"Sharper axes, lower taxes"

Sarah Dobbs's picture
Clearly, Gove is just not right wing enough.

This report has been welcomed by Tory MPs.

Chilling. These are its conclusions:


Government spending is over 50 per cent of national income. Spending grew steadily in the twentieth century and then experienced very rapid growth from the beginning of the 21st century.

• Much government spending discourages economic activity and prevents innovation and competition in crucial sectors such as health and education. Furthermore, government intervention is incoherent. For example, government spending and implicit subsidies strongly encourage certain carbon-intensive activities; other forms of government spending are then used to try to reduce carbon-intensive energy generation.

• the recent Comprehensive Spending Review was anything but comprehensive. Certain departments were omitted from the review altogether. Most other areas of spending were ‘salami sliced’. No coherent, bottom-up analysis of government functions has taken place. the government could achieve its main public policy objectives at much lower levels of spending if there were to be a radical review of all aspects of spending.

• even if the coalition achieves its objectives, there will be only modest reductions in government spending. Nominal spending will rise, real spending will be cut by less than 1 per cent per annum and spending as a proportion of national income will fall back only to 2007 levels.

• A complete review of government functions could, as a first step, lead to cuts in underlying government spending of £242 billion in addition to the government’s proposed cuts. Using the government’s definitions of government spending and national income this would amount to a cut of £215 billion to around 29 per cent of national income.

• Government spending – even in areas such as research and development, investment and education – has little or no beneficial effect on economic growth. the taxation necessary to fund government spending, however, seriously and adversely affects economic growth. A reduction in government spending of the order suggested by our authors would lead to economic growth increasing by more than 0.75 per cent per annum: this would mean that national income would grow by an extra 20 per cent every 25 years.
• Much government-owned infrastructure can be privatised; marketbased solutions to transport urgently need to be adopted with a consequent elimination of government subsidies; and climate change policy is currently incoherent. Huge savings in government spending are possible in the field of climate change policy even if the government wishes to retain incentives to reduce carbon emissions. Over £80 billion a year could be available for tax decreases from the proposals made in these areas.
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Janet Downs's picture
Thu, 14/07/2011 - 15:32

In the section on Education the author discussed Alison Wolf’s book “Does Education Matter?”: “Wolf argues that the social spillovers from education are limited, that huge amounts of government money have been wasted on pursuing illusory links between education and economic performance, and that economic history shows no consistent linkage between rapid growth and government investment in schooling.”

The OECD would not agree that the link between education and economic performance is “illusory”. It says that if the UK boosted its average PISA scores by 35 points over the next 20 years “could imply a gain of US$ 6 trillion for the UK economy over the lifetime of the generation born in 2010” and “Bringing the UK up to the average performance of Finland… could result in gains in the order of US$ 7 trillion.”

Wolf says there is no "consistent" link between rapid growth and government investment in education. This presupposes that the only reason to educate people is to ensure “rapid growth”. Ensuring that people have skills needed for work is, of course, essential. But it is only part of what a good education should be.


Janet Downs's picture
Thu, 14/07/2011 - 15:44

On pages 107/8 of the IEA report the author considers the pupil premium and its aim of persuading schools to take on more disadvantaged pupils. “The assumption seems to be that disadvantaged children will gain from mixing with the more academically oriented middle class. But it could equally well be that a large influx of disruptive children could undermine the ethos of successful schools”.

The author clearly hasn’t read the analysis by the OECD about the effects of the concentration of disadvantaged pupils in schools. These have been aired on this site and can briefly be summarised:

1 All pupils tend to do worse in disadvantaged schools.

2 Disadvantage pupils tend to do better than expected in mixed socio-economic intake, while advantaged pupils tend to do worse than expected.

3 All pupils tend to do better than expected in schools with a privileged socio-economic intake.

Janet Downs's picture
Thu, 14/07/2011 - 16:23

Page 109 of the report: “As a share of GDP, state-funded education now accounts for more expenditure than in countries such as the USA, Canada and the Netherlands.” The author said that the UK cost would be more if spending on private education was added.

This is what OECD says: “While GDP per capita reflects the potential resources available for education in each country, it does not directly measure the financial resources actually invested in education.”

Nevertheless, I tried to check out the share of GDP figures. It’s difficult to find up-to-date information so if anyone obtains them please post a link. I found the Eurostat figures for education spending in 2007 as follows:

UK: Publicly funded 5.39% of GDP; Privately funded 1.75% of GDP

Netherlands: Publicly funded 5.32% of GDP; Privately funded 0.90% of GDP

USA: Publicly funded 5.32% of GDP; Privately funded 2.58% of GDP

Canada wasn’t in the Eurostat table. However, the figures show that in 2007 the figures for publicly funded education in UK, Netherlands and USA as a share of GDP was more-or-less equal. Note: 7% of UK children had 1.75% of GDP spent on their education, while the other 93% shared 5.39%. Isn’t there some disparity here?


Janet Downs's picture
Thu, 14/07/2011 - 16:34

Still on page 109: the author mentions the Progress in International Reading Literacy Study (PIRLS) for 2006 which showed a fall in UK ranking from third in 2001 to fifteenth. OECD Programme for International Student Assessment (PISA) for 2009 results were also mentioned but the author had the good sense to compare them only with 2006 and not use the discredited 2000 figures as Mr Gove and others do. PISA also showed a fall and the author described the results as “uninspiring”. It’s true that average in maths and reading is not exactly inspiring, but it’s not damning either. And the author doesn’t mention that UK pupils scored above-average for Science. Neither does the author mention the Trends in Maths and Science Survey (TIMSS) of 2007 when English students gained the highest marks in Maths and Science in Europe. Admittedly, TIMSS is a smaller survey than PISA, but it is nevertheless an achievement which the author decided to omit.

That's enough for now. I'll carry on from page 110 tomorrow.

Janet Downs's picture
Fri, 15/07/2011 - 09:25

The rest of the IEA report’s section on compulsory education advocates the following:

Profit-making schools should be allowed. The author quotes one piece of Swedish research which claims that profit making schools produce better outcomes than publicly-funded schools. However, the author didn’t mention the work done by Suzanne Wiborg who said that Swedish free schools “have met ‘profound criticism’ and the public seem to have been most exercised by the idea of shares, money and profit … The Free schools didn’t use their freedom to reinvent education in the same way as Ikea reinvented furniture, they simply set up another beige version of MFI, eroded the workers’ pay and conditions, and were constantly looking over their shoulder at the balance sheet to make sure they made a profit rather than doing anything radical to improve the way they delivered education.”


Parents should pay towards their children’s education in the same way they expect to pay for pre-school childcare. Parents don’t “expect to pay” for pre-school care, they HAVE to pay if parents need to work. The author praised Sweden for its use of profit-making schools but didn’t mention that Sweden has a long preschool tradition and there is strong state support for families with young children. 95% of the preschool activity in Sweden is provided by the state via municipalities and the state pays 91% of the costs (and 100% in the case of low-income families).


Alternative providers of education should be encouraged. OECD said that the academy and free school programme could increase user choice in England, but also said that the evidence about whether increased user choice increases outcomes is “uncertain” (page 85 OECD Economic Surveys UK 2011).

The pupil premium should be scrapped. This is the opposite of the OECD view that “the premium will go some way towards addressing underspending on deprived students.” (page 106 op cit).

The plan to raise the school leaving age to 18 should be abandoned. This is a sensible idea although there must be sufficient training places and employment available for young people who do not wish to stay in school or go to FE colleges after the age of 16. Employers must play their part here.

Janet Downs's picture
Fri, 15/07/2011 - 10:20

The report was written by the Institute of Economic Affairs who is a free market think tank. The IEA claimed that an opinion poll conducted by ComRes for the IEA shows “overwhelming public support for a much deeper programme of spending cuts.” The poll was an online survey of 2,050 British adults.

There were four questions in the poll. The first one asked about current Government spending plans as a proportion of UK national income. The second asked respondents to choose between two statements about whether the Government intended to reduce or increase the national debt before the next election. The third asked respondents to say what proportion of the nation’s income should the Government aim to spend. Only the fourth question directly asked a question about spending cuts and was framed like this:

“By the time of the next election the current Government’s plan is to spend around 40% of the UK’s national income each year. If the Government were to reduce its spending to 30% of national income, the Government would have less money to spend, but each household would pay around £7,500 less tax on average. Would you support or oppose this reduction in government spending?”

70% of the 2,050 respondents supported the reduction. This is hardly surprising, since the carrot of £7,500 extra in the pocket was dangled in front of respondents. However, a moment’s thought would show that this extra money would not be enjoyed by those who pay little tax such as low-paid workers. Neither would it benefit vulnerable groups such as the long-term sick or elderly pensioners. And yet it is these groups who would suffer if the policies suggested by the IEA were implemented.



That is not to say that savings can’t be made. Stopping academy conversions, the free school programme and the proposed University Technical Colleges would save millions.

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