Education Spending - Forward Thinking, Progressive for all

Last updated: 7th September 2016

William Vickrey: Nearly all educational spending should be considered a capital outlay, whether it provides a future return in the form of enhanced taxable income or in terms of an enhanced quality of life”.

Why Education Spending Matters

Education spending is an investment in the future of the UK and in 2015 was £84.3 billion, equivalent to 11.5% of total Government spending.

 Education Spending, 2010-11 to 2014-15 (£ Million)

education expenditure

Source:  HM Treasury


In European terms, the UK has an above average spend on education:

International Benchmarks of Spending on Education, 2014 (% of GDP and % of Total Government Spend)

education expenditure UK and Europe

Source:  Eurostat

Since the UK spends more than the European average on education, it should be at the forefront of achievement. The spread of the spending is important:

Breakdown of Education Spending, 2014-15 (£ billion)

education expenditure segmentation

Source:  HM Treasury

It is possible to place this in an international context:

International Breakdown of Public Spending on Education, 2014 (% of Total Public Spending)

education expenditure segmentation UK and Europe

Source:  Eurostat

The UK is a strong spender at every level of education.

Since 1953, education spending in Britain has increased by nine times in real terms. Over the same period numeracy and literacy among school leavers have hardly changed. Britain is the only country in the developed world where literacy and numeracy levels among 16 to 24-year-olds are no higher than among 55 to 65-year-olds.

According to the World Literacy Foundation, Britain has up to 8 million functionally illiterate adults. According to their research this is costing the UK economy £81 billion a year in lost earnings and increased welfare spending. This is the highest cost within Europe. It is more than double that of Germany at £39.4 billion and France at £28.2 billion. The cost calculation includes £23.5 billion on welfare, unemployment and social programmes with the rest made up of lower personal incomes and business earnings.

The Office for Budget Responsibility in its long-term fiscal sustainability review, identifies the expected proportion of GDP devoted to education which suggests a declining need:

Office for Budget Responsibility Central Projections on Long-term Education Spending, 2012/13-2062/63 (% of GDP)

long term education expenditure forecast

Source:  Office for Budget Responsibility

In the UK there are five stages of education: early years, primary, secondary, further education and higher education. Education is compulsory for all children between the ages of 5 and 16. Further education is voluntary. It covers non-advanced education at further (including tertiary) education colleges and HE institutions (HEIs). The fifth stage, higher education, is study beyond GCE A levels and their equivalent which, for most full-time students, takes place in universities and other HEIs and colleges.

In England since September 2010, all three and four year olds are entitled to 15 hours of free nursery education for 38 weeks of the year. Early years education takes place in various settings including state nursery schools, nursery classes and reception classes within primary schools. It also takes place in settings outside the state providers such as voluntary preschools, privately run nurseries or childminders.

In recent years there has been a major expansion of early years education and childcare. The Education Act 2002 extended the National Curriculum for England to include the Foundation Stage. Introduced in September 2000, it covers children’s education from the age of three to the end of the reception year, when children are aged 5. The Early Years Foundation Stage (EYFS) came into force in September 2008. It is a framework to provide learning, development and care for children in all registered early years settings. It covers the period between birth and the academic year in which they turn 5. The EYFS Profile (EYFSP) is the statutory assessment of each child’s development and learning achievements at the end of the academic year in which they turn 5.

The primary stage covers three age ranges: nursery (under 5), infant (5 to 7 or 8) (Key Stage 1) and junior (up to 11 or 12) (Key Stage 2). In England, primary schools typically cater for 4-11 year olds. Some primary schools may have a nursery or a children’s centre attached to cater for younger children. Most public primary schools take both boys and girls in mixed classes. It is usual to transfer straight to secondary school at age 11 in England but some children make the transition through middle schools catering for various age ranges between 8 and 14. Depending on their individual age ranges middle schools are classified as either primary or secondary. The major goals of primary education are achieving basic literacy and numeracy among all pupils, as well as setting up foundations in science, mathematics and other subjects. Assessment of children in England is at the end of Key Stage 1 and Key Stage 2.

In England, public provision of secondary education in an area may consist of a combination of different types of school. The pattern reflects historic circumstance and the policy adopted by the local authority. Comprehensive schools largely admit pupils without reference to ability or aptitude and cater for all the children in a neighbourhood. In some areas they coexist with other types of schools, for example grammar schools. Academies, running in England, are publicly funded independent schools. Academies benefit from greater freedoms to help innovate and raise standards. These include freedom from local authority control, the ability to set their own pay and conditions for staff. They also have freedom in the delivery of the curriculum and can change the lengths of terms and schooldays.

In March 2000 the Academies Programme was introduced to replace poorly performing schools. Academies were established and driven by external sponsors, to achieve a transformation in education performance. It was extended in the Academies Act 2010. This enables all maintained primary, secondary and special schools to apply to become an Academy. The early focus is on schools rated outstanding by Ofsted and the first of these new academies opened in September 2010. These schools do not have a sponsor but instead are expected to work with underperforming schools to help raise standards.

Further education is one part of a wider learning and skills sector. It runs alongside workplace education, prison education, and other types of non-school, non-university education and training. Since June 2009, it is overseen by the Department for Business, Innovation and Skills. Some parts (such as education and training for 14-19 year olds) fall under the Department for Education.

Higher education comprises courses that are of a standard that is higher than GCE A level, the Higher Grade of the SCE/National Qualification, GNVQ/NVQ level three or the Edexcel (formerly BTEC) or SQA National Certificate/Diploma. There are three main levels of higher education courses:

  • Undergraduate courses include first degrees (honours and ordinary), first degrees with qualified teacher status, enhanced first degrees, first degrees gained alongside a diploma, and intercalated first degrees (where first degree students, usually in medicine, dentistry or veterinary medicine, interrupt their studies to complete a one-year course of advanced studies in a related topic)
  • Other undergraduate courses which include all other higher education courses, for example SVQ or NVQ: Level 5, Diploma (HNC/D level for diploma and degree holders), HND (or equivalent), HNC (or equivalent) and SVQ or NVQ: Level 4 and Diplomas in HE
  • Postgraduate courses leading to higher degrees, diplomas and certificates including Doctorate, Masters (research and taught), Postgraduate diplomas and certificates as well as postgraduate certificates of education (PGCE) and professional qualifications which usually require a first degree as entry qualification

Since the Further and Higher Education Act 1992, former polytechnics and some other HEIs were designated as universities in 1992/93. Students normally attend higher education courses at HEIs, but some attend at further education colleges.

During the Coalition Government period some 2.2 million apprenticeships were created since 2010. While the number of people starting apprenticeships has risen dramatically since 2002, it is equally the case that in the past couple of years the number has fallen. In 2013-14, some 440,000 apprenticeships started, 70,000 less than in the previous year. Most of those apprenticeships were in the service industries. In 2013-14 there were 126,000 in business, law and administration; 109,000 in health, public service and care; 87,000 in retail and commerce; and 65,000 in engineering and manufacturing. At the same time manufacturers identify they face a serious skills shortage.

According to the Centre for Economic and Business Research, on average an apprenticeship raises the productivity of a worker by £214 each week. British workers’ productivity lags behind that of Germany, France and the USA. Britain has fewer apprenticeships than comparable countries. There are only 11 per 1,000 employees in England, according to a study by the London School of Economics, compared with 39 per 1,000 in Australia, and 40 per 1,000 in Germany.

Tuition Fees

Tony Blair’s Labour government brought in tuition fees with students who began their courses in Autumn 1998 paying £1,000 a year. This was later controversially tripled to £3,000 a year for students starting their courses in 2006 or later. It was tripled again to a cap of £9,000 by the Coalition Government for students starting a university in 2012. The 2015 budget resulted in a further change. Education providers that can show excellent teaching, supposedly through the proposed Teaching Excellence Framework (Tef), will be able to increase their tuition fees in line with inflation from 2017-18.

The 2015 budget also increased interest charges on student loans. Before the budget they were 1% above the Bank of England base rate (a then charge of 1.5%). The budget changed this to an interest rate of either retail price inflation (RPI) or RPI plus 3%, depending on how much the graduate earns. RPI is always higher than the UK’s main measure of inflation which is a consumer price index (CPI). Increases on benefits and other payments are based on the CPI. Under this ruling graduates face interest rates of up to 6.3%, equivalent to four times the previous level.

The budget also replaced student maintenance grants (of up to £8,200) with loans from 2016-17. These will be repaid under the same terms as tuition fee loans once a graduate earns more than £21,000.

Unlike US student loans, or any other personal debt, repayments depend on how much the graduate earns. This is meant to ensure that every student can afford their repayments.

Forward Thinking Policies on Education

Education must target providing equal opportunity in preparing the pupils for their future and careers. There needs to be a fundamental understanding of the needs of agriculture, commerce and industry to achieve this. The UK Commission for Skills and Education already undertakes long-term estimates of future employment needs. This is useful only if the education curricula adjusts to it. There needs to be much stronger communication and links between the education providers and employers. Education needs this communication to make sure the curricula is relevant and employers need to play a role in that.

The UK is not underspending on education by European standards. Neither is it achieving the best results, despite its above average spending. There are also areas where the UK is failing in education. The Pearson Learning Curve identifies the UK ranks 6th in its index of cognitive skills and educational attainment. This does not sound too alarming, but the index score in 2014 was 0.67, significantly lower than the countries that ranked above the UK:

  •  South Korea    1.30
  • Japan                1.03
  • Singapore        0.99
  • Hong Kong      0.96
  • Finland             0.92

The UK is complacent in its belief in the standards of education provided. There are clearly some centres of excellence, but the standards are not universal. Overall standards need a major appraisal to assess opportunities for improvement. A regulator needs to examine individual subject success internationally so the UK can benefit from the most successful techniques.

The major change to education has to be equating academic and practical skills in prestige and importance. There needs to be a marrying of the needs of industry and commerce with the training and skills of students. A mystifying stigma has developed in the UK over vocational subjects in schools, colleges and universities. These do not exist in countries such as Germany, South Korea and Switzerland.

The most fundamental need is to align the demands of industry and commerce with education. There is a need to train the right numbers of people with the right skills for our society. Some needs are for academic skills, some for practical skills, but there needs to be connection between industry and commerce and education.

Some (though it is difficult to quantify) of the UK net immigration is a result of the right skills simply not to being available from the UK. An assessment of education is needed to examine opportunities for:

  • employers to take a lead in improving skill levels
  • more vocational pathways to work
  • greater integration between the worlds of work and education
  • more apprenticeships
  • work experience to become an integral part of education

The regulator needs to examine how other successful education systems work so the UK can progress. The UK needs to promote vocational training. There is a benefit in analysing the Finnish education network, since it is the highest ranking in Europe (and previously the highest in the world). To identify how its methods could benefit the UK and look at all international techniques where individual subject results are better than the UK.

The Finnish Education Network

education system

Central to Forward Thinking policy is that a curriculum of life skills is developed, to prepare students for their future lives and careers with fundamental skills. This is important to encourage opportunities for everyone, with skills such as:

  • finance and budgeting to include banking and credit skills
  • sex education
  • mental health
  • domestic skills including nutrition, cooking and the importance of exercise
  • environmental skills to heighten responsible behaviour
  • the importance of diet and healthy life skills which will reduce the burden on the health service itself and the health service needs to take a role to prepare generations of citizens
  • careers advise, work placement experience

The UK is still sending pupils into the workplace who are functionally illiterate, It is unacceptable at a social level, and creates hardship for people. It restricts their opportunities and the progress of the country. There are 8 million functionally illiterate adults in the UK. There needs to be an action plan to correct this, and to make sure education does not fail more people. All the time education fails in such basic issues, equality of opportunity remains a dream.

The multicultural (and faith) population of the UK has led to some education run on the lines of individual faiths. This promotes segregation. The regulator needs to examine state funding to these schools.

Private schools (and the very ill-named public schools) provide a parental paid system that upsets many for being elitist. This encourages people to support their closure because the schools fail based on equality. However, they often achieve high academic results. A part, but not all, of this is because they can select students. Rather than challenge the private sector by preventing them from running, the powerful way to challenge their position is to make the state schools academically superior. It is too easy for equal opportunity to drag down parts that work. It is a far bigger, but more useful, task to raise the standards of others. The aim of state education has to be to make the private schools redundant because they have nothing better to offer.

The grammar school network now has no political allies. It seeds academic ability. Grammar schools lost political support because the ‘middle classes’ became disillusioned when their children failed to gain entry on academic grounds favouring achievement rather than social position. The emphasis on achievement is precisely why it needs to be reconsidered.

The grammar schools broke the domination of public schools in politics. It delivered a succession of Prime Ministers for 35 years:

  • Harold Wilson (Labour)
  • Edward Heath (Conservative)
  • James Callaghan (Labour)
  • Margaret Thatcher (Conservative)
  • John Major (Conservative)

During this time the grammar school system was largely abandoned, and so there was a return to the public school domination of the post with Labour Prime Minister Tony Blair. Clearly the grammar schools gave chances to a wider range of the population than the private, fee paying system which seeds on parental ability to pay.

The major argument against the selective grammar schools is that they only provide opportunity to a part of the population. The number of state grammar schools peaked at almost 1,300 in the mid-1960s when around 25% of all pupils in state secondaries attended grammars. There are now some 163 grammar schools in England with just 163,000 pupils. Selection based on academic ability is good providing the remaining 75% of pupils have high-level education. This must include, but not be limited to, vocational training.

Pre-Primary and Primary

Primary and pre-primary schools need to offer attendance hours that allow parents to work. It must provide stimulation and excitement to children through balanced curricula.


Forward Thinking believes those longer opening hours in secondary education also have a role to fulfil in equality. By opening later in the day, there is the chance to replace ‘homework’ with private study that will give more equal chances for all students whatever of their social background. At minimum schools need to be able to receive students by 08.00 hours and house students to 18.00 hours to allow parents to work. The time allows outdoor sports and recreation as well as private study time. Activities already chosen by many pupils such as sports clubs, scouts and guides, corp. services, dance, drama should be incorporated. Sport and outdoor activities would also have a role to play in tackling child obesity.

Post Secondary

The UK has some of the most successful, and world renowned, universities in the world in Oxford and Cambridge. This has led to complacency over the entire post secondary education in the UK. The Oxbridge model (partly the college network) has not been copied by enough other providers.

The mass changeover of polytechnics to universities has failed to further the vocational qualifications offered by polytechnics. The regulator should examine if their reinstatement as polytechnics would promote a better match of education to job prospects.

Tuition Fees

A feature of student loans is that many graduates will not earn enough to repay it before the 30years limit on the debt expires. The Government factored this in to the calculations with 30% of the loans never expected to be repaid in full. Realistically the figure is now believed to be nearer 45%. This is a huge gap, given that around £10 billion a year of student debt is issued. Independent estimates suggest the default rate will rise to 48% to 49%.

The system is saddling graduates with bigger loans, but is creating no extra cash overall. There are many reasons for this but by far the most important is that students will simply not gain the lifetime higher earnings expected in the original calculation. This seriously questions the rationale behind the entire system.

The OECD Education at a Glance suggested in 2013 that 47% of the population between the ages of 25 and 34 years old were graduates. This was one of the highest levels in the world. Germany has scrapped fees and the same measure was 28%. This is also the same level as for those aged 25 to 64 years old. This is important because it shows the consistency of policy in Germany (in the UK the level for the wider age group falls to around 35%) rather than the chaotic policy changes of the UK.

There needs to be a major review of further education to:

  • assess the potential role of private company sponsorship of students
  • evaluate how to increase practical skills in education
  • align courses with the skills required by industry
  • consider the German approach of no fees for students
  • examine opportunities for a greater reliance on apprenteships

University students face high tuition fees and living costs during the time of study. Yet many courses comprise few hours each week in actual study. An independent adviser needs to look to see if there are possibilities to condense degree courses into a shorter number of weeks, to offer to students as an option.

© Forward Thinking 2019, Progressive for all.