“Rather than #AbolishEton, we should use vouchers”

Steve Macey

The persistence of a small, exclusive but highly influential private schools sector in this country is explained partly by an absence of consensus on how to reform the status quo.

Compulsory state action, such as forcing private schools into the state sector, or banning parents from sending their children to private schools, are seen as incompatible with a liberal society, even by many on the left.

In this blog I will offer a radical new idea, utilising a counter-intuitive combination of “neoliberal” economic theory and state price controls.

This would see the state issue “school vouchers” to parents to take to any school of their choice, either state or independent, and for such schools to compete to attract students.

However, in a dramatic departure from typical school voucher proposals, the state removes the right of the rich to buy superior education for their children, and equalises purchasing power amongst parents, by capping school fees at the level equal to the voucher.

Shifting times

There was a brief period in 2019, when #AbolishEton, a provocative slogan devised by the ‘Labour Campaign Against Private Schools’, was trending across progressive twitter.

Private education has always been controversial on the left and the campaign regurgitates the intuitively powerful argument that it is unjust for education and life chances to be so determined by wealth of one’s parents.

The campaigners perhaps picked their timing well. Nearly a decade’s worth of public-school buffoonery at the hands of Cameron, Osborne, Clegg and Farage has reached its pathetic nadir in the form of Boris Johnson, the least able prime minister in UK history.

The toxic cocktail of incompetence and class-based entitlement could convert even the most tepid voter into a class warrior. With the ascension of Boris Johnson, the idea of meritocracy in the UK has never seemed like more of a sham.

Despite the long-standing opposition to private education amongst the left, Labour has never previously dared undertake a policy of closing private schools.

A 2017 manifesto commitment to put VAT on private education (technically contrary to the EU VAT Directive) was the most radical stance taken by the party in recent history.

Long-standing Labour reticence has been driven by a mixture of political calculation, a concern over the cost of educating an extra 580,000 pupils, plus some genuine issues of principle.

Even many on the left regard it as heavy-handed to ban parents from using their own money to fund the education of their own children and would shirk at such authoritarianism.

The Radical Proposal

There may be a way of achieving significantly greater equality of opportunity whilst preserving both the liberty of parents and independence of private schools.

Counterintuitively, the answer comes from an idea most generally associated with the radical right, namely the introduction of school vouchers.

First envisaged by neoliberal economist Milton Friedman, this scheme essentially involves transferring the education budget to parents in the form of vouchers which they can use to pay for schooling of their choice.

The simple theory behind it is that schools will compete for pupils (or more realistically, parents) and such competition will raise standards. Supply will naturally respond to demand, with popular (good) schools expanding whilst less popular (bad) schools forced to either improve or close.

As proposed by Friedman and in the version proposed by the Trump regime, there are alarming implications for inequality which is why it has been automatically derided by the left.

Undoubtedly, wealthier parents would ‘top up’ the value of the voucher and be able to offer more to their preferred schools, thus ensuring substantial inequality in access to top schools and perpetuating educational inequality.

The poorest in society will be left with those bottom-tier schools charging the value of the voucher only. Introducing such a scheme would probably make access to good education even more dependent on parental wealth than is already the case.

Such refusal to contemplate even the notion of vouchers has prevented a devastatingly radical but also very simple progressive idea from being advanced.

This idea is to augment the introduction of vouchers with regulation of school prices to mitigate the adverse impact on inequality arising from unbridled choice.

Put simply, in parallel with granting parents a voucher for each school age child, the government could legislate that schools charge no more than the value of the voucher.

All schools, from Eton and Harrow to the lowliest comprehensive will be forbidden to charge more than this amount. For interest, the current value of the voucher (assuming no change to the education budget) would be approximately £6,200 per secondary school.

The beauty of such a scheme is that it equalises purchasing power amongst parents, ensuring that access to quality education is not dependent on parental wealth.

This achieves the utopian vision of equal educational opportunities regardless of background whilst preserving parental choice and the independence of schools.

Independent schools would be left alone and could even expand depending on sufficient interest from parents. Genuine competition on the grounds of school and teaching quality could ensue with new ‘education entrepreneurs’ rushing to provide new schools which could attract voucher-wielding empowered parents.

With this policy, the government is posing no restriction on the actions of parents but is merely regulating the pricing behaviour of private operators for the social good.

This is a standard action by governments of both left and right – see minimum alcohol pricing, capping universities fees and capping energy prices. Since no one would deny that education is an important good, it’s not a great leap of the imagination to say there is a public interest in the prices charged by education providers.

Rather than #AbolishEton, as the latest campaign demanded, we would abolish the right of the rich to buy privileged access to Eton, by ensuring that the child of a single parent on benefits would have the same access as the child of Boris Johnson himself.

Once access to quality education is equalised amongst children (surely the objective of progressives), the issue will arise of how to decide admissions to oversubscribed schools.

Once every parent has a voucher equal to a year at Eton College, what is to stop (aside from geographical convenience) every parent in the country offering their voucher to Eton? How would Eton decide who to accept and reject?

The Pupil-School Allocation Process

A clear implication from equalising the purchasing power amongst parents is that good schools will be oversubscribed.

Currently, independent schools deal with oversubscription in the same way that football clubs do when eager spectators exceed stadium capacity.

They set high prices (in reality they also use measures such as pupil attainment) to ensure the number of pupils accepted does not exceed their capacity, a capacity primarily determined by parents’ expectation of a low staff-pupil ratio, rather than real classroom capacity or resource constraints.

If the ability to set prices to suit market conditions is taken from them, they will need another mechanism to decide who to accept.

Left to their own devices, they are likely to use academic ability as the primary sorting criteria (with possibly some consideration for alumni offspring).

In this case, existing independent schools will become a second-generation of grammar schools, and ambitious parents will do everything to ensure their children access their academic reputations and facilities.

Although this would be arguably fairer than the current situation, it just reintroduces the same set of problems which led to the UK abolishing the vast majority of grammar schools decades ago.

Clearly therefore, they cannot be entirely left to their own devices on school admissions policies, and neither can the many state schools which are likely to be oversubscribed. 

To prevent schools from using such criteria, the state should legislate that school vouchers cannot be rejected by schools. The state will be legislating that in the unique education market, the right of ‘consumers’ to have their custom accepted exceeds that of ‘providers’ to decide who to sell to.

This again is not unusual behaviour from governments, and the state assumes a similar approach in other markets under the guise of consumer protection, most notably in the utilities industry.

A simple analogy could be made with the law requiring pubs and restaurants to provide tap water for free, despite it not being in their financial interest to do so. This law recognises water as a unique good, unlike Brewdog IPA or J20, the price of which can be set by the vendor.

If tap water is important enough for the state to compel private companies to supply it to consumers for free, surely education is important enough for the state to compel providers to supply it for a price set by government?

Once parents are empowered with vouchers granting them theoretical access to any school in the land, with schools unable by law to reject them, we come to the awkward issue of matching demand and supply, given how oversubscribed the top private and state schools in the UK are likely to be.

Allocating places at oversubscribed schools between children is always rife with controversy, as can be seen with places at good state schools today. Controversies could become even greater with access to top private schools suddenly also available.

There are several different ways of distributing pupils between oversubscribed and undersubscribed schools, none absolutely perfect, and the exact details are not the primary focus of this paper.

The most obvious is on geography, with oversubscribed schools choosing between applicants based on geographical proximity to the school.

Parents can still use the vouchers for any school in the country, but oversubscribed schools must use proximity in their selection criteria.

There is also a potential use for lotteries amongst applicants, perhaps restricted to applicants within a prescribed distance from the school.

Either way, government at either a central or a local level will clearly have a role (as it does now) in ‘clearing’ between students unlucky in their first choice and ensuring they are accepted at a school within a reasonable distance.

Implications for quality of education

The biggest direct impact of this reform will be on existing independent schools. Although they will retain their independent status (subject to regulation on price-setting and voucher acceptance), they will suffer significant financial implications.

Currently, the average price for private secondary school education is approximately £15,000 per year, approximately 2.5 times the average budget for a state secondary school and proposed value of our voucher.

However, this masks enormous deviations with the top-end public schools (Eton, Harrow, Westminster etc charging upwards of 30,000) whilst the lowest-charging scores generally have fees ranging around the £10,000 mark.

This is still above the proposed value of the voucher (£6,200) but the lower pupil-teacher ratio in private schools means such schools could charge the voucher to a greater number of students in order to bring pupil-teacher ratio roughly into line with the state sector, and be left on similar income.

There have also been recent innovations in low-cost ‘no frills’ private schools, such as the recently created ‘The Independent Grammar School – Durham’, charging just £2,995 per year, and planning to expand to multiple sites across the north-east of England. Education entrepreneur James Tooley sets out the business model:

‘No-frills’ does not mean low quality. The model brings down costs by renting premises rather than tying up scarce capital; rents for suitable buildings are lower than we expected. We’ll cut costs too by renting sports facilities. There’ll be none of the fripperies that seem to come with the territory of normal, high-cost private education. So there’ll be no Olympic-sized swimming pools, no cricket grounds, no planetariums, no magnificent (but expensive to maintain) old buildings.

This suggests that independent schools could provide a quality education at a value close to the voucher, especially if chains of schools exploit economies of scales.

Further evidence that private schools could continue to provide their services at lower fees arises from the persistently inflation-busting increases in fees over the last few decades, a phenomenon recently explored by the Financial Times:

The 2019 annual report from the ISC shows that fees have effectively risen by 5.3 per cent on average since 2000, or 166 per cent in total. By way of comparison, the consumer price index went up 65 per cent between 2000 and 2018.

There are several reasons for this price increase, including increased demand from international students (particularly from China).

However, another is via excessive expenditure on facilities, or “frills” as Tooley might describe them, which are undertaken more to achieve “positional advantage” rather than enhancing teaching quality according to one of PSPR’s founders, professor Francis Green at University College London.

As one school adds a multi-million special facility, so its rivals fear falling behind, leading to schools making investments beyond what would be socially optimal and needing to recoup such investments through higher prices.

Price caps would end the possibility of this socially useless phenomena.

Although top-end schools will receive a dramatic fall in revenue per student, there is no reason for them to go out of business as some might threaten. Firstly, such schools offer bursaries and other discounted fees which would no longer be required and would lessen the financial blow.

Secondly, such schools often have substantial capital including endowments, valuable assets such as Olympic-sized swimming pools, valuable land and multiple science labs which can be leveraged to maintain school finances.

However, in order to enhance annual income, they would undoubtedly increase the number of students they accept and thus increase their pupil-teacher ratio.

These implications are broadly positive for social welfare. High-performing independent schools with significant resources will expand, as the decades/centuries of private investment in world class education facilities are captured for public good whilst remaining in private hands.

There is a strong possibility that the quality of education per pupil in private schools will decline, since class sizes will be larger plus certain facilities would be sold.

However, the net impact on educational quality for children in the UK is likely to be highly positive, since the education in the independent sector will be shared amongst a far greater range of students.

The current state sector should see a mild reduction in numbers as the current ‘independent’ sector increases but should lose equivalent funding too.

The main impact on the state sector will come from the introduction of school vouchers, granted to all parents, which will go straight to their chosen schools.

The ability of parents to take their vouchers to alternative schools is likely to raise educational quality, since schools will be selected by parents solely through the quality of education they offer.

Fixing school prices prevents schools competing on prices, and thus sacrificing educational quality in order to attract poorer parents through low fees, as would occur in a free-market system.

With all schools charging the same price, and all parents with equal purchasing power, schools will be competing to offer the highest quality education for the same fixed price.

Profit-making schools and chains of schools will only profit through parents selecting them due to their provision of high-quality education.

The profit-driven incentive to cut costs will still be there, but schools will be careful to ensure cost-cutting is not done at the expense of quality, since this would lower demand and thus pupil numbers.

The whole structure of incentives is for schools to maximise the quality of education given the fixed and equal funding per pupil.

As a final comment, the policy also has a potentially positive side-effect in encouraging greater support for education spending.

Whilst increasing taxes for education spending in general (as in “we will be put 1p on income tax and spend that money on education”) may be the sort of policy voters will tell pollsters they support but then not do so at the ballot box, the introduction of vouchers going straight to schools changes that equation.

Offering voters an increase in the voucher going to your child’s school from £6,200 to (say) £7,000 is a far more specific offer which parent-voters are likely to be more receptive towards.

The net effect of my proposal is to achieve what banning private schools aims to achieve in terms of equalising life chances for the poorest and richest, but by the state empowering parental choice and allowing a competitive private sector, whilst imposing a simple price cap on schools.

This regulated market approach should lead to the gap between the current state and independent sector dwindling over time, and a reduction in the inequalities of opportunities between rich and poor which so hold our country back.

Steve is a public policy consultant with experience in tax, economic policy and international development. He has worked in Whitehall as an economist for HMRC, in addition to consulting for governments such as Sierra Leone, Liberia, Nigeria, Saudi Arabia, Ethiopia and Laos. He has consulted for a range of international organisations, including the World Bank, the IMF, UN Environment and the UK Department for International Development.