Subsidising Private Schools

Fred’s last post prompted several commenters to mention subsidies for private schools. It’s worth taking a closer look at this issue in isolation.

As Harry Clarke reminded us some time ago in a related discussion, subsidising private education is efficient if it reduces the burden on the public sector (though I’ll argue that’s more true in the short term than in the long term).

For this to work, the subsidies need to result in lower fees for families who are price sensitive when it comes to choosing between state and private schools. These will be preponderantly middle-to-low income families.

Whether subsidies to private schools or for private education promote equity as well as efficiency depends on your point of view. In any case, we need to distinguish between the subsidies that change people’s behaviour and those that don’t.

In the case of families who would have opted for private schools anyway, we are just talking about a straightforward redistribution from taxpayers in general to those families. As far as rich families are concerned, only the RWDBs would find this an appealing idea. But there are unquestionably many middle to low income families who make big sacrifices to send their children to private schools while still contributing to public education through their taxes*. There is probably wide support for giving relief to such people, financed by progressive taxation.

On the other hand, families who switch from the public to the private system as a result of subsidies do not necessarily benefit very much some of them may only marginally prefer the private system after the subsidy is paid. So in this case the equity issue is rather how the public money saved the efficiency dividend will be spent. If it’s just handed back in tax cuts, there’s no particular equity implication. But if public schools keep the money and enjoy smaller class sizes, and if most public school students come from low-income households, this is a progressive move and ought to suit Fred’s agenda.

Of course not all public school students are from poor families. Free school for families with above average incomes is middle class welfare. So if equity is the aim, perhaps we should go further and impose means-tested fees in public schools, obliging the middle classes to pay their way or switch to private schools.

But middle class attrition from the public system imposes its own cost, a long term cost this time, in terms of equity. An important resource in schools as important as the teachers, equipment and buildings is the endowment of learning skills and attitudes that children bring with them from home. This endowment helps the children who have it, but also other children from less educationally advantaged backgrounds. The latter benefit from the good example and cooperative environment created by the former. When the well-endowed students depart for private schools, the average endowment falls, and public schools become less conducive to learning, driving more well-endowed students away, and depriving their lesser-endowed peers of the positive externality.

If this process of adverse selection continues, we will end up with a distinct two-tier system. Even if the public system is well resourced and has a low student-teacher ration, it will cater largely for the socially disadvantaged. I can’t prove that this would be a bad thing, but it doesn’t attract me. I like the idea of a strong public system which serves as a social leveller as well as a cultural melting pot, and promotes some kind of unified and unifying national ethos. I also think that, whatever benefits the classical liberals and libertarians foresee from introducing competition to school education, a lot of people – and not just the Teachers’ Federation – would rather keep commercialism out of the whole thing. No doubt that makes me a   nanny-statist, a conservative, a meddling utopian social engineer, or most likely all three, but as Carlton’s Lone Grudging Socialist concedes, I’m not alone in my failure of vision.

In any case, if we are going to subsidise private school education, vouchers or tax rebates make a lot of sense, since they can be means-tested and directed to families who need them and/or would otherwise use the public system. (Like Fred, I strongly disagree with the idea of universal vouchers.) Subsidising the schools themselves only makes sense if students from poorer families congregate overwhelmingly in particular schools.

*Like the people across the road. Neither husband nor wife completed Year 12. They have a household income a little below average, but send their three children to Catholic schools (they are not Catholics) at a considerable cost. Nothing I’ve seen suggests their children learn more than mine do in the local public school, but they are nonetheless certain that private schooling will give their kids the edge in life they missed out on themselves.

This entry was posted in Economics and public policy, Education, Uncategorised. Bookmark the permalink.
Subscribe
Notify of
guest
18 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Jc
Jc
15 years ago

“in any case, if we are going to subsidise private school education, vouchers or tax rebates make a lot of sense, since they can be means-tested and directed to families who need them and/or would otherwise use the public system”

No one from the right, where the idea of vouchers originated, has ever suggested means testing. If they are means tested it clearly becomes a tax hike of sorts compared to the old system we have now.

This novel idea of means testing vouchers would be at complete odds with the original concept of vouchers. Milt never had this in mind and neither have recent advocates of vouchers.

There has always been a social compact between the citizens and the government that public ed would be avilable for all funded by tax receipts. Vouchers would simply rearrange this compact in a way that promotes competition and busts the teacher unions. It was never meant as another redistributary angle through means testing.

Damien Eldridge
Damien Eldridge
15 years ago

James,

Targetting vouchers solely at people who would otherwise use the public system would be difficult. How do you identify these people? What would stop families from deliberately sending their children to public schools initially in order to qualify for vouchers, even if they have every intentio of sending their private schools eventually? Personally, I would prefer a voucher system in which the parents or guardians of every child recieved a guarranteed minimum level of education funding, with some of them potentially recieving more funding based on particular needs such as learning difficulties and the like. In general, socio-economic disadvantage is probably best addressed directly through income redistribution. However, if there are concerns that parents or guardians will not spend sufficient funds on their childrens education, then allocating some of the redistribution through additional education funding for those childrem might also be reasonable.

I should probably note that I attended Catholic schools for my primary and secondary education. (I should probably have noted this in my comments on Fred’s post as well.)

Regards,

Damien.

Corin
15 years ago

What about differential vouchers? I mean needs based funding makes more sense than simply favouring public over private or even private over public.

See: http://www.onlineopinion.com.au/view.asp?article=4370

I mean who could argue with funding following the student if the needy students have larger funding attached.

You sounds like you have only heard of a pure vouchers when in reality there are a varied set of options that reduce the risk on the poor and those with learning difficulties.

Indeed I would argue that a differential voucher creat5es more demand for those students and would be its best asset.

Corin
15 years ago

James – this is what I wrote on Craig Emerson’s proposals in Vital Signs in a recent review (probably coming out on OLO soon – date?):

“Emerson cites that a larger sum for poorer students will provide better school funding outcomes and this I agree with. Further that schools will now want poorer students to attend them for custom rather than these students being pushed to the margins of poor performing schools. This powerful case for removing the funding distinctions between state and private schools is valid as long as the funding differential (with weighting to the poor) is sufficient. Indeed the values of choice will be further embraced by Australian’s if more Australian’s are able to access better schools

Andrew Norton
Andrew Norton
15 years ago

James – You are taking public education as the starting position. The other way to look at is to take compulsory schooling as the default position, but in a liberal society the government should not be more prescriptive than that, and should not discriminate against parents and students in their choices of school, which is what the current system does.

The equity argument, as you acknowledge, gets confused because rich families who send their kids to government schools get much higher subsidies than poorer families who send their kids to the local Catholic school.

But this untidy situation is the practical consequence of 19th century decisions to try to undermine the Catholic Church by competing with their schools instead of treating all faiths equally. Rather than creating the cohesion you want, this was a signficant cause of resentment as Catholics thought that they were being treated as 2nd class citizens. By the early 1960s state aid for church schools was introduced to deal with this issue, and I believe contributed to the easing of tensions between Catholics and Protestants. These have eased so much that young people have trouble understanding that this was once a major fault line in Australian society.

Treating parents equally has always been seen as too expensive, and there is a practical sense in which parents voluntarily forgo part of their subsidy by going private. But trying to cut back private schools, apart from having negative educational consequences, would not create a ‘unifying national ethos’. Instead, it would re-open old religious wounds and create new resentments, among parents who don’t want their kids used in a leftist social engineering project.

Ken Parish
Admin
15 years ago

The more I look at them, vouchers are bullshit. If you have a universal voucher system (which seems to be the only sort people like JC are prepared to contemplate), it’s seriously regressive welfare for the rich that undermines equality of opportunity in a fundamental way. We’d end up with low quality public schools for the poor who can’t afford to supplement their vouchers with their own money, and much better schools for the children of the rich who can afford to top up the cost of their kids’ education. As Fred has commented in various contexts, it really does come down to values. If you believe that equality of opportunity and as close as possible to a truly meritocratic “level playing field” is what we should be aiming for in public policy, then you would be appalled by any such option. It simply entrenches wealth and privilege irrespective of merit: the “cream” (rich and thick) always rises to the top because, however stupid, they get to go to much better schools than the poor, so they are able to maximise whatever natural talents they have while the poor cannot, in addition to the social contacts and advantages that “naturally” flow from having wealthy parents.

A differential voucher system with the value of the voucher based on a family’s needs, including more for both poorer families and those with special needs (handicapped etc) children, would be better, but potentially complex and intrusive to administer. Would it be based on income or income and assets? What about small (or large) businesspeople whose affairs are structured so they make little taxable income and all their property is vested in trusts etc? No doubt it could be worked out, as it is with the age pension income and assets test, but extending those administrative arrangements to such a large, active and diverse cohort of the population is going to be expensive and complex.

That’s why I think we should essentially stick with the existing system, but:
(a) freeze the amounts of state aid going to very wealthy private schools;
(b) pursue the sort of more needs-based approach to private school funding grants that applied until Howard started dicking around with and skewed it towards the wealthy GPS schools;
(c ) increase funding to state schools to get them to a standard of excellent education, which doesn’t require ritzy gymnasiums and tennis courts to impress rich parents, just reasonable class sizes, excellent teachers and a rigorous curriculum (Howard is right on that point) with proper assessment standards rather than the “outcomes-based” nonsense that currently applies in several state systems;
(d) restoration of an external (national?) year 10 exam, with selective senior state high schools for students with the ability and desire to go on to university (perhaps with an International Baccalaureate curriculum or even the curriculum competition Andrew Norton discussed recently), with mainstream non-selective senior high schools concentrating on a combination of a broad general curriculum and more pre-vocationally based subjects (trade, business studies etc).

As long as state schools are funded and operated to ensure that they deliver excellence in primary and secondary education, then we “small l” liberals who believe in equality of opportunity (i.e. meritocracy rather than perpetuation of privilege irrespective of merit) don’t need to give a stuff if some parents decide for religious, snobbish or other reasons to fork out more money to send their kids to a private school where they’ll get some “bells and whistles” and perhaps social preferment through the old boy network, but no better education than they would receive in a state school. Ordinary Catholic and other denominational schools, which are accessible and catering to the general population of a particular faith, should be funded relatively generously by the state, but the state funding of high fee-charging GPS schools should be capped at current levels (simply to avoid the sort of squealing like a stuck pig response that Latham’s policies predictably provoked at the last election).

The present situation is that Labor generally favours the equality of opportunity/funding aspects of the above model (although

Andrew Norton
Andrew Norton
15 years ago

Using the ABS schools and household income data, I just did a quick calculation on SES background of school populations. For 2003-04, about 226,000 students from households in the top third of the income distribution attended government schools, compared to 106,000 in Catholic schools and 108,000 in independent schools.

I suspect if you took it down to the top 10% of households private schools would be a clear majority, but at this level they are pretty evenly divided.

wpd
wpd
15 years ago

Ken, I think you speak with lots of sense. Vouchers might seem good in theory but, among other reasons, would be an administrative nightmare.

You also say:

but seems to be hostage to the teachers’ unions in terms of curriculum and assessment.

Can you elaborate with examples or is it just the ‘received wisdom’?

In Queensland, the private school sector, including the ‘elite’ private schools, participate willingly in the development of curriculum and assessment along with parent, teacher and university representatives, whether that be through Subject Associations, Principal’s Associations and Unions both public and private etc.

Curriculum development, if is is to be widely accepted and implemented, must involve compromises.

Oz
Oz
15 years ago

Did the ABS schools and income data make a distinction between comprehensive and selective high schools?

Fred Argy
Fred Argy
15 years ago

James I am glad you have raised this thorny but important topic.

Ken I accept that differential vouchers, which appeal to me greatly in principle, might not be administratively cost-effective. And if it allows kids to use the vouchers for private and public schools alike (as politicians might consider appropriate), it might speed up the exodus from public schools which worries James and I.

Perhaps some special allowances to enable brighter kids to complete year 12 might be easier to implement and could be applied only to public school kids (where the problem of drop-outs overwhelmingly lies)? That seems in line with what Damien proposes.

If differential vouchers and allowances are ruled out – and even if they are not – I like a lot Ken’s three proposals on schools. What do the experts like Norton think?

As to universities, the Macquarie vice-chancellor (Schwartz) recently said “the best way to increase equity is to raise HECS and then use the money to fund scholarships aimed at

Andrew Norton
Andrew Norton
15 years ago

“Without further increasing HECS, why can’t governments provide incentives to universities to embrace scholarships on a scale approaching the USA?”

Though in the US lots of scholarship $$ are wasted in positional competition for the top students. I don’t think this should be banned, but it should not be encouraged. I’m not comfortable with charging high fees to middling students so that the seriously bright can get a free run; and if I am not comfortable with it social democrats should be completely against it.

James Farrell
James Farrell
15 years ago

Thanks for all the comments.

Damien

There is obviously no way of exactly identifying people who would otherwise use the public system. It would be based on household income, on the basis that lower income families are more likely the marginal purchasers of private schooling. Since that dovetails with the equity objective, that seems fine with me. I see no need to repeat the mistake that was made with health insurance, giving high-income families a cash incentive to use a service they would have used anyway.

Andrew

We agree that the present system penalises a certain class of families – the ones like my neighbours in the footnote – and we both want to fix the problem. You can’t see any solution other than abolishing the public school system, whereas I’m looking for ways to finance that system more effectively and equitably, in particular by funding the student rather than the school. I’m not sure why you characterise my position as ‘wanting to cut back on private schools’. I think that would be an unwarranted attack on liberty (though I don’t mind reining in schools that go too far with religious brainwashing).

Ken

I agree that the administrative complexities and costs involved in means tests are the main problem. Means tests also create high effective marginal tax rates. But I’m still inclined to think that funding the student has to be more efficient than funding the school. And I share wpd’s curiousity as to wherein exactly the teachers’ unions exert their baneful influence on curriculum.

Ken Parish
Admin
15 years ago

James (and wpd)

My concerns are more with assessment than with curriculum per se, especially the lack of an external Year 12 exam in Queensland (or so I understand). In other states too (e.g. NT/SA) it can at least be argued that there is too much emphasis on school-based continuous assessment and too little on central assessment (whether exam-based or otherwise), especially for the non-academic streams at year 12 level. I’m not, however, suggesting that we should go back to the old days of a 100% external exam at year 12 (as it was back when I sat the HSC)

I’m also deeply suspicious of the entire concept of “outcomes-based” education (and more especially the sort of impenetrable bureaucratic jargon it fosters in school reports to parents).

I’m also concerned about promotion of teachers in most if not all states and territories by time-based salary increments rather than any objectively assessed merit criteria. Wholly peer-assessed (you scratch my back and I’ll scratch yours) “teachers of excellence” schemes aren’t much better IMO, although some peer input is certainly necessary.

And I’m equally suspicious of the alleged benefits of “middle schooling”, which (perhaps depending on the manner of implementation) appears to adopt a lowest common denominator approach to teaching in junior high school years as the price of reducing disruptive student behaviour in an era when traditional disciplinary structures (in public schools at least) seem to have become politically incorrect. Thus, having a generalist humanities teacher teaching a class English, history, SOCE (a confused polyglot subject which should be terminated with extreme prejudice in any event) etc and another generalist teaching the same class maths, science etc, which is the system about to be implemented in the NT, strikes me as a bad idea. It inevitably compromises academic rigor, especially for high-achieving students in Years 7-9, in favour of nurturing/”student-centred learning”.

I also agree with the moderate conservative view (viz John Hirst) on the benefits of teaching history in senior high school (at the very least) as a stand-alone core subject.

Finally, although people like Kevin Donnelly greatly overstate the case, I DO think that post-structuralist/critical theory approaches to the teaching of senior English are perhaps over-emphasised in some aspects of curriculum in some states, although I notice that ACER has debunked Julie Bishop’s silly line about “Maoist” influence on the English curriculum, at least in relation the NSW senior English curriculum. My concern in this regard is not with silly and simplistic claims like “left wing bias”, but with the fact that overemphasis on a formulaic critical theory approach can indeed detract from engaging meaningfully and deeply with literature (although arguably not to any greater extent than earlier generations like me who were taught to critique Shakespearean “texts” – they weren’t called that back then though – under the framework of theorists like AC Bradley or FR Leavis) . These are debates that we’ve hashed and rehashed in the blogosphere over a long period so I don’t see any point in revisiting the arguments here. I’m simply responding to your request that I should explain what I meant by my throwaway line about the influence of teachers’ unions in my previous comment.

wpd
wpd
15 years ago

Ken thanks for the response. Needless to say there is a host of further questions. But one step at a time.

it can at least be argued that there is too much emphasis on school-based continuous assessment

Of course, it can be can be debated and has been over a number of years.

You say also:

My concerns … especially the lack of an external Year 12 exam in Queensland (or so I understand).

It is true that there is no ‘external Year 12 exam in QLD’, (at least for most students but certainly not all), but that does not equate to no external assessment. I will leave that point for the moment.

Can I ask how many universities have ‘external assessments’, given that external evaluations/assessments are apparentely more valid than internal efforts?

I don’t know what you teach but are you subject to external evaluation? Or at least, are your students subject to external evaluation? If so, are they subject to evaluation at the end of their three years; at the end of semester; end of year or whatever?

Lots of questions. Hope we can have a dialogue.

Corin
15 years ago

Ken – Perhaps read the chapter in Imaginning Australia. I read it after I wrote my article but it is much clearer on admin mechanism than I could ever be anyway.

Alternatively ask Andrew Leigh on this, I think his view on managing the admin would be grand and worthwhile.

Andrew Norton
Andrew Norton
15 years ago

The complexity of individualised differential vouchers is why the current private school funding system, which bases funding on the residential location of parents, may be a reasonable proxy, since it includes in the sample a whole lot of people who have no incentive to lie about their income (though I think it does use census data, which has its own accuracy problems).

It could also help deal with social mixing concerns, since any ‘rorting’ (ie going to a heavily subsidised school, despite being personally wealthy) would have the effect of putting upper middle class kids in with students who are generally from a lower socio-economic background.

Flat rate vouchers have the virtue of simplicity (one easily verified question: is the person an enrolled school student?), equal treatment of all, and maximum choice of school, but the great negative of high expense.

Corin
15 years ago

Andrew – explain the difference say than with the current system in getting a kid into a special needs class room?

Also on the family income background – surely we use enough Tax data to compile the benefits scheme – couldn’t this be used to evaluate the size of the voucher.

My understanding of the current system is that whilst it uses geaographic location as a marker – it does not pay a true voucher to the parent – it only pays to the school. Do you think that works effectively in giving choice? i.e. the poor still have to pay the full fee and can’t use their sum directly as a payment.

This is a criticism I have of Emerson’s payment structure – i.e. wouldn’t families make better choices if they knew they had a visible sum to use? Also wouldn’t they feel that the sum devoted gave them an ‘outcome’ and wouldn’t this promote engagement. In my view this is the primary reason to support a differential voucher scheme.

I guess what I’m getting at is that the benefits may not be directly economic, nor even educational – perhaps they are simply that people have ‘control’. That they hold power and can exercise it themselves. i.e. it is a political reason to support such a devolvement of decision making.

Andrew Norton
Andrew Norton
15 years ago

Corin – I agree that it’s better if parents can make their own choices. My difficulty in this debate is that I am conflicted between what I think would be the best outcome if starting from scratch, which is politically very difficult, and the more urgent need to introduce reforms likely to improve things in the medium term.

This is why I made a remark on one of these threads that in bringing markets into higher education the ‘supply’ side should receive more focus: curriculum competition, more autonomy for state schools (and Catholic systemic schools, for that matter).

Because vouchers have become iconic on the right and demonised on the left they get too much attention relative to other reform options.