A disadvantaged pupil premium

Date: 06 March 2009
Publisher: IFS

This weekend, the Liberal Democrats will gather in Harrogate for their spring conference, which will focus on education. On Saturday, they will discuss a series of proposals designed to combat inequalities in Britain's education system. One is a "pupil premium [to] bring the funding levels [of] one million disadvantaged pupils immediately up to private school levels." How effective might this be?

A pupil premium would provide extra funding to state schools for each pupil from a disadvantaged background they admit. The current system of school funding in England already does this to some extent, albeit in a rather slow and unnecessarily complex way (see our previous school funding report). In economics, we usually talk about "getting the incentives right" and in principle this policy could simultaneously achieve two objectives: focus more resources on schools with poorer pupils; and partly counteract any incentive schools may have to "cream-skim" more affluent or easy to teach pupils.

However, research by the OECD implies there is, at best, a weak relationship between spending per pupil and educational performance across countries. Furthermore, to quote an example from a recent report by Policy Exchange, American researchers used estimates of the effect of spending on the attainment of black children to say that nine times as much needed to be spent on black children to get their attainment up to the national average. Closing ethnic gaps and gaps in attainment by socio-economic status are obviously not directly comparable, but if the cost for getting the attainment of poor children up to the national average were just five times the current spending per pupil, the pupil premium would need to be set at over £25,000. The Liberal Democrats propose a premium in the range of about £3,000.

As a further motivation for the policy, Nick Clegg has said that he is "determined to close the gap between the private and state schools." This is very similar to an aspiration espoused in Budget 2006 by Gordon Brown, but the Liberal Democrats claim they would achieve this target earlier than Mr Brown would. In practical terms, they both want to see the future level of state school spending per pupil rise to the current level in the private sector. By the time state school spending reaches this level, however, private school spending will have increased even more. Neither the government nor the Liberal Democrats are truly proposing for state school spending to 'catch up' with (contemporaneous) private school spending. Closing that gap would require a one-off injection of funds and increases in funding every year to at least match increases in school fees. But when one talks about 'educational inequality', it is surely the gap in any given year which one really means - not the inequality between today's state system and the private sector some years ago.