Education Policy in England
OXFORD REVIEW OF ECONOMIC POLICY, VOL. 20, NO. 2 DOI: 10.1093/oxrep/grh010
EDUCATION POLICY IN ENGLAND
PAUL JOHNSON Department for Education and Skills1
The English education system performs well against a number of international benchmarks, particularly in terms of school attainment and the performance of the higher-education system. But there are major issues for policy to contend with, including a low staying-on rate in post-compulsory education, a significant gap in attainment between social classes, and poor work-force skills. Much recent policy change, and the very substantial increases in spending, can be seen to flow from these imperatives and from the continued high returns to education in this country. This paper concentrates on a few aspects of policy, including the central roles of funding systems and Public Service Agreement targets. We argue, inter alia, that there are important policy complementarities and informational and incentive problems that could benefit from further attention, and that the low staying-on rates after 16 remain one of the key concerns of policy, being both symptomatic of problems at earlier ages and a cause of later problems.
I. INTRODUCTION more demonstration of the growing importance of the economic study of education policy. The state funds education to the tune of £63 billion a year in the UK in 2004/5—one pound in eight of This paper is intended to set the economic context all public spending, 5.4 per cent of GDP, and second of education policy. It is divided into two parts. The only to health in the scale of public provision. The first part provides a very high-level overview of the 2004 Budget promised increases taking education system and suggests four key areas of concern spending to 5.6 per cent of GDP by 2007/8. It pays which explain the potential need for increased gov- for the employment of over 1m staff. Yet, in the UK, ernment intervention and spending. The second the analysis of education policy has only recently section then takes three parts of the education developed into an area for the significant attention of system in turn—schools, further education (FE), economists. This issue of the Oxford Review is one and higher education (HE)—and looks at how they 1 Chief Economist, Department for Education and Skills, writing in an entirely personal capacity. Nothing here should be taken as the view of the department. I would like to thank many of my colleagues in Analytical Services for assistance in preparing this paper, in particular Mutsa Chironga, Gavin Lambert, Karen Hancock, and Paul Mount.
Oxford Review of Economic Policy vol. 20 no. 2 2004 © Oxford University Press and the Oxford Review of Economic Policy Limited 2004; all rights reserved. 173 OXFORD REVIEW OF ECONOMIC POLICY, VOL. 20, NO. 2 are funded and regulated, and at key policies which Of these, the vast majority of those who are success- have been put in place to tackle the issues identified ful at age 16—i.e. with five or more ‘good passes’ in the first section. The weight of the paper is at GCSE—will pursue the academic A-level route towards schools, which form by far the largest part which prepares for entry to HE, with a variety of of the education system, with less weight put on HE, vocational and academic courses followed by the in part because it is dealt with elsewhere in this rest. Another 14 per cent of the 16-year-old cohort issue. In the interests of making the subject matter is in part-time education or employment with train- manageable, we do not consider pre-school educa- ing, about 6 per cent are in employment without tion and interventions at all, except to note that its training, with a stubborn minority of about 8 per cent expansion has been one of the major changes and not in education, employment, or training (NEET). recipient of additional funding since 1997. Also However, only about 1 per cent of a cohort is NEET neglected is much of the policy and infrastructure for the full 2-year period from 16 to 18. directed towards improving work-force skills. Age 16 is also the point at which the funding and organization of education changes. Both pre-school II. OVERVIEW and compulsory education is organized by, and funded through, England’s 150 Local Education A brief description of the education system is in Authorities (LEAs). While the schools and LEAs order as a preface to the rest of this paper. have to abide by many central government rules regarding testing, curriculum, and funding, they are Compulsory schooling starts at age 5—younger the ones responsible for delivering education serv- than in many European countries—and there is now ices. The changing pattern of responsibility between universal provision of pre-school education for all 4- central government, local government, and schools year-olds with the promised extension of that to 3- is of key interest in understanding the development year-olds in 2004.2 of education policy.
Most pupils attend state-maintained primary schools After age 16, responsibility for delivery passes to the until age 11, with national testing in literacy and Learning and Skills Council—a powerful public numeracy at ages 7 (key stage 1(KS1)) and 11 body with a budget of £8 billion (2002/3) charged (KS2). They then transfer to secondary school, with delivering all continuing and further education taking KS3 tests at age 14 and GCSEs at 16. There in England (not including HE). The bulk of its funds is a relatively small independent sector—about 7 per go to supporting FE colleges—both general and 16–19 cent of the total school-age population—though its only, the latter commonly known as 6th form colleges. importance varies geographically, with up to 20 per cent of children in inner London educated privately. About half of each cohort of students reaches ‘Level The compulsory phase of education continues until 2’—equivalent to five passes at grade C or above at age 16, at which point formal examinations leading GCSE—by age 16; 76 per cent are at this level by age to labour-market-recognized qualifications—GCSEs 19. By age 19, 52 per cent have attained Level-3 (general certificates of secondary education)—are qualifications (equivalent to two A level passes).3 taken. In England, over half of the government’s entire education budget is spent on primary and Entry into HE generally takes place between ages secondary schools. 18 and 21, with 35 per cent of the cohort entering by age 21. Financing of HE occurs largely through At age 16 paths diverge. About 73 per cent of the another quango—the Higher Education Funding Council cohort stays on in formal full-time education—a for England (HEFCE)—which allocates roughly £5 proportion which is low by international standards. billion a year to England’s 131 universities.
2 Ages refer to the year in which the child turns that age. 3 Qualifications are classified by Levels in the National Qualifications Framework, ranging from Entry Level up to Level 5, where, for example, Level 2 equates to 5 GCSEs at grades A–C, Level 3 equates to two A levels, and Level 4 equates to a first degree. We also refer below to levels of achievement within the Key Stages of the National Curriculum, which is a different classification system ranging from level 1 to level 8. Here, for example, 7-year-olds are ‘expected’ to reach level 2, 11-year-olds level 4, and 14-year-olds level 5 or 6.
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III. ECONOMIC CONTEXT AND Red Book (HM Treasury, 2004), in which the SYSTEM PERFORMANCE government set out the key areas in which it expects to set PSA targets, which are themselves an abso- Planned spending on education in England in 2004/5 is lutely key driver of policy and its implementation. £52 billion (the UK figure is £63 billion). Public These are set out in Box 1.5 spending on education in England has risen dramati- cally since 1999, with an overall real-terms increase (i) Returns to Education of more than 60 per cent planned between 1998/9 and 2007/8. Public spending on education in the UK There is a key economic sense in which the contin- will have risen from 4.5 per cent of GDP in 1998/9 ued drive for more education appears to be well to 5.6 per cent in 2007/8. The scale and continuity of justified. Returns and rates of return to education, these increases are unprecedented in recent his- particularly to academic qualifications, in the UK tory. The bulk of the increase to 2004 has been on are high6 by international standards. There is an schools.4 unusually large gap between the earnings of the well educated and the less well educated. Table 1 (taken An obvious question is whether this increased in- from OECD, 2003) compares social rates of return vestment in education has been justified. At this to upper-secondary and tertiary education across 10 stage let us ask that question by considering whether OECD countries. There are many ways of calculat- greater outputs are required from the system. The ing this sort of pattern, but the results consistently effectiveness of some of the inputs in producing show that returns are high in the UK. some of the outputs we will consider, in some instances, later. Despite enormous increases in the proportion of the adult population qualified at higher levels—the pro- A number of factors point towards the potential portion of those in employment educated to Level 4 utility of greater investment in education in the UK. (equivalent to a first degree) doubled to about 28 per cent in the 20 years up to 2001—the wage returns First, returns and rates of return to most qualifica- to higher-level qualifications have not fallen at all tions, at least academic ones, are high by interna- (see Machin, 2003, for example). These high re- tional and historical standards. Second, there are turns, and high rates of return, provide one important significant ‘skills deficits’ among the adult work- justification for greater investment in educational force, with fewer adults qualified even to the ‘semi- success. skilled’ Level 2, and more lacking even basic liter- acy and numeracy skills than in most competitor Note, though, that there is an important exception to countries. Third, and linked to this, large numbers this rule that educational qualifications provide sub- still leave the compulsory phase of education with stantial wage returns. Numerous studies have failed few qualifications and limited skills and, by interna- to find returns for significant proportions of the tional standards, staying-on rates in formal educa- population from lower-level vocational qualifica- tion past 16 are very low indeed. Fourth, there are tions—and in particular from National Vocational very significant gaps in the educational outcomes of Qualifications (NVQs) at Level 2.7 children from higher and lower social classes, provid- ing a case for further intervention on equity grounds. There are, of course, a number of possible explana- tions for these high returns and big differences It is worth considering each of these in turn, but first between the well and less well educated. Part of the it is worth noting one key indication of policy priori- British pattern is likely to result from flexible labour- ties given by the list of priorities for Public Service market institutions which allow wage inequality to Agreement (PSA) targets set out in the 2004 Budget prosper. Part is likely to reflect the very poor skills
4 The allocation between schools and the other elements of the system after 2004 is not known at time of writing. 5 Taken from HM Treasury (2004, p. 148). 6 Return refers simply to the percentage increase in earnings attributable to a qualification; rates of return take account of the direct costs and opportunity costs associated with study. 7 McIntosh (2004) is a recent example of an author finding nil wage returns to these qualifications.
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Box 1 Priorities for PSA Targets (HM Treasury, 2004)
Improve life outcomes and general well-being of children and young people • Improve children’s learning and emotional development by increasing the proportion who are prepared for their education. • As a contribution to reducing the proportion of children living in households where no one is working, increase the availability of childcare and narrow the gap in childcare provision between the 20 per cent most disadvantaged wards and other areas. • Increase the number of schoolchildren spending a minimum of 2 hours each week on high-quality physical education and sport beyond the current commitment. • Reduce the under-18 conception age by 50 per cent by 2010.
Raise standards and tackle the attainment gap in schools • Increase the proportion of 11-year-olds achieving level 4 or above in English and maths and close the gap in educational attainment by setting more challenging floor targets for schools. • Increase the proportion of 14-year-olds achieving level 5 or above in English, maths, ICT, and science, and close the gap in educational attainment by setting more challenging floor targets for schools. • Improve school attendance, including reducing the level of unauthorized absence at school level. • Narrow the gap in educational attainment between children in care and that of their peers, and improve the stability of their lives.
All young people to reach age 19 ready for skilled employment or HE • Increase the proportion of those aged 16 who achieve Level 2 qualifications (equivalent to five GCSEs at grade A* to C) and close the gap in educational attainment by setting more challenging floor targets for schools. • Increase the proportion of 19-year-olds who achieve at least a Level 2, as a step towards the government’s long-term objective that all young people reach the age of 19 ready for HE or skilled employment. • Reduce the proportion of 16–18-year-olds who are not in employment, education, or training.
Tackle the adult skills gap • Increase progress to reduce the number of low-skilled adults, so that by 2007 1.5m adults have improved their basic skills and by 2010 the number of adults in the work-force who lack NVQ2 or equivalent qualifications is reduced by at least 40 per cent.
Raise and widen participation in HE • By 2010 increase participation in HE towards 50 per cent of those aged 18–30 and also make significant progress year on year towards fair access, and bear down on rates of non-completions. of the unskilled by comparison with other countries. at Levels 2 and 3. Table 2, drawn from Hansen and But the overall implication is clear enough—there Vignoles (2004) is a typical illustration of this fact. are significant economic gains to be had from increasing numbers with higher levels of education. Perhaps of even greater concern—and it has cer- tainly led to a major programme to combat the (ii) Skills Deficits problem—is the existence of significant literacy and numeracy problems among the adult population. While the UK compares favourably in terms of the Highlighted in a report from Sir Claus Moser (DfEE, proportion of its work-force educated to degree 1999), which suggested that 20 per cent of adults in level, it has significantly lower proportions qualified England (7m people) have severe literacy difficul-
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Table 1 Social Rates of Return to Education (rates of return to upper secondary and tertiary education by gender)
Social return to upper secondary Social return to tertiary Males Females Males Females
Canada 6.8 7.9 Denmark 9.3 8.7 6.3 4.2 France 9.6 10.6 13.2 13.1 Germany 10.2 6.0 6.5 6.9 Italy 8.4 7.0 Japan 5.0 6.4 6.7 5.7 Netherlands 6.2 7.8 10.0 6.3 Sweden 5.2 7.5 5.7 UK 12.9 15.2 13.6 USA 13.2 9.6 13.7 12.3
Source: OECD (2003, Table A14.4).
Table 2 Qualifications Held in the Work-force, 1996 (percentages)
At least degree At least A level At least good GCSE
Germany 22 74 83 France 23 45 73 UK 24 36 55 USA 22 29 50
Source: Hansen and Vignoles (2004). ties, with an even higher proportion suffering nu- That these facts matter is suggested both by the meracy problems, one illustration of the interna- work of authors such as O’Mahoney and De Boer tional comparison is in Figure 1. More recent analy- (2002), who find that, for example, a fifth of the sis of the scale of the problem in England (Williams UK’s productivity gap with Germany is accounted et al., 2003) confirms its size and, perhaps of for directly by lower skill levels, and Dearden et al. greatest concern, that low levels of literacy and (2000), who find significant wage returns to pos- numeracy are, if anything, more prevalent among sessing even the lowest numeracy and literacy younger workers in England than among those in the skills. middle of their working life. This is a pattern not seen in other countries. (iii) Low Staying-on Rates A similar pattern can be detected in international The UK has a relatively low staying-on rate in full comparisons of qualifications held at Level 2—the time education after age 16, illustrated in Figure 2. proportion of younger Britons without this level of Given high returns to education this is, perhaps, qualification is particularly low. surprising and probably economically inefficient.
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Figure 1 Proportion of Working-age Population at Lowest Literacy Level, 1994/5
50%
40%
30%
20%
10%
0% y d en ds nd Z K n d n lia la N U US e rman tra e rla us Canada zer Ireland Pola Sw G it ethe A N Belgium (Fl) Sw Source: OECD (2000).
Figure 2 Proportion of 17-year-olds in Full-time Education
100 90 80 70 60 50 40 30 % in education at age 17 at education % in 20 10 n
m a n d a s ia rk d rg l ly d K e y u re ce e d k lia u nd US ga n ec ico e ada gi way an n a lan a a u Ita la U x rk n Rep. Japan r ustri la v ma r Spainel a re e u el h Ko Fr Polan r lo ze ungary Ireland c G T Ca B Finland No Swed A e S it I Port M Germany h Den H Austrxembo Ze Czec Sw ew Net Lu N
Source: OECD (2001).
Given very substantial differences in staying-on part of the adult population referred to above, rates by social background, it is also of concern from alongside high levels of participation in HE for the an equity point of view. more successful. The recent PISA exercise (pro- gramme for international student assessment)—a This low rate of staying on is also part of a pattern comprehensive international comparison of the attain- which sees the English system looking quite suc- ment of 15-year-olds—put the UK close to the top cessful up to age 16, but with a sharp divergence of the international pile with high average scores in thereafter, leading to the low skill levels for a large maths, science, and reading. But, as we have seen,
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Figure 3 Mean Cognitive Attainment at Entry to Pre-school Education by Social Background
115
110
105
100
95
90 Mean Cognitive Score 85
80 Never worked Unskilled Manual Semi-Skilled Skilled Manual Skilled Non- Other Professional Non- Manual Manual Professional Non- Manual Manual Highest social class of mother and father a little later on in the life cycle, attainment of a large International comparisons also suggest a significant part of the population is behind international competi- degree of inequality in the performance by social tors and that fact appears, at least in part, to be related class at school. The OECD PISA comparisons, to low levels of educational participation post-16. which involved testing 15-year-olds in a range of OECD countries, found a greater variation in per- (iv) Inequality formance by social background in the UK than in the majority of countries. But, note, this is within the The child of a professional parent has an 80 per cent context of a high-performing system, putting the probability of entering HE—more than four times UK’s average performance near the top of the the probability of the child of a manual worker. international league, and with much of the social Many other illustrations of the scale of the inequality inequality coming from the astonishingly high per- in achievement by those from different social classes formance of the top performers and social classes or levels of parental income are possible at each in this country, rather than a particularly bad per- stage of the system, and some are provided in the formance by those nearer the bottom. How these next section. positive results at age 15 relate to the rather poor performance of the UK system immediately post- In this issue, Blanden and Gregg provide substantial school remains something of a puzzle. evidence of this intergenerational relationship. It starts early—one can measure cognitive differ- ences between the children of different social groups IV. SCHOOLS from a very early age. Figure 3, drawn from a recent longitudinal study, Effective Provision of Pre-school Schools in England enjoy a mixture of autonomy and Education (EPPE), illustrates this for children of central control. Since 1988 each of the 20,000 different backgrounds on entry to pre-school. As primary and 5,000 secondary schools has had con- Feinstein in this issue and elsewhere (e.g. Feinstein, trol of its own budget, and headteachers have 2003) demonstrates, those from poorer backgrounds considerable autonomy over the way they run with low measured attainment at an early age, are their schools. The power of central government most unlikely to move up the distribution. Those from to impose policy is limited by the fact that most higher social groups are much more likely to move up. funds are distributed to schools via LEAs, not Conversely, poorer children with high early attain- directly from central government. On the other ment are at much greater risk of moving down the hand, a formal curriculum, national bargaining distribution than are their richer peers. Which is all over teachers’ pay and conditions, a national to some extent a long-winded way of saying that system of regulation, and publication of perform- inequality starts early and widens with age. ance tables, alongside centrally driven initiatives
179 OXFORD REVIEW OF ECONOMIC POLICY, VOL. 20, NO. 2 to meet performance targets, all combine to im- Local authorities receive funds from central gov- pose central control. ernment which are supposed to allow each of them to meet a standard level of service in each of their The main levers for government are, on the demand main areas of responsibility, of which education is side, the provision of information and choice to the largest. This is the Education Formula Spend- consumers; on the supply side, the distribution of ing Share (EFSS). This formula for distribution funds through local authorities or directly to support reflects the significant differences in needs be- particular priorities, and the pay, composition, and tween authorities through additions to a basic per- training of the school work-force; and through the pupil allocation, which varies according to the ages structure of the curriculum. Also very important in of the pupils, reflecting the level of Additional policy delivery has been the role of targets which Educational Needs (AEN) in the authority—meas- have set expectations and benchmarks for the ured by factors such as the number of children in system as a whole for LEAs and for individual families in receipt of Income Support or Working schools. Increasingly, the government is judged Families Tax Credit, those with low birth weight, the against how well the system performs against tar- ethnic make-up of the authority—and an area cost gets, and individual schools are judged on how well adjustment (ACA) to reflect the differences in costs they have performed on the same metric. of paying teachers in different parts of the country and variation in business rates. The two most impor- We start by explaining the funding regime, go on to tant elements of this formula are the AEN and ACA consider the role of regulation, choice, and account- additions. The latter has a particularly big effect on ability, including the use of targets, and then consider allocations to Inner London authorities. particular important policies relating to the creation of specialist schools and tackling inequality in per- Within the School Formula Spending Share, differ- formance. ent formulae apply for the different phases—pri- mary, secondary, and special—and for high-cost One subject not covered despite its importance, but pupils. As an example, the formula for the 2003/4 for want of space, is that of policy towards teachers primary sub block takes the form: and the school work-force. Briefly, recent policy has increasingly targeted extra spending on teach- £2,005 × number of 5–10-year-old pupils ers by, for example, awarding additional incentives + to those in shortage subjects, such as maths, and £1,300 × number of AEN pupils above threshold introducing a form of performance-pay system for + more experienced teachers. In addition, there has £165 × Sparsity Index × number of 5–10-year-old been a very substantial increase in the use of support pupils staff other than teachers in an effort to increase × efficiency by reducing the amount of time spent by ACA Index teachers on routine work, and to provide support in = the classroom. PRIMARY SUB BLOCK.
(i) Schools Funding The effect of the operation of this formula on allocations to LEAs is illustrated in Figure 4, which Most schools are funded from the budget of the local shows the variation in per-pupil funding across the authority in which they are located. Because of the country. Two things are striking—for many authori- way that the English local government finance ties there is relatively little variation, but there are system works, this funding through local authorities some, particularly in London, which receive a great nevertheless means that the great bulk of finance deal more than the average per pupil. (around 75 per cent) comes from central govern- ment, only 25 per cent or so being collected locally The extra funding for poorer areas is not enough to in local taxes. close the performance gap between them and
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Figure 4 2003/4 EFSS per Pupil Breakdown
7000
6000
5000
4000
£ per pupil per £ 3000
2000
1000
0
Basic per pupil AEN per pupil Sparsity per pupil ACA per pupil
Note: On the x axis are LEAs ranked by per-pupil funding. wealthier areas—though that is perhaps not surpris- cess in exam results a key element of the utility ing, given the generally relatively low estimates of function of most head teachers, the absence of the impact of funding on performance.8 The quarter additional funding for pupils less likely to be success- of LEAs with the lowest funding for additional ful will provide incentives to skew admissions poli- needs, received per-pupil funding of £3,2509 in cies away from such pupils. In fact, most maintained 2003/4 and 56 per cent of their pupils achieved five schools are constrained by LEA admissions poli- good GCSEs in 2003. The quarter with the highest cies, but, importantly, voluntary aided (VA) and additional-needs funding received £3,800 per pupil, voluntary controlled (VC) schools—generally faith with 44 per cent of pupils achieving five good schools—which make up 36 per cent of the total of GCSEs.10 primary schools and 20 per cent of the total of secondary schools, have significant freedom over The actual pattern of school funding is mediated by admissions criteria. In some areas, particularly Lon- LEAs and there is significant variation between don, this can make a difference to the distribution of them in how they distribute money to schools, with pupils over schools, though nationally the attainment elements that take account of a whole host of pupil- at entry to VA/VC schools is only marginally higher and institution-led factors. They have considerable than for other maintained schools. freedom as to how these formulae should work, within a framework which ensures that at least 75 Two final points need to be made with regard to per cent of delegated funding is ‘pupil-led’. This rule policy on funding schools. The first is that, over the is designed in part to ensure that successful schools period between 1997 and 2003, the proportion of are rewarded for success in pupil recruitment. money going to schools which effectively bypassed this system grew substantially (from 4 per cent to 16 The second key issue of incentives for schools per cent of the total) as central government targeted within this funding system is the extent of reward for funds on a range of specific schools or programmes. increasing the number of poorer pupils. With suc- In addition, a very small but increasing number of 8 Chevalier et al. (2004) provide a useful summary of this literature. 9 EFSS per pupil for 2003/4, deflated by ACA. 10 These figures exclude the effect of the ACAs, which, if included, would widen the funding gap further because of the correlation between higher AEN and higher ACAs in areas such as London.
181 OXFORD REVIEW OF ECONOMIC POLICY, VOL. 20, NO. 2 schools are funded directly by the Department for effectively act as rationing devices. Gorard et al. Education and Skills (DfES). By 2003/4, 12 ‘Acad- (2003), in the most comprehensive study of the emies’ (rising to 53 by 2007) are funded in this way. changes to date, find no evidence of increased social These are largely new or relaunched schools in areas segregation. of need which have secured some private-sector investment/sponsorship. In addition, 14 City Technol- In fact, social segregation appears more likely as a ogy Colleges are funded directly by the DfES. result of effects largely unchanged by the 1988 reforms—the impact of school catchment areas Second, this is a complex system. The combination having very different social mixes and the fact that of complexity and political sensitivity makes it very it is possible for those with adequate resources to hard to change—a fact amply demonstrated by the move into the catchment areas of more effective furore caused by a change in the funding system in schools (Gibbons and Machin (2001) provide evi- 2003 which, while it increased the total quantity of dence that this can have a substantial impact on local money spent on schools, changed its distribution house prices) and the existence of VA/VC schools through a combination of a change in the funding in the maintained sector which can select pupils on formula and a movement away from direct grants the basis of faith, ability, or in other ways. back to more of the money going through LEAs. The result was a complex pattern of winners and Alongside this element of consumer choice has losers among individual schools and a successful come the introduction of much more information and high-profile campaign from the losers which about school performance, including Ofsted school saw extra funds promised by the government to reports (more details below) and, in particular, the ease the situation in 2003/4 and a significant review publication of information about school perform- of policy for 2004/5 and beyond, designed to ensure ance in exams and key-stage tests, allowing parents stability in individual schools’ budgets, principally to see precisely how schools compare with each through a ‘Minimum Funding Guarantee’. other on this metric. A more recent innovation has seen the publication of ‘value added’ scores for (ii) Accountability, Regulation, and Consumer schools which take account of the prior attainment 11 Choice of pupils in the metric of school success. The systems of accountability, regulation, and con- In some respects, the quasi-market in education is sumer choice are the key elements of the quasi- not very highly developed and there are limits to how market operating in the schools system working far it can go. The school system has multiple goals through the publication of school exam results (per- and multiple agents and there is significant stickiness formance tables), the right of parents to choose the in the system through which expressed demand for school their children attend, and inspection by the places at a school leads to expansion of that school. Office for Standards in Education (Ofsted). Nevertheless, there are studies which suggest that some efficiency improvements can be attributed to The 1988 Education Reform Act institutionalized the quasi-market—for example Bradley and Taylor the notion of consumer choice as an important (2002) find that the schools with the best exam element of the school system, requiring that parents results grow fastest, while Levacic (2001) suggests have the right to choose a school for their off- that in areas with higher density of schools and spring—or more properly to express a preference therefore greater competition, there has been faster within a clear framework for admissions. There has improvement in GCSE results. Gorard et al. (2003), been continued concern about the impact of this though, find no conclusive evidence to back this up. more choice-driven system on social segregation. In fact, in many less urbanized parts of the country, the An important part of the accountability framework degree of choice is limited by geography, and in is the regulation of schools which occurs through more densely populated areas popular schools can Ofsted, created in 1992 to carry out regular inspec- become over-subscribed and admissions criteria tions of all schools—primary, secondary, and spe-
11 Performance tables can be accessed at: http://www.dfes.gov.uk/performancetables/
182 P. Johnson cial—in England. This work has three primary of value added which take account of the prior functions. The first is to offer feedback and advice attainment of pupils. to the head teacher and staff at the school, helping them to understand what is working well and how to Partially in response to at least some of these improve things. The second is to offer substantial criticisms, proposals for a more frequent but much information to parents and prospective parents of ‘lighter touch’ regulatory regime were launched by pupils to aid their decision-making process—all Ofsted in 2004 (Ofsted, 2004). inspection reports are publicly available and readily accessible, for instance over the web. Third, Ofsted (iii) Targets and Direct Intervention has a role in identifying schools which suffer from ‘serious weaknesses’. In such cases detailed rec- As in other parts of government, targets for im- ommendations and an agreed action plan are drawn proved performance have been a central feature of up and close monitoring from inspectors will follow. policy in schools (and other parts of the education If this proves unsuccessful, or the weaknesses are system). There are PSA targets for improvements serious enough, a school will be put into ‘special in performance in national tests at age 11 (KS2), age measures’, requiring close monitoring, a plan of 14 (KS3), and age 16 (GCSE). Embedded within action with specific targets, and re-inspection. If inad- these are also floor targets for the lowest perform- equate progress is made, then the school can be closed ing schools and LEAs—for example that every by order of the Secretary of State for Education. school should have at least 20 per cent of pupils attaining at least five passes at A*–C. These targets So Ofsted provides a framework of regulation and set out the key objectives for policy and are used in accountability for schools which provides informa- a number of ways: to be clear publicly about what tion to participants in a market which would other- matters, to judge the performance of the system, to wise be subject to severe information failures and a drive performance at local level by putting pressure statutory mechanism for intervening in schools which on schools and LEAs, and to hold them to account are judged to be performing and being run very if progress is not made.12 poorly. Performance has been good in the sense that progress The methodology has been subject to significant continues to be made—results at each stage are criticism, though. Inspections take place on a 6-year improving.13 But it has been disappointing in the cycle—so major changes can have taken place sense that targets have not been met. Figures 5, 6, since the latest available report. Each inspection is and 7 show performance at key stages 2 and 3, and announced well in advance and there is, at the very GCSE since 1995, with targets also shown. least, a perception that there is a significant regula- tory burden on the schools undergoing the inspec- Note that the key targets are expressed as propor- tion. Some commentators argue that unannounced tions of each cohort reaching a particular level and inspections would be both more revealing and less are not, for example, expressed in terms of average disruptive, and more generally that there is little point scores. At KS2 the target is to get a certain evidence that current inspection methods work proportion up to level 4, at GCSE it is to get a (Fitzgibbon, 2000). Finally, there is concern that proportion attaining five GCSEs grades A*–C. inspection reports do not give enough weight to the (There is also a PSA target to increase numbers circumstances of the school. The National Audit achieving GCSEs at any grade, but it appears to Office (2003) pointed out that inspection results have lower public salience.) The underlying philoso- were more closely correlated with absolute per- phy is that there are levels of attainment which it is formance in secondary schools than with measures expected that pupils of each age should be able to
12 There are also targets to reduce non-attendance at school, but we do not look at those here. 13 Though there is continued debate over whether ‘standards’ are maintained over time. This is an area too complex to explore here. Even in the key stage tests where standards are easier to maintain and are relatively transparent, changes in requirements from year to year create some uncertainty. In GCSE exams, showing that standards are maintained is very hard. There is some evidence (for example, Tymms and Fitzgibbon, 2001) that in some subjects required standards have fallen, but this is a hotly contested issue.
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Figure 5 National Performance at Key Stage 3 between 1995 and 2003 and Straight Line to the PSA Threshold Target (2004 and 2007) 85% 85% National Performance at Key Stage 3 between 1995 - 2003) and Straight line to the PSA threshold Target (2004 and 2007) 80% 80%
75% 71% 69% 70% 68% 67% 66% 65% 65% 65% 75% 64% 64% 65% 62% 70% 60%
Percentage Achieving Level 5+ 59% 59% 60% 57% 57% 57% 56% 56% 55% 55% 55% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
English Maths Science
Figure 6 National Performance at Key Stage 2 between 1995 and 2003 and Straight Line to the PSA Threshold Target (2002, 2004, 2006, and 2007)
90% 85% 85% 85% 80% 80% 75% 75% 75% 75% 75% 71% 70% 65% 63% 65% 57% 60% 55% 49% 50%
Percentage Achieving Level 5+ Level Achieving Percentage 45% 40% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
English Maths
Figure 7 National Performance at GCSE/GNVQ between 1995 and 2003 and Straight Line to the PSA Threshold Target (2002, 2004, and 2007)
Q 59.6% 60% 58% 56% 52.9% 54% 51.6% 52% 50.0% 54% 49.2% 50% 47.9% 48% 46.3% 50% 44.5% 45.1% 46% 43.5% 44% 42% 40% Percentage Achieving 5+ A*-C GCSE/GNV 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2006 2007
184 P. Johnson
Table 3 Probabilities of Achieving Particular Levels at Key Stage 3 English in 1998 and 2003 for Given Achievement in Key Stage 2 Three Years Previously (percentage achieving KS3 level)
1998 2003 Level 5+ Level 6+ Level 5+ Level 6+
KS2 average Below 3 18 3 2 0 level 3 48 12 22 2 486507526 598839775 reach. This obviously creates the possibility that mon in some primary schools. Machin and McNally schools will react to incentives to alter behaviour to (2003) use the forerunner of the literacy strategy, move marginal pupils over the borderlines at the the National Literacy Project, to provide convinc- expense of those well above or below the boundaries. ing evidence that this form of intervention was, There is some qualitative evidence that this occurs but indeed, effective in improving results. no systematic and quantified evidence of which I am aware. These very big increases in performance suggest substantial initial levels of inefficiency in converting There is a particular issue in this regard for GCSEs, resource into the particular outcome—success at where the targets do not include specification of KS2 tests—and a severe failure of information or subject. As some have pointed out, while over 50 per incentives within the school sector itself. No doubt cent of the cohort achieved five good GCSEs, substan- part of the improvement reflects learning about the tially fewer achieved five good GCSEs including particular requirements of the test, but the scale of maths, English, and a modern foreign language. In increase is striking and the scale of potential ineffi- 2003, 52.9 per cent of 15-year-olds achieved 5 A*– ciency which seems to have been part of the system C GCSE/GNVQs. Of these just over 79 per cent is remarkable and worrying, suggesting that the got C grades or above in both maths and English— incentives and market structure were not combining so 41.9 per cent of the cohort achieved at least to create anything like an efficient outcome. 5A*–C including maths and English. Because performance of schools is measured in the published One disappointing aspect of the major improve- performance tables by reference to this same measure ments in KS2 results is that they did not feed through of any five achievements, the message and incentive as much as hoped to KS3. The transition matrix is very clear for schools. worsened as results at KS2 improved. This is illustrated for English in Table 3, which shows the The targets regime has been accompanied by sig- probability of reaching levels 5 and 6 in KS3 English nificant support and intervention from government, in 1998 and 2003, given results at KS2. For exam- aimed at raising performance towards the targets. ple, it shows that 86 per cent of pupils with a level 4 Most notably, the literacy and numeracy strategies at KS2, who sat KS3 in 1998, got at least level 5, and in support of KS2 performance are credited with a 50 per cent got level 6. But of those pupils with level significant part of the remarkable improvements in 4 at KS2 who sat KS3 in 2003, just 75 per cent results between 1997 and 2001. These strategies set reached level 5 and 26 per cent reached level 6. The out very clear guidelines for teachers, with clearly response has been the introduction of a KS3 strat- structured lessons and daily ‘literacy hours’, in part egy,14 aimed also at improving the quality of teach- responding to significant criticism of practices com- ing and management of learning for this group.
14 Details can be found at: http://www.standards.dfes.gov.uk/keystage3/about_ks3/
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(iv) Specialist Schools examination results can be put down to social class and prior attainment (for example Gorard et al., One feature of government policy has been an 2003). The gap between the performance of pupils increasing differentiation between schools in the from more and less advantaged social backgrounds maintained sector, and perhaps the most important has been a major theme of government policy at part of that has been the Specialist Schools Pro- least since 1997, though it has been recognized as an gramme. That this has been at the centre of the issue for generations. government’s strategy for secondary education was emphasized by the publication in 2003 (DfES, 2003a) There is any number of ways of demonstrating the of the document, A New Specialist System: Trans- scale of inequalities, both at individual pupil level and forming Secondary Education, with a clearly at school level. For example, Figure 8 shows the stated ambition that ‘in the long term we hope all proportion of pupils in schools of different levels of schools will be specialist schools’. Already more free school meals (FSM) receipt, achieving level 4 than half have specialist status. in KS2 English. The gap between schools with low and high levels of FSM pupils is substantial, but fell What does that mean? Following the gradual, and by between 1998 and 2003. Figure 9 shows the gap no means complete, abolition of the selective entry between pupil attainment in English at each of the system into grammar schools (for the 25 per cent or main key stages. so academically most able at age 11) and secondary modern schools, which occurred during the 1960s Perhaps the most important intervention to support and 1970s, the large majority of secondary schools schools in more deprived areas has been the Excel- in England are comprehensive schools—i.e. schools lence in Cities programme. Launched in 1999 it is not selecting on the basis of ability. (Rather fewer designed to provide additional support and resources than 200 selective grammar schools survive.) Since to schools in poorer urban areas, including through 1994, these schools have been able to apply for learning support and mentoring services and special specialist status with a particular focus on a chosen programmes for the gifted and talented. Alongside subject area.15 They should act as a resource for targeted funds and targeted advice and guidance for other schools in their area of specialism. The moti- schools in challenging circumstances, this has formed vation behind the policy is a belief that designation as part of a significant effort to close attainment gaps. a specialist school will help it develop a particular National strategies also seem to have had some character and ethos, acting to improve standards effect, as some of these schools start further away across the school. Specialist schools gain extra from the efficiency frontier. funding—£100,000 up front and over £100 per pupil per year for 4 years. There is some evidence that In 2003 schools in each of the government’s target specialist schools add more value than others, but categories—Excellence in Cities schools, Educa- whether that is because of the extra money re- tion Action Zone schools, specialist schools, ‘lead- ceived, the process that needs to be gone through to ership incentive grant’ schools, and ‘schools facing achieve the status, or the specialist status itself, is challenging circumstances’, increased GCSE per- not clear.16 formance by more than others.
(v) Interventions Affecting Poor Schools Two words of caution are in order, though. In the first place, it appears to be non-poor pupils in the poorest There is very significant variation between schools schools who have benefited most from, or driven, their in the academic success of their pupils. Much of that relative improvement. Second, closing a performance variation is directly related to the socio-economic gap at one level is often accompanied by an opening background of the pupils and, in secondary schools, gap at a higher level. For example, the closing of the to their prior attainment. Typical estimates suggest gap in attainment of level 4 at KS2 illustrated in Figure that as much as 90 per cent of the variation in 8 has been accompanied by a widening achievement 15 The specialism can be in arts, business and enterprise, engineering, humanities, language, mathematics and computing, music, science, sports, and technology. 16 See, for example, National Audit Office (2003).
186 P. Johnson
Figure 8 School Performance at KS2 English in 2003 Compared to 1998 for Maintained Mainstream Schools Only
2003 Medians and Ranges 1998 Medians 100 90 80 7% 70 9% 60 11% 50 13% 14% 40 30 20 10
Percentage Achieving Level 4+ 0 n=5246 n=3691 n=2433 n=1402 n=780
=<8% FSM >8% & =<20% FSM >20% & =<35% FSM >35% & =<50% FSM >50% FSM Primary School FSM bands
Notes: A minimum of 1 per cent of schools lies outside each of the ends of the vertical bar ranges. Coverage is schools with > 10 pupils. Source: Performance Tables Data. Figure 9 National Performance in English Subjects 2003 (all pupils with attainment data and PLASC data)
Non-FSM FSM e
100%
90% 83% 79% 80% 73% 70% 61% 62% 60% 54%
50% 43%
40% 33% 30%
20%
10%
0% Key Stage 1 English (Reading and Writing) Key Stage 2 English Key Stage 3 English GCSE English Percentage Achieving the Expected Level at each Key Stag Source: National Pupil Database (2003, unamended dataset). gap at level 5 at the same age. In fact, one sees this V. FURTHER EDUCATION pattern of the social-class gap closing at one level and opening higher up time and again over the past In this section we deal with post-compulsory educa- 60 years, as those from lower social classes have tion below HE. To maintain a manageable subject become more likely to achieve some qualifications, matter we will not focus on the whole of the skills more likely to stay on after 15 and after 16, and so agenda and the role of employers in providing on, so their better-off peers have pulled ahead by training.17 Rather, we will again look at the institutional achieving higher qualifications and, in particular, funding structure and the role of choice and account- entering HE—on which more later. ability, and key policy priorities to increase the
17 Though with the publication of a comprehensive skills strategy (DfES, 2003b) this has been an important focus of government activity.
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Table 4 Spending by the LSC
Spend by programme area Spend by programmes
Programmes for young people £4.1 billion of which 16–18 participation in FE £1.88 billion School sixth forms £1.40 billion Work-based learning for young people £0.53 billion Programmes for adults £2.4 billion of which FE participation for adults £1.83 billion Work-based training modern apprenticeships £0.21 billion Adult and community learning £0.16 billion Adult discretionary student support £0.08 billion Programmes for standards and capital (infrastructure) £0.74 billion of which FE standards fund £0.18 billion Teaching pay initiative £0.14 billion FE capital buildings £0.13 billion
Total (inc. admin. and ESF) £7.52 billion
Note: Only the most major elements of programmes included, so the right-hand column does not add up to the middle column. All figures are rounded to nearest £10m. ESF is European Social Fund. Source: LSC (2003). proportion of individuals choosing to stay on in educa- The main components of expenditure are set out in tion after compulsory schooling ends at age 16. Table 4. The biggest element of LSC spending is on young people up to the age of 19, studying in FE or The key PSA targets which illustrate government in school sixth forms. Spending for adults in FE at priorities relate to the proportion of 19-year-olds £1.8 billion is similar to that on young people in FE. attaining Level 2 qualifications, the proportion of 21- The total for work-based learning for adults and year-olds reaching Level 3, and the numbers of young people together, largely modern apprentice- adults improving their basic skills. The skills strategy ships, reached £740m. stresses the over-riding importance of adults reach- ing qualifications at Level 2. It is not be possible to look at all these elements of spending in any detail. Instead, we concentrate on (i) Funding the funding mechanisms for FE colleges, the institu- tions through which the great bulk of LSC funding is Public funding for FE does not go via local authori- directed and which themselves deliver the great ties in the way that funding for schools does, though bulk of teaching. it did until 1993. Since then there have been two major upheavals in the system architecture: the Broadly speaking, FE is a learner-led system, with creation of the Further Education Funding Council funding following the learner and depending on their and then, from 2001, the Learning and Skills Council qualification aims: (LSC), a quango with a budget in 2003/4 of around £8 billion, charged with funding and planning educa- Funding per qualification = national base rate × tion and training for over-16-year-olds in England. It programme weight × disadvantage uplift × area is supported by 47 local LSCs. costs uplift – learner contribution
188 P. Johnson where national base rate varies primarily according prior attainment and outcome, differences in prior to course length, and programme weight reflects the attainment can be taken into account when assess- fact that some subjects are costlier to deliver than ing how well a college is performing in A-level others. Their product makes the weighted national provision. However, for most FE colleges, A levels base rate. The disadvantage weight is largely de- represent a small proportion of total provision. For termined by home post code. The learner contribu- non-A-level qualifications and adult learners, prior tion is 25 per cent of the national base rate (i.e. attainment is not a good predictor of outcome. An before programme weight and uplifts are applied). independent quality assessment, which considers The contribution equals zero if the learner is eligible each curriculum area and overall leadership and for fee remission (which all learners up to age 19 management, is provided by the inspection process, are, as are most of those in receipt of benefits and with Ofsted now having (at least part of) the those engaged in basic skills courses). responsibility for inspecting course quality.
The formula is essentially average-costs based, Where a college is unable to reverse poor perform- providing a strong incentive to increase participation ance, it is common for it to be merged with a more up to the point at which marginal costs exceed successful local provider. Since 1992, 55 mergers average funding. Ninety per cent of funding (ex- have taken place, with the majority being the merger cluding learner contribution) is unrelated to learner of a poor provider into a more successful one. achievement. There are innumerable complications to this basic formula but its essential features re- There is an inevitable tension in this sector between main. It is important to note that well over half of all the desire to encourage as much learning as possi- FE students aged 19 and over are granted either full ble—hence providing a high level of general subsidy or partial fee remission, with the majority of those to learners—a belief in the importance of individual granted remission under college discretion rather choice, and a concern that certain sorts of learning than being automatically passported—providing good are desirable or needed by the local or national evidence of the scale of the incentive to maximize economy. The result is a system in which costs to participation. learners in no sense reflect costs to institutions, rebates are made available, paid both on the basis of (ii) Accountability Regulation and Choice national priorities and local discretion, colleges are responsive to demand from local populations in The market in FE is not quite as free as this funding ways which may or may not reflect economic formula suggests. Under new arrangements, FE returns or local needs, while also trying to lead colleges have to agree 3-year plans with their local demand on the basis of known needs. LSCs, plans which are supposed to take into ac- count the ‘needs’ of the local economy and with (iii) Encouraging Participation after Age 16 targets for, inter alia, learner numbers, success rates, and employer engagement. The LSC is As we have seen, staying-on rates after age 16 are currently developing proposals which will require rather low in the UK. Participation in full-time colleges to outline their planned provision in suffi- education by 16-year-olds rose dramatically in the cient detail to support national targets (e.g. adult late 1980s and early 1990s, from under 50 per cent Level 2). in 1986 to over 70 per cent in 1993. It has remained fairly steady since then, with a slight rise to 73 per The current key indicator of college performance is cent in 2002. The big increases in the 1980s were the success rate (retention rate × achievement associated with the introduction of GCSEs and the rate). The headline measure is a crude indicator of removal of benefits for 16/17-year-olds, while the relative performance, owing to differences in provi- recession of the early 1990s helped the trend con- sion mix and ‘quality’ of learners. Differences in tinue. Interestingly, while GCSE results are by far provision mix can be taken into account by the most important predictor of whether someone disaggregating success rates (e.g. short/long, level stays on in full-time education, the steady improve- of study, curriculum area). For 16–18 A-level pro- ment in results over the past decade has not been vision, where a strong relationship exists between accompanied by increased staying-on rates.
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Figure 10 Staying-on Rates by Number of GCSEs (grade A*–C) and Social Class
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% % remaining in full time education time full in remaining % 0% 0123456789+ Number of GCSEs
Non-manual Manual Figure 10 illustrates the strong relationship between cessful at age 16, choices are relatively simple, with attainment and propensity to stay on. Nearly all a majority going on to do academic A levels (just those with nine or more good GCSEs stay on, over two-thirds of those with 5+A*–C at GCSE). compared with fewer than half of those without any. For those who are less successful, the choice set is At each level of achievement, students from higher complex, relevance often opaque, and quality vari- socio-economic backgrounds are only slightly more able. The majority of lower achievers who decide to likely to remain in education than are those from remain in full-time education face a bewildering lower social classes, but they are much more likely array of vocational qualifications from which to to be successful at age 16. choose. These include GNVQs (General National Vocational Qualifications), NVQs, BTECs (awarded Given the importance of educational success in the by the Business and Technician Education Council), labour market, and given that 80 per cent of those C&Gs (awarded by the City and Guilds), and RSAs who do not stay on have not achieved the ‘target’ (awarded by the Royal Society of Arts), most of 5+A*–Cs at GCSE, attempts to remedy this have which are offered at Levels 1, 2, or 3 and encompass been a feature of recent policy. Two major policy a variety of subjects and frameworks. Figure 11 initiatives have been put in place in an attempt to shows this distribution, with the less common voca- increase staying-on rates—Connexions and Educa- tional qualifications expressed as NVQ equivalents. tion Maintenance Allowances (EMAs). Importantly, In addition, pupils also face choosing between full- a complete overhaul of the qualifications frame- and part-time education, variable quality appren- work is also under consideration—through the ticeships, and work with little or no training. Tomlinson review (Tomlinson, 2004)—for both cur- riculum and the structure of the public examination Given this complexity, and the additional range of system matter for staying-on decisions. Indeed, the work-based options, good advice for young people fact that England is one of very few countries to is important. One major innovation in this area has have a full public examination system in the aca- been the Connexions service which brings together demic year in which pupils reach age 16 is often a number of components of earlier initiatives in a cited as a possible explanation for the low staying- personal advice and guidance system, which applies on rate. across the age range 13–19. Its main feature is the joining up of careers advice, youth work, and other Related to this low staying-on rate is the quality and services directed at young people, into a single complexity of choices available to young people service. Its resources are targeted at the most who continue education. For those who are suc- needy, with a particular focus on preventing drop-
190 P. Johnson
Figure 11 Main Study Aim of 16-year-olds in Full-time Education Who Had Achieved Fewer than Five GCSEs at Grades A*–C
Level unclear/ not stated 19% Intermediate/ Foundation GNVQ 32%
NVQ3 and Equiv. 4%
Adv. GNVQ 7%
GCSE 9%
NVQ 1/2 and other equivalent A/AS Level 11% 18%
Source: Youth Cohort Study (2002). out from education, employment, and training alto- concern at low levels of participation in education gether. Since its rolling out as a national service, among young people from poorer backgrounds and reliable estimates of its impact are not available, the fact that the British labour market means that though there is substantial positive evidence of a income is available in low-skilled employment for more qualitative nature of its potential positive ef- 16-year-olds leaving school with few qualifications. fect18 and the National Audit Office (NAO, 2004) The programme has been subject to a very exten- concludes that Connexions is ‘on course to meet its sive and robust evaluation (Middleton et al., 2003), objective of reducing the proportion of young people having been piloted in a number of areas before aged 16–18 who are not in education, training or eventual roll out across the country in 2004. The employment’, though there are ‘wide variations’ in evaluation suggests significant effects on staying- performance between partnerships. on rates—increased full-time participation among those eligible by 5.9 percentage points in Year 12 The EMA programme, by contrast, is a substantial and 6.2 percentage points in Year 13 (Middleton et means-tested programme of financial support for al., 2003). young people staying on in full-time education after age 16. Following extensive piloting, the national programme will be rolled out from September 2004 VI. HIGHER EDUCATION and will benefit students from families with incomes of less than about £30,000 a year, with maximum By most international benchmarks the British HE weekly payments of £30 going to those with house- sector is a successful one. With, by international hold incomes below £19,000. It contains a number standards, high levels of participation, low drop-out of innovative features, including bonuses for contin- rates, short times to completion of courses, and high- ued attendance at college. Its introduction reflects quality research output, recent policy has focused 18 The DfES research website (www.dfes.gov.uk/research/programmeofresearch/) shows 27 research and evaluation reports covering some aspect of Connexions.
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Figure 12 Trends in HE Participation (left axis) and Unit Funding (right axis) Trend in Unit Funding and HE participation 40 9,000
35 8,000
7,000 30
6,000 25
5,000 (%) 20 (£ 2002-03) 4,000 API Unit funding 15 3,000
10 2,000
5 1,000
0 0 1984- 1985- 1986- 1987- 1988- 1989- 1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Financial Year on three priorities: raising participation rates to- on agreed student numbers and the cost weight of wards 50 per cent,19 widening participation from the course (laboratory-based subjects being deemed lower social classes, and reforming funding ar- to cost twice as much as those not requiring special rangements such that universities become free to facilities), with £2,808 being, in 2003/4, the assumed differentiate fees for undergraduate students up to cost of a full-time undergraduate student in a non- a cap of £3,000 per student per year. laboratory-based subject. Of this £2,808, £1,125 is (deemed to be) paid by the student—or in the case (i) Funding of poor students, by the government on their be- half—in fee income.21 Of all the sectors, the change in the amount of funding per student has been most dramatic in HE. Importantly, this is a managed market. HEIs cannot As participation has more than doubled from 14 per simply expand to the point where they maximize the cent in 1985 to 35 per cent in 2001, so the unit of total number of students, since they have to agree an funding has fallen by 36 per cent over the same allocation with HEFCE, which will not fund places period, although it is planned to rise almost to 1995/ significantly beyond the numbers agreed. So a 6 levels by 2005/6. Figure 12 shows how the in- university which wants to expand will need to reach crease in participation has been matched by a fall in agreement with HEFCE that they should either take unit funding. an increased market share or succeed in getting a piece of the action in a growing market. Additional Funding for England’s 131 HE institutions (HEIs) funded student places are awarded through a com- comes through HEFCE20 which distributes grants to petition, where HEFCE announces the criteria for cover teaching and research. It distributed a total of success. Most recently this exercise has enabled £5.5 billion in 2003/4. The grant for teaching is based HEFCE to steer expansion towards foundation 19 The precise formulation of this measure is important to understand—it refers to the proportion of the cohort who will have had some experience of HE by the age of 30. To count against this target one does not need to complete a course, nor to be studying for a full degree. It is not the same as the age participation index (API) which we use to illustrate participation rates here. 20 HEFCE also provides funding for the 170 FE colleges which offer HE courses. 21 For details of the funding formula see HEFCE (2003).
192 P. Johnson degree provision and the provision of additional From 2007, assuming the HE Bill passes into law, medical student places, in line with government HEIs will be free to vary the tuition fees they charge policy. for any particular course up to a maximum of £3,000 per student per year. This will introduce something Institutions are free to vary their charges for courses of a market mechanism into the system, though it to postgraduates (other than those studying for the remains to be seen quite how much variation there Post-graduate Certificate in Education) and non- will be in fees charged. There seems little doubt that EU residents. Those which do so often charge many of the more prestigious institutions, and per- several times the HEFCE rate to non-residents. The haps others, will charge the full fee for the full range incentive to recruit from overseas in this market of their courses. situation is clear and some institutions have used this as a route to increase funding. For example, 45 per There has been significant opposition to the intro- cent of the LSE’s student population is from outside duction of variable fees, largely because of con- the (pre-1-May) EU. cerns over access to more prestigious institutions by poorer students. However, the design of the policy The other element of HEFCE funding is for re- minimizes this risk. All students will be able to take search. This funding is allocated annually through a out income-contingent loans, only repayable once formula which weights the quantity of funding heav- earnings rise over a threshold (proposed to be ily towards the departments judged most effective. £15,000) and then payable as a proportion of earn- Quality is assessed every 4 or 5 years through a ings. A zero real rate of interest will be charged, and Research Assessment Exercise which, through a debts written off if not paid after 25 years. This will process of peer review, rates research quality in look in some ways rather more like a tax than subjects in institutions. In addition, research council ordinary debt. In addition, poorer students will be funding pays for many specific research programmes entitled to grants of up to £2,700 a year, for the first and projects. time since the principal grant scheme for supporting maintenance ceased in 1999/2000.22 Given that— Note, though, that HEFCE funding for institutions is on average—university graduates benefit to the mainly in the form of a block grant. So funding is tune of earning 26 per cent23 more than they other- calculated on the basis of student numbers and the wise would have as a result of their HE, that these performance of particular departments in research, returns are highly variable by course (see Figure but institutions are free to distribute the money 13), that the beneficiaries of HE pay only a small between teaching, research, and other activities and proportion of its cost, and that there is some evi- between different research activities as they see fit. dence that some institutions add more value than others,24 the economic and social case for these changes looks overwhelming. (ii) Variable Fees Since 1998, all universities have charged a flat-rate In fact, the one significant fly in the ointment is that annual fee to undergraduate students, undifferenti- the costs to the government of the new grants and ated by either course or institution. From September loans for students could well be as great as the extra 2004, the fee will be £1,150 annually. The introduc- money raised for universities by the variable fee tion of fees followed the Dearing report of 1997, system. Dearden et al. (2004) calculate the maxi- which drew attention to the significant returns earned mum cost of fee deferral (the cost to the govern- by graduates in the labour market (Dearing, 1997). ment in current terms of the subsidy inherent in a Prior to that, no fees had been payable by British loan with zero real interest, some default, and a 25- undergraduates, though maintenance loans had been year write-off) as £665m, and the cost of increased in place since the start of the 1990s. grants and loans for student support at £485m,
22 Grants are still available for students with special needs—e.g. for support towards child-care costs. 23 McIntosh (2004)—results control for all qualifications held, not just A levels. 24 Walker and Zhu (2002)—compares degree earnings against 2+ A levels only.
193 OXFORD REVIEW OF ECONOMIC POLICY, VOL. 20, NO. 2
Figure 13 Returns to Different HE Subjects Taken
Accounting Economics Law Medicine Mat hs Business Engineering Women Science Men Social Architecture Education Languages Arts Nursing -50 0 50 100 Note: These are earnings gaps from Labour Force Survey data controlling for age, marital status, ethnicity, union membership, health status, and region. ‘Social’ is social sciences. Source: Nickell and Beath (2004). making a total annual cost to the taxpayer of £1.15 of educational success, and early cognitive ability billion. This is an amount a little more than the less important, between the cohort of individuals government actually expects the variable fees to born in 1958 and that born in 1970. The middle raise for universities. So overall the package does classes have colonized the expanding HE system. not represent a significant shift in responsibility for As Alison Wolf points out (Wolf, 2002) this is an funding HE from taxpayers to students. Rather, it international phenomenon. reflects increased costs for high-earning graduates from relatively affluent backgrounds, and higher Making an impact on that gap will not be easy. Given costs for taxpayers, with some students from poorer A level results, there is almost difference in the backgrounds, especially those who go on to do less propensity of students from different social classes well in the labour market, actually benefiting from to enter HE—though there is evidence that well the changes.. The difference is that more of a qualified students from poorer backgrounds are market will now work in the HE sector which will somewhat less likely to apply to the more prestigious develop over time and, it is to be hoped, make it more institutions than their better-off peers. So nearly all responsive to student demand. of the gap arises from differential achievement pre- university—though that is, of course, to some extent (iii) Widening Participation determined by intentions with regard to HE partici- pation in any case—if you have decided by age 14 As Figure 14 shows, participation in HE has risen that HE is not for you there is much less incentive to dramatically since the mid-1980s, from about 15 per achieve good academic qualifications. cent to over 30 per cent of the cohort reaching HE by the age of 21, with especially big increases by All that said, there is reason to be optimistic in one young women. It is set to grow further. But, as sense—the level of participation is such that further Figure 15 shows, the gap in participation rates expansion of the HE system is likely to see some between those from higher and lower social classes reduction in this social-class gap, just as the social- remains dramatic. Indeed, recent work by Galindo- class gap in staying-on rates after 16 closed in the Rueda and Vignoles (2003) suggests that the in- early 1990s, following a widening in the 1980s. But creased access to HE may actually have increased as in the case of KS2 results discussed above, this inequality, at least in the following sense—that will probably not be the end of the story. Closing the social class has become a more important predictor gap in the more prestigious institutions will be harder
194 P. Johnson
Figure 14 Participation in HE since 1972 (the age participation index, API)
40% 35% 30% 25% 20% 15% 10% 5% 0%
72 74 76 78 80 82 84 6 8 0 99 99 00 19 19 19 19 19 19 19 1986 1988 1990 1992 1994 1 1 2
Male API Female API GB API
Figure 15 Participation in HE by social class
80
70
60 50
40 30
20
10 0 Professional Intermediate Skilled non- Skilled manual Semi-skilled Unskilled manual than in the system as a whole. And, with massive more challenging intake. This has been underpinned increases in the numbers going on to postgraduate by a sustained increase in spending and the use of study, getting a first degree is no longer the end point targets to incentivize and drive performance. Beyond of the education system. One day not long from schools, policy has focused on improving participation now, we might start to worry about inequities in and attainment by young people, raising adult skills, access to postgraduate study. particularly among the least skilled, and, more re- cently, reforming the system of paying for HE.
VII. CONCLUSIONS These policies have met with some success. Per- formance at age 11 rose dramatically initially, though Education policy since 1997 has been very active. has been flat for some years now. Performance at Probably its most important focus has been on GCSE exams at age 16 continues to trend upwards. driving up performance in schools through a range International studies have, for the first time, shown of policies aimed at spreading best practice, sharp- British 10- and 15-year-olds to be among the OECD’s ening the system of accountability and regulation, highest performers across the core subjects. At increasing the diversity of school type, and focusing some levels the gap in attainment between higher support on less effective schools and schools with a and lower social classes has shrunk. Policies such
195 OXFORD REVIEW OF ECONOMIC POLICY, VOL. 20, NO. 2 as the EMA have been shown to be effective at positional good, and those who can will invest to raising participation of 16-year-olds and the basic maintain a high relative position for themselves skills strategy has had some success. But success or their children. has been only partial. Performance at age 11 has been stalled since 2000 and much of the previous (iv) There is probably more scope to align funding success does not look to have been sustained in the mechanisms with desired outcomes in each of later performance of those same pupils. While the main sectors, but current complexity and EMAs have been shown to be effective, and will be political sensitivity make significant change dif- rolled out in 2004, and GCSE results have improv- ficult. ed, overall rates of participation post-16 are little changed. While social-class gaps have closed at (v) Work to improve the curriculum offer for 14– some levels, they have opened elsewhere (a pattern 19-year-olds is probably crucial, alongside ini- repeated over a period of 50 years at least). And tiatives such as EMAs and Connexions, to while progress is being made on adult basic and rectifying the low staying-on rates which are Level 2 skills, there is a formidable mountain left to one of the English system’s biggest problems. climb. (vi) These low staying-on rates contribute to a It is possible to draw a number of tentative conclu- continuing situation in which too high a propor- sions from this analysis. tion of the adult population is poorly educated. Continued interventions to support adult learn- (i) There are serious failures of information or ing are necessary to complement improve- incentives in the school system—the literacy ments to the system at younger ages. and numeracy strategies could not have been so successful otherwise. The stalling in KS2 (vii) Reforms to the HE financing system are eco- improvements after sharp increases suggests nomically justified and are unlikely to endanger there are limits to the use of direct guidance to equity objectives while promoting efficiency, teachers to correct this. but increasing equality of access (by social background) will require long-term intervention (ii) There are major complementarities between throughout the system. policies. The fact that results at age 14 did not respond as well as expected to improvements And finally, there is still too much we just do not at age 11 suggests that intervention needs to be know about policy effectiveness. This government consistent across the life of students.25 has done more than any previously to use pilots of policies, research, and evaluation to understand (iii) As with income poverty, it is likely to be easier effects, but across a whole range of policy domains to tackle absolute low performance than rela- more long-term investment in understanding policy tive low performance by those from less ad- effectiveness is likely to prove the only productive vantaged backgrounds. Education is in part a way forward.
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25 This, of course, is a point made in much literature on pre-school interventions, and well put more generally in the excellent work of Heckman and Carneiro (2003) in the US context.
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