Simon Burgess, Professor of Economics &
Director of the Centre for Market and Public Organisation

In these hard times, spending government money effectively is more important than ever. Last week Fraser Nelson challenged the effectiveness of spending in schools, one of the areas relatively protected from Coalition cuts. He said: “The biggest surprise, though, was the money: no matter how you split the figures, the amount spent didn’t seem to make the blindest bit of difference”, his reading of a report by Deloitte commissioned by the Department for Education.

What is the evidence? In fact, it is surprisingly difficult to establish the impact of spending more money on student achievement. This is partly due to shortage of data (researchers always want more data), but there is a more fundamental reason too.Perhaps inadvertently, Fraser Nelson illustrated the difficulty in his first paragraph. He noted the variation in per-pupil expenditure “ranging from £4,500 in Lyme Regis to £10,000 in Salford.” This is absolutely right – there are very significant variations in revenue per pupil. But the key point is that these are not random: extra resources are explicitly and systematically directed towards schools in poorer neighbourhoods. The mechanism, accreting the new schemes of each successive government, may be incomprehensibly complex, but the intent is surely right.

Getting back to our question, on the one hand we have this systematic distribution of resources towards poorer neighbourhoods. On the other hand we know that pupil attainment is typically lower in schools in such neighbourhoods; not for every pupil, not in every school, but on average. So if money has no impact on attainment, and we line up pupil attainment and school expenditure, we will tend to see a negative relationship. This derives solely from the way that money is distributed to schools. The fundamental problem is that there are two things going on with opposite effects: low attainment is associated with more money (via the schools funding system) and more money may be associated with high attainment (via the education process). With no other information, there is simply no way of disentangling these two opposing effects, and by itself these numbers can tell us nothing about the causal impact of school expenditure on pupil attainment.

So the view that “the amount spent didn’t seem to make the blindest bit of difference” cannot be supported by this evidence.

What of the wider research evidence, based on studies with a plausibly causal research design? One of the most prominent economists in the field of education, Rick Hanushek from Stanford, is famously sceptical of the value of greater resources for schools. There certainly are studies that show money can matter, but it is probably fair to say that the majority view among economists is that simply providing more resources for schools is not the best option.

The really interesting question is this: why doesn’t more money raise attainment? More money usually helps most things. Either there simply is nothing that schools can buy that raises attainment. This seems unlikely, and would certainly be a surprise to parents paying many thousands of pounds to send their children to private schools. Or there are features of the system which lead schools to spending extra resources on the ‘wrong’ things – things that have little impact on attainment. This might be the manner in which the money is distributed by government (typically short-term, making long-term expenditure decisions risky); or the regulations and agreements governing its spending by schools; or other factors. We have speculated a little about this here. 

Coincidentally, the Department for Education has just opened a consultation on school efficiency – they await your views.

You can visit the Centre for Market and Public Organisation (CMPO) website.