Mind the gap

The IFS funding gap analysis is out-of-place, misleading, biased and raises much bigger questions about the "independence" of the author

This chart has been doing the rounds on social media. I explain how, and how badly, it’s wrong. I’ve been trying to find someone in politics or the media to help amplify these concerns, if anyone wants to pick this up please get in touch in the comments.

This chart was issued by the Private Education Policy Forum, which argues for the abolition of independent schools.

TL/DR (but please do read the details and comment)

• The PEPF chart is a deceitful and ridiculous misrepresentation of work by the IFS (original below);

• IFS and PEPF are too cosy by half; the IFS has not registered any concern about the stupid chart or the fake attribution

• Even the original is absurd:

  • it’s completely unclear why the (taxpayer-funded) IFS paper, before addressing the narrow and legitimate question of “how much revenue will VAT on school fees raise” does a red herring into the inequality of inputs;

  • no attempt is made to explain why this analysis is important or interesting; or to probe into either the underlying causes and effects of the inequality;

  • the chart commits the flaw of averages “leading to oversights that can fuel misinformed decisions and propagate misleading narratives”; it hides the large number of independent schools where inputs are comparable, or less then, state school funding

  • no attention is drawn to the fact that the existence of independent schools increases the £/child available to state schools, let alone that one way to increase £/child in state schools would be to encourage more use of independent schools

• it’s notable that the author makes no mention of other market features such as competition, quality, diversity, choice, innovation - the only feature worth mentioning is inequality;

• The Y-axis inputs (public spending of tax receipts vs private spending of after-tax income) are not morally or economically equivalent; a more philosophical observer would have noted this prominently; failure to do so is yet another concern about the famous “independence” of this body of work;

• If there is to be a (taxpayer-funded) comparison it ought at least to be like/like, apples/apples; there are several glaring errors in the composition, which (to nobody’s surprise) have the effect of exaggerating the inequality narrative.

How to lie with statistics

The disgraceful PEPF chart comes from the original, below. You can quickly see the presentational issues with the PEPF take, such as:

• They cherry-picked the start and finish point, so that you don’t get to see the increase in real-terms state school funding in the latter years of the Conservative government

• They decided to index the y-axis at 0% to make the effect “look” really dramatic (50% vs 15%). The more traditional 100% indexing (giving us 150% vs 115%) wouldn’t have been so titillating, and nor is the original below

• They chose not to make Sibieta’s deductions for per capita bursary funding (dotted line, which roughly doubled over the period), which further exaggerates the “ooooh inequality” narrative, disregarding charitable effect, supporting social mobility, and reducing the funding gap

So the PEPF take is complete nonsense. It’s grist for trolls on X of course, and it’s grotesque that they tell everyone the IFS generated that work.

It’s also grotesque that the IFS doesn’t defend their integrity by telling the PEPF to desist and at least to correct the above three errors. It’s as though the “independent” people at the IFS don’t really mind…?

PEPF, IFS and friends

I’ve written briefly about PEPF here. The ringleaders are (privately-educated, grammar school dads) Francis Green and David Kynaston. There’s a huge amount I could write about the PEPF and their low-quality research, also about the incestuous overlap between the PEPF, University College London, the Nuffield Foundation and the Institute for Fiscal Studies, particularly the (taxpayer-funded) Centre for Microeconomic Analysis of Public Policy (CPP), whose board you can see here.

Question for anyone curious: can you find any evidence among CPP, Nuffield, or PEPF of interest or expertise, in any aspect of the private sector? When did they cover investment, choice, innovation, trade, competition? Specifically, what evidence is there that any of these people are qualified to hold forth on independent education?

Remarkably, this entire body of work receives generous public funding via the Economic and Social Research Council (ESRC). That’s where the atrocious Sibieta Paper comes from, which has been touted repeatedly as “independent”.

I’ll get back to all that. Today, I want to focus on the chart:

The IFS take

Here’s another clip of Sibieta banging on about the funding gap. It’s clearly very important to him. Before I even get stuck into the numbers, let’s do some philosophical beef about this part of the work. So what? What’s it for?

The Sibieta paper is ostensibly a (publicly-funded, don’t forget) review of the expected fiscal impact of applying VAT and business rates to school fees. It seems to be answering the narrow, legitimate, public-interest question, as of July 2023, “How much will the Labour Party’s proposed tax measure actually raise?” That would have formed part of a more interesting question “is it a good idea taking all side-effects into account?”

For a narrow fiscal-impact question, it’s very strange to start off with this inequality question at all. If I was the author, I wouldn’t want to distract from my tight analysis by covering something entirely different. What’s it there for? For those of us interested in the quality of education provided at state schools, and possibly accepting that the green line needs an increase….who cares about the gap? What effect does this story have, other than to set a political scene, to encourage the reader to dwell on inequality, and attune the reader to taxing these schools as a sensible way to pay for those schools.

Given that the chart does have that effect, didn’t anyone reviewing this (publicly-funded) paper ask whether it’s (a) in the public interest or (b) politically-neutral? Who commissioned Sibieta to do this work, and why? Who signed it off? Was this funding gap topic part of the specification?

I would have just hit the fiscal impact question. But if a neutral and independent observer wanted to compare the state and independent sectors more broadly, he ought to explore quality, innovation, competition, diversity, family and other facets of the market. Two more interesting openers would have been “what’s the effect of free taxpayer-funded state schools on the independent sector”, and “how much does the independent sector save the taxpayer?” Alternatively, if I was going to preface a paper about education by providing a quick industry overview, I’d definitely mention that education is the text-book example (literally so) of a merit good, and my opening paragraphs would (uncontroversially) say the independent sector saves the state sector several billion quid.

Nope, Sibieta wanted to cite one red-herring, and one only, the inequality of inputs. Neutral? Independent?

Having identified the inequality of inputs, it might also be interesting to probe how they arise. What’s the nature, and motivation, of parents willing and able to pay fees? Sibieta’s only remark here is that “Unsurprisingly, private school attendance is largely concentrated at the very top of the income distribution,” which is utter rubbish as I explained here: 1/6 of children attending private school are from below-median-income households; a further 1/3 are from outside the top-decile.

The reality is, some lower and middle-earners can and do find ways to afford private school fees. Their need to do so could be particularly great, for example where children have special educational needs (SEN) or other disabilities, or where the children have experienced bullying in the state sector. Or, they could find one of the more affordable schools, where the “inequality of inputs” is non-existent. The “average” of £17k a year hides several hundred schools that cost parents less than state schools cost taxpayers.

Meanwhile, among higher earners, a strong majority choose state schools despite evidently being able to afford to pay the fees. These high-earning families clearly find free state education, despite the funding gap, doesn’t trouble them at all. They manage to spend their money on education, VAT-free of course - it’s only the “school” bit that’s capped. Sibieta’s incurious about that too.

Finally, it’s not even considered worthy of mention that the state school budget would be spread more thinly if independent schools didn’t exist. Remove the yellow line, and the green line would immediately move downwards by 6.5%, and that’s generously ignoring the fact that independent schools serve a disproportionate number of children with SEND.

Why does the IFS gaslight these (obvious) situations and pretend the only feature of interest is the input of funding?

A pound here, or there, isn’t the same pound

Independent schools save the taxpayer serious money - £4.4bn, according to Oxford Economics (2022), and arguably more than that if we fully account for fixed costs and industry overheads in the free taxpayer-funded sector.

Sibieta is quite wrong to conflate private money with public money, presenting them as equivalents on the Y-axis. A banana in Africa is economically different from a banana in Alaska. An umbrella for sale on a rainy day is not the same as when the sun’s out. A pound of taxpayer’s money is completely different from a pound of after-tax income for a household.

Comparing public spending to household spending gaslights the tax-contributing toil, and the value created to customers, employers and employees, that goes into earning income. Sibieta should state that those high-earning households make disproportionate contribution to the cost of state schools, and particularly so when they don’t demand the (unfunded) places they are entitled to.

Otherwise he’s taking taxpayers for granted. It’s “as though” he subscribes to the extreme socialist view that private income intrinsically belongs to the state.

Neutral. Independent. Taxpayer-funded.

Apples and pears

So finally onto the comparison. Remember, we paid for this analysis and have every right to expect quality and rigour. If we’re going to compare resource inputs, then it should at least be an apples/apples comparison, right?

Let’s go through the state school funding line first, where Sibieta ignores:

• the cost of school transport at public expense

• the opportunity cost/rental cost of land

• industry overheads at the Department of Education and Local Authorities

• VAT reclaimable from local authorities

• free school meals and the Household Support Fund

• taxpayer contributions to the Teachers’ Pension Scheme (TPS), and taxpayer underwriting of TPS (which many independent schools have withdrawn from and do not benefit from)

• the “free” or discounted provision of independent schools’ facilities and activities-in-partnership

• contributions from state school PTAs (with Gift Aid, natch)

For independent schools, Sibieta does not remark on the coverage, typically included in the fees (and now all subject to VAT), of

• provision of learning support, not as an “extra” but as part of the service, to diagnosed and undiagnosed children with SEND

• upwards skew due to inclusion of schools with SEN specialism, which typically have higher fees

• services that state school parents can and do pay as extras or out-of-school, VAT-free of course:

  • wraparound care, soon to be enhanced by free breakfast clubs, often paid for by taxpayers outside the school budget

  • after-hours tutoring

  • school meals

  • extra-curricular activities

  • construction and running costs of facilities provided by the school instead of by state school PTAs

• marketing and acquisition costs, given independent schools do not benefit from a largely-captive-and-mandated market with guaranteed taxpayer-funded income

• the significant cost of using and maintaining heritage assets

• the provision of partnership activities and other support to the community

• 100% of TPS contributions for those schools still within the scheme

Dear Luke: Economics is about peer comparisons not averages.

State school families use wraparound care, tutoring and after-school clubs, all of which are typically bundled into independent school fees, and can easily rack up several £k, and some of these are free paid for by taxpayers. And there goes your funding gap.

Or, they don’t need wraparound care because Mum (or Dad) is at home, most or all of the time. If Dad (or Mum) earns enough, given school is free paid for by taxpayers, it’s a fine life with loving care, somebody to help with homework, and no financial stress, while in receipt of (depending on earnings) child benefit. And that’s a form of “privilege”; it’s to be welcomed, but why is a dual-income dual-taxpaying feepaying family, whose school arrangements enable their working hours, being told to pay even more (while portrayed as enemies of the state), while a comfortably-off single-income state school family is encouraged to feel aggrieved about the funding gap?

Taking a step back, there’s more to life for these families than totting up public vs private expenditure on schools. “Comparison is the thief of joy”; I suspect it’s particularly joyless if that comparison is your job, you’ve been at it for fifteen years, and you’re this bad at it.

One-sided mistakes

We can all make mistakes, but we’d expect mistakes in good faith to be randomly arranged - we’d expect some mistakes to be positive and others negative.

Does anyone agree with me that, strangely, all of the above omissions / errors point in the same direction, with the effect of:

• Understating the cost to taxpayers of state school provision?

• Exaggerating the material deprivation of state school provision?

• Exaggerating the disparity between state and independent resource inputs?

Independent? Neutral? Am I the only person asking these questions? What are the Opposition up to?