Britain's education system was radically transformed by the Education Reform Act (1988). The objective of these reforms was to raise educational attainment through the establishment of a quasi-market based on greater parental choice of school and the transfer of control of resources from local education authorities to the schools themselves. Annual School Performance Tables were published in order to help parents make a more informed choice of school. This report asks whether these reforms were actually successful in bringing competitive forces into education, and what the effects have been in terms of efficiency and equity.

Analysis of data from 3000 publicly funded schools provide these answers:

1. Parents have sought equality. Schools with a 'good' exam performance relative to their local competitors have taken a bigger share of the market.
2. The exam performance of schools is positively related to school size. Small schools are at a disadvantage in terms of exam performance.
3. Exam performance has risen as schools feel the effects of competition and try to outdo the achievement of other schools nearby.
4. There is some evidence of a widening gap in the social composition of schools, through this is small.

However, factors other than competition may have produced the improvement in exam performance. Government efforts to expand higher education may increase the pressure to 'do well' in GCSEs.There is a growing realisation that in the information age, job prospects are linked to educational performance. And the publication of performance tables, schools may have focused on the headline A* to C grades rather than more diffuse targets.

Since the introduction of market forces has had a positive impact on the exam performance of schools, it seems appropriate to use the market mechanism as a means to deliver further improvements. Attention needs to be focused more directly, however, on improving the performance of pupils from lower-inome groups, since this is where the problem of poor performance mainly lies.

In terms of future policy, an obvious extension of the competition approach is to provide incentives to get the best teachers and the best school management teams into the schools with the worst performance.

An alternative policy is to create incentives for schools with 'good' exam results to take a greater proportion of their pupils from low-income families, allowing them greater resources to offset the disadvantages of their family background. Such a policy would help pupils from low-income families to benefit from peer-group effects on their performance, thereby raising the average level of educational attainment.

Read the full paper.