Naturally, this framework would force the government to abandon its commitment to cover upfront capital costs for new schools and converter academies. But this would be a good thing. Being able to find capital is part of the market test — if providers are not willing to invest their own money, or cannot find people who are willing to back them, they probably would not start or expand their places in the first place.
While profit-making providers have an advantage here because of their access to capital markets, PFI schemes — in which private contractors pay upfront for schools and then lease them back to providers — could be used to enable non-profit and state providers to get access to capital.
In general, it would be advisable to revamp the capital-funding regime entirely. Rather than having a separate system, an allowance for capital funding could be included in the per-pupil funding system. Indeed, all funding for schools should be paid on a per-pupil basis. Both state and non-traditional providers would then have to use their total revenues for whatever expenses they incur, including repayments on loans. Autonomous budget decision-making is a necessary element in any functioning market, although transparency regarding what schools spend their money on must be upheld.
Some of the phased-out upfront capital funding could be spent on paying for transportation costs for children from poor families, to enable them to attend schools farther afield. This may be important since research from the voucher programme in Milwaukee, published in the Economics of Education Review by Rajashri Chakrabarti, suggests that lotteries in combination with the covering of transportation costs can stem school sorting by income. Again, by expanding the size of market areas, such subsidies would also sharpen competitive incentives among all schools.
As well as reforming the state-funded education sector, we could also utilise the independent sector to expand choice and competition further, especially at sixth-form level. Well-endowed independent schools could follow the example of private American universities and make their admissions need-blind: that is, admission to the sixth form should be independent of the level of parental income. Fees for sixth formers from disadvantaged backgrounds could be paid out of a combination of endowment income and state funding (including the pupil premium). Naturally, enabling disadvantaged pupils to attend independent schools in this way would introduce even stronger competition for the state-funded schools; competition would sharpen especially for the pupils who need it the most.
The question is no longer whether we should have school competition, but rather how competitive systems should be designed to maximise their positive impact. Certainly, governments worldwide have often been too naïve when introducing market incentives in education. Producing functioning quasi-markets demands more than just allowing a theoretical right to choose. It demands a coherent reform package that changes the overall incentive structure. In other words, if the creation of quasi-markets 1.0 involved the establishment of the basic structures, the creation of quasi-markets 2.0 involves a careful crafting of complementing reforms to maximise the positive effects of those structures.
While profit-making providers have an advantage here because of their access to capital markets, PFI schemes — in which private contractors pay upfront for schools and then lease them back to providers — could be used to enable non-profit and state providers to get access to capital.
In general, it would be advisable to revamp the capital-funding regime entirely. Rather than having a separate system, an allowance for capital funding could be included in the per-pupil funding system. Indeed, all funding for schools should be paid on a per-pupil basis. Both state and non-traditional providers would then have to use their total revenues for whatever expenses they incur, including repayments on loans. Autonomous budget decision-making is a necessary element in any functioning market, although transparency regarding what schools spend their money on must be upheld.
Some of the phased-out upfront capital funding could be spent on paying for transportation costs for children from poor families, to enable them to attend schools farther afield. This may be important since research from the voucher programme in Milwaukee, published in the Economics of Education Review by Rajashri Chakrabarti, suggests that lotteries in combination with the covering of transportation costs can stem school sorting by income. Again, by expanding the size of market areas, such subsidies would also sharpen competitive incentives among all schools.
As well as reforming the state-funded education sector, we could also utilise the independent sector to expand choice and competition further, especially at sixth-form level. Well-endowed independent schools could follow the example of private American universities and make their admissions need-blind: that is, admission to the sixth form should be independent of the level of parental income. Fees for sixth formers from disadvantaged backgrounds could be paid out of a combination of endowment income and state funding (including the pupil premium). Naturally, enabling disadvantaged pupils to attend independent schools in this way would introduce even stronger competition for the state-funded schools; competition would sharpen especially for the pupils who need it the most.
The question is no longer whether we should have school competition, but rather how competitive systems should be designed to maximise their positive impact. Certainly, governments worldwide have often been too naïve when introducing market incentives in education. Producing functioning quasi-markets demands more than just allowing a theoretical right to choose. It demands a coherent reform package that changes the overall incentive structure. In other words, if the creation of quasi-markets 1.0 involved the establishment of the basic structures, the creation of quasi-markets 2.0 involves a careful crafting of complementing reforms to maximise the positive effects of those structures.
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