. Maybe, rather than trying to improve its worst schools, the UK should encourage its best ones to grow. They already have the right leadership, culture and capability in place. Why not get them to do more? Why not challenge them to teach our most deprived students, as well as our most affluent ones?

If England had increased the size of its best schools by 10% each year in the last 15 years, then 10% more students would have graduated with five GCSEs last year. If it continued with this strategy, then it would be the highest performing OECD country in 25 years, our research shows. With an estimated £12 billion to £25 billion increase in UK gross domestic product along the way.

The current strategy isn’t working – it’s time for a new one.

The problem


In 2001, the economist Ralph Harris told an interviewer, “We have had a century of compulsory, universal state-provided education. There is a 20% adult illiteracy rate, half of the children are below their reading age, the reading skill they should have reached at that age. State education is one of the most terrible flawed failed industries or services in the whole of this nation. There is no way that a private education company could have gone on for a hundred years with a worsening output with every sign of failure, and gone on being funded and funded. Yet state education can do that.”

Things have not improved since. The results of the PISA educational tests for science, reading and mathematics amongst 15-year-olds, published by the OECD in December 2016, make for painful reading. They show that Britain falls far short of the best performing nations, such as Singapore, Denmark and Finland; worse still, we lag behind much poorer countries, such as Vietnam, Poland and Estonia. In maths, Britain is ranked 27th out of more than 70 countries, its worst performance since the turn of the century; in reading, we are placed 22nd, having dropped out of the top 20 over 10 years ago; only in science have we marginally improved our position, in spite of lower absolute scores.

The irony is that Britain has a disproportionately large share of the finest schools in the world. Our best schools are a magnet for parents throughout the world who seek the finest education for their children. As a country, we are almost unique in treating secondary education as a precious export market. The problem seems to be that we cannot emulate our own success on a national scale.

The gap between our best and worst schools seems as unbridgeable as ever. According to the same PISA tests, by the time British children leave school, the top 10% are nine years ahead of the bottom 10% in science, and eight years ahead in mathematics. 47% of children leave school without five good GCSEs. If there were a Gini coefficient for educational inequality, Britain would win the gold medal. Fewer than 7% of our schools produce over half of all successful Oxbridge applications.

If education were a competitive market, our best schools would have put our worst schools out of business a long time ago. Competitive pressure and parental choice would have guaranteed an ever-increasing quality of educational provision as the best schools systematically replaced the worst. However, in Britain, we do the opposite of what a competitive market would do. We concentrate our improvement efforts on our worst performing schools. We place them in special measures and parachute in “superheads” to transform their fortunes. In short, we invest disproportionately in failing schools in the hope that they can be turned around.

Those who pay the price of this flawed policy are, inevitably, the poorest third of the population. Surely, a wiser solution would be to encourage our better schools to grow.

The solution


Drawing upon the Pareto principle, it is more fruitful to build on the successes of the best 20% than try and reverse the fortunes of the worst 80%. As Richard Koch wrote in his bestselling business book: “Exploit 80/20. Whenever you can, move resources from 80% activities to 20% activities. The profit from this is enormous because it is highly leveraged arbitrage. You use what is not very valuable to make something that is enormously valuable, winning at both ends of the exchange.”

Applying this logic to education: What if we encouraged the best schools to replace the worst ones? If the best 3,000 schools in the UK (roughly one-eighth of the total) set up another 3,000 schools every five years, then every school would be delivering a top quality education (in the top 20% of today’s schools) within 15 years.

Take, for example, Winchester College. It currently has nearly 700 pupils. Adding the same number every five years would mean that by 2035 it would be educating nearly 3,000 pupils on four or five campuses. If this could be achieved without compromising its standards, then it would have replaced the same number of poorly performing schools. If Britain’s best 3,000 schools were to do the same, then in five years they would have driven out of business most of the schools currently in special measures and at least another 10,000 schools by 2030.

The main beneficiaries of such a scheme would be those who are currently disadvantaged. The poor suffer disproportionately from a variable, sub-standard, public service.

"Education is far too important to be left to governments. Markets will get to a better, fairer, more popular outcome faster."

The design


So, how could we establish a competitive educational market? What are the free society conditions that would encourage the best schools to replace the worst?

An electronic voucher system (managed by the government and funded by the state) should be introduced such that all state and private schools receive their educational funding directly and wholly from parents. Education at every school in the country would be free. Social mobility would increase as the financial barriers currently inhibiting poorer parents from accessing Britain’s best schools are dismantled;

The poorest and most disadvantaged families should receive the highest priced vouchers to encourage the best schools to go where they are most needed if national educational standards are to improve;

Vouchers should come with a day-school and a boarding-school value so that parents can choose which option they prefer; and schools, mindful of parents’ wishes, can choose the mix of day and boarding places that they make available;

Schools should be free to set up sister-schools wherever they wish. Many of the UK’s private schools have already done this. For example, Harrow has schools in Bangkok, Beijing and Hong Kong; Sherborne in Qatar; Wellington and Dulwich in Shanghai; and Haileybury in Almaty. The voucher system would incentivise similar schools to open subsidiaries in, say, Sunderland, Toxteth or Blackpool. Only those schools with a reputation for excellence would have both the confidence and the access to venture funds to do so; indeed, the best schools would be facing a Hobson’s choice: in order to maximize their income and sustain their educational reputation, they would discover that they had little alternative but to expand into those parts of the country where there is a relative dearth of good schools and compete as hard as they could for the least advantaged, but most lucrative pupils;

The least popular schools would be forced to close as the better schools replaced them;

Every school should be free to choose its own style, priorities and curriculum, including the mix of subjects on offer, the pedagogical methods of its teachers, the criteria for selecting pupils, the pay and conditions for its staff, the hours of work and length of school year – in short, the very same freedoms that created our finest schools in the first place;

The government’s role should be limited to three key tasks: determining the differential pricing structure of the vouchers, administering the nation-wide system of educational qualifications (such as the current GCSE regime), and publishing the examination results of every school.

The Outcome


The adoption of this policy would result in four main outcomes. First, a far greater variety of schools would emerge, driven by parental choice and responding to the varied needs of different families and communities. Second, educational standards would rise as the gap between the best and worst schools narrowed and the children of the least fortunate third of families gained equal access to the finest schools. Third, the divisive and doctrinaire distinctions between private and public schools, between independent and local authority schools, and between privileged and underprivileged schools would evaporate. Fourth, the UK economy would strengthen as its educational rankings improved: research suggests that a 1% improvement in examination performance leads to between a £0.3 and £0.6 billion increase in gross domestic product.

The Assumptions


The benefits of our proposal are based on eight key assumptions:

1.    Education has more power than any other institution in society to redress inequalities of opportunity. In Britain today, the educational system is the main cause of inequality, operating essentially as a producer-led, market-insensitive, government-directed public monopoly;

2.    Parents want a better education for their children – and will seek this out once the financial and geographical barriers are removed through the introduction of a voucher system;

3.    The current strategy isn’t working. The philosophy of trying to improve the UK educational system by focusing attention and resources on failing schools has resulted in the UK consistently underperforming its peers over the last 15 years;

4.    Our best schools have untapped potential. They could exert a much greater impact if incentivised to do so. Moreover, they have the ability to teach children with varying abilities and needs across different sites in different parts of the country without diluting their standards or reducing their current performance;

5.    Good schools want to have greater impact. They want to help improve society and would welcome the opportunity – and the challenge – to educate a larger and more diverse range of students;

6.    The unacceptable range of educational outcomes across the country is due more to the variation in school standards than the variability of pupil potential. A great school is great, not because of the quality of its pupils but because of the quality of its product. The best schools are as good as they are, not because they are selective, but because they are selected. It is a peculiar form of snobbery that claims that the children of wealthy parents have greater potential, and are more deserving of a good education, than the children of poorer parents.

7.    Parents generally make better choices for their children, than governments or local authorities – and a moral society is one where any mistakes of judgment are made by parents rather than officials. Parents should not be encouraged to outsource these fundamental decisions to the state. An educational system genuinely open to all and free at the point of delivery would help dismantle the disabling belief that people are the product of their circumstances rather than their decisions.

8.    Education is far too important to be left to governments. Markets will get to a better, fairer, more popular outcome faster. Directed by the tastes and preferences of users, a greater variety of schools would emerge and, by the principles of variation and selection, faster progress in educational standards would be achieved than by any amount of planning, re-structuring, hectoring, or re-engineering. The quality of a nation’s schools improves in proportion to the variety of schools competing with one another – and at a pace proportionate to the number of experiments being conducted by these schools. In education there is no better formula for improvement than trial and error, adjudicated by a market of freely choosing parents armed with vouchers. Markets are the best means we have ever discovered for encouraging the best organisations to flourish and grow, and for the worst to fail and disappear.

Conclusion


Life chances in today’s high-pressure society are determined overwhelmingly by two sets of influences: the family (particularly the quality of parenting) and the educational system (particularly the quality of schooling). For government to try and control or enhance the quality of parenting is almost certainly beyond its competence, and would be regarded by most citizens as none of its business. However, the quality of the nation’s education is absolutely central to its remit. It is a core duty of any government. And it is the greatest opportunity the state has to enhance the life chances of the poorest third of its population.

How much longer, then, must our failing state education system be tolerated – and how much further must the international ranking of Britain’s schools fall – before the British government recognises that a market solution to our educational problem has a greater chance of success than yet another dose of top-down policies?

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Comments (2)

A..J 1 months and 16 days ago

There is a 'problem' - Yes What is the cause of the 'problem' - ? You propose a 'solution' - Yes If the 'cause' of the problem hasn't been identified, is it valid to propose a solution - ? What evidence is there that the proposed solution will work - ?

CKS 1 months and 23 days ago

This is a very relevant article with a lot of useful data. The research commands in-depth debate given the poor global rankings of the UK’s secondary education. Why should we be so far behind? My two cents as a devil’s advocate: 1. Assumption: “Parents want a better education for their children” Argument: Does the want of parents measure proportionately with their capability to understand what’s the best education for their children? A solution is offered through another assumption that says, “A moral society is one where any mistakes of judgment are made by parents rather than officials.” However, isn’t the moral society rather duty-bound to educate the parents about how best they could improve their capability on this matter? I would assume state support in better parenting as an appropriate solution here. 2. The article mentions, “If the best 3,000 schools in the UK set up another 3,000 schools every five years, then every school would be delivering a top quality education within 15 years.” This is backed by valid assumption as well about the schools’ capabilities being more relevant than the learners’. However, is that practically the case? And then comes the next question of the impact of increase in scale of operations on the quality of the top schools. Can this really be a linear correlation? I don’t have a better solution to this. But I would rather request the government to focus attention from worst schools to the second and then the third quartile schools. 3. The article recommends, “The poorest and most disadvantaged families should receive the highest priced vouchers.” Isn’t this solution very similar to the complaint of the article about the government’s focus on the most poor quality schools? There is a clash of vis-a-vis logic here. If meritocracy is being advised, it might be rather good to not turn to (reverse) discrimination and preferences. It is worth debating this topic further. Thank you for focusing on a root cause.

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