Increasing access to private education will add billions to growth

• The UK’s average annual growth rate between 1960 and 2007 would have been almost 1 percentage point higher had it matched the Netherlands' long-term level of independent school enrolment since 1960. This in turn means that UK GDP per capita would have been over £5,800 higher in 2007 than it was.

• Better education boosts economic growth; improving students’ international test scores by 10% raises a country's average annual growth rate by 0.85 percentage points.

• UK GDP per capita would have been almost £5,300 higher in 2007 had it performed as well as Taiwan since the mid-twentieth century.

Britain could add billions of pounds to long-term economic growth if it increased access to private education, a new report released today (Tuesday July 29th) by the free-market Adam Smith Institute has found.

The report, “Incentive to Invest: How education affects economic growth”, illustrates how higher educational achievement boosts long-term economic growth, and the important role of private schooling in this process.

Through the use of existing research and new quantitative evidence, the author of the report, Gabriel Heller Sahlgren, establishes that test scores are closely related to growth. Lifting achievement by 10% hikes a country’s average annual growth by 0.85 percentage points.

Furthermore, the report illustrates how competition from independent schools has proven successful in generating higher international test scores, while also driving costs down. Sending 20 percentage points more 15 year olds to independent schools would raise growth by 0.4pp—or about a sixth—via its positive effect on educational achievement.

Based on his findings, Heller Sahlgren calls for the government to radically reform education policy by encouraging more privatisation and competition in the education sector.

Had the UK matched the Netherlands’ long-term level of independent school enrolment since 1960, its GDP per capita would be over £5,800 higher today, the report argues. At a time when policymakers are trying to cement and broaden the economic recovery, the report suggests that expansion of access to private schooling would be an attractive component of a long-term growth strategy.

Commenting on the report, its author Gabriel Heller Sahlgren said:

My research shows that a focus on increasing the number of pupils taking higher qualifications is misguided. There’s in fact no robust impact of average schooling years in the population on economic growth on average.

On the other hand, education quality, proxied by international test scores, has a consistent and strong effect on growth. According to my calculations, the UK’s real GDP per capita in 2007 would have been over £5,000 higher had we performed on par with Taiwan since the mid-20th century. So the dividend of improving children’s attainment is large indeed.

Yet there are different ways to do achieve this. Unlike expensive resource-driven education reforms, which are rarely cost effective, a good option is to raise the level of independent school competition, which other research shows both increases international test scores as well as decreases costs.

According to my calculations, the indirect economic benefit, via higher achievement, of increasing the number of pupils in independent schools to the Netherlands’ level would be a 0.92 percentage point higher long run GDP per capita growth rate. The government should therefore continue their market-based reforms on education and expand choice as widely as possible.

Sam Bowman, Research Director of the Institute, said:

This report shows that we need greater access to private schooling for all pupils regardless of background, not just to improve the welfare of the children themselves but to boost the UK’s overall standard of living and long-term economic growth.

Expanded access to private education through school vouchers and a revival of the assisted places scheme may be an easy, low cost way for the government to boost growth by improving the human capital of British workers. The results may take some time to materialize but studies like this show just how valuable a long-term strategy for expanding access to private schools could be.

Click here to read “Incentive to Invest: How education affects economic growth”.

For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@old.adamsmith.org / 07584 778207.