In economics, an 'externality' occurs when a transaction is made that has an effect on individuals other than those who take part in or consent to the transaction. For example, if I had flu, I might choose to purchase some medicine to make me better. This transaction not only affects me, making me well again, but also affects others: e.g. when I am better I am able to go back to work, benefiting the company I work for; I am also less likely to spread my flu on to others, benefiting other individuals I have close contact with. The 'externality' of me purchasing some medicine, then, is the effect it has on my friends and the firm I work for. Externalities can be positive (as with the medicine example) or negative. Petrol, cigarettes and alcohol are the most common examples of negative externalities. Purchasing and using petrol contributes towards global warming - which has a negative effect on our planet and everyone on it. Drinking large amount of alcohol can lead to anti-social behavior and also bad health, which can cost tax payers money on the NHS (both of which are negative externalities.) Cigarettes also cost the NHS money as well as producing second-hand smoke which many individuals find unpleasant. I believe that private education also produces a negative externality.
Normally, governments will tax products that produce a negative externality. They do this so that the price individuals pay for their product reflects the higher cost to society that consuming their product involves. For example, governments tax petrol so that the price of petrol goes up, meaning that individuals are likely to purchase less, reducing the impact of car use on global warming. Cigarettes are taxed to discourage individuals from smoking and also to help pay for the extra cost that smokers bring to the NHS when they need to be treated for smoking-related illnesses such as lung cancer. Currently, private schools do not face high levels of tax - as cigarettes, alcohol and petrol do. In fact, many private schools are registered as charities and receive tax breaks from the government.
So what's so bad about private schools? I believe that they produce a negative externality as they lead to higher levels of social immobility - they keep the rich rich, and the poor poor - and also lead to class divides. Private schools should be taxed to reflect this cost that they bring to society. I am not against parental choice when it comes to deciding which school to send their children. I believe people should be free to do whatever they want - smoke, drink, drive or send their children to private school - so long as they don't harm others, or at least pay higher rates of tax in order to negate the harm that they do.
The only factor that has been shown to be able to narrow this gap in academic performance is excellent teaching and school leadership. This is why charities such as Teach First try to develop top graduates to teach in under-performing schools: this is the only way to give children from disadvantaged families a fairer start in life. Private schools are something that we should tax not only because it is fundamentally unfair that someone's chance in life should be affected by arbitrary factors such as their parents wealth, and also that they can contribute to social tension and class divides between the rich and poor - private schools do something much worse than that: they actively harm those in the state system by recruiting the best teachers and headteachers.
At the moment, the best teachers tend to flock to private schools - where they are paid more, class sizes are smaller and children are better behaved. This leaves children in the worst comprehensive schools with teachers that tend not (although not always) to be of as high a quality; and also who tend to stay at a school for much less time - so that they don't get a chance to get to know their students properly and also often leave in the middle of a school year. Private schools (and also, to an extent, grammar schools) are actively harming our state education system: They are depriving comprehensive schools of the best teachers and headteachers and stopping the children who most need it of a decent education, allowing the gap between the rich and poor to widen even further, and adding to class divides within society. Yes, parents should have the choice to be able to send their children to private school if they wish - but only if they pay higher rates of tax to reflect the cost that sending their children to private school brings to society: just as smokers pay more tax to reflect the cost on the NHS, and road users pay tax on petrol to reflect the cost to the environment.
Defenders of private schools will claim that they are justified in not paying higher rates of tax because if they didn't send their children to private school, they would be in the state system, costing the state even more money. This is not a good argument. As I mentioned above, research shows the single thing that is most needed to close the educational gap between the rich and the poor is exceptional teachers and headteachers. If fewer students went to private school, more of the best teachers would teach in the state sector. Even if class sizes got bigger as a result of fewer parents opting to send their children to private school this would still be a good thing. Excellent teachers matter far more than smaller class sizes.
Taxing private schools is good for two reasons: Firstly, it would raise money for the government to spend on increasing social mobility (i.e., the ability of individual's from a more disadvantaged background to become successful), and secondly, it would create a disincentive for parents to send their children to private school, creating a more equal society though freeing up more of the best teachers to teach in state schools. Any money raised from taxing private schools should be used as a 'Pupil Premium', as advocated by the Liberal Democrats in the run up to the recent 2010 election. A Pupil Premium would give each school extra money for every pupil it has from a disadvantaged background, e.g. money for each child it has which is eligible for Free School Meals. Schools should be allowed to spend this extra money to recruit the best teachers to teach their (more disadvantaged) pupils. Schools with the pupils which tend to start off school with lower levels of education from more deprived families would have access to the best and most inspirational teachers - this is the only way to begin to narrow the attainment gap between the rich and the poor, and the only way to create a truly mobile society where an individual's chances in life are not (to a large extent) determined by the wealth of their parents. Taxing private schools - like taxing cigarettes, alcohol and petrol - is fair: It allows people the freedom to do what they want, so long as they are willing to pay for the price of their actions.
Interesting article Jon. I think your argument applies far better to Grammar schools; It is not difficult to argue that they are havens for middle class, create many of the effects that you describe and don't cost anything to the families.
ReplyDeleteHowever, I feel that the argument on private schools is more complex. Your article is very dismissive of the fact that parents who send their children to private school still pay tax for a service that they do not benefit from. Additionally, if you look at revenue statistics from income tax, the rich are paying a substantially larger amount than the families of those who do use the system.
The system you propose... does it really perform a different function to what is already in place?
In this way you might say your proposed tax is polemic, seeking more to brand private schooling as consciously harmful.
ReplyDeleteAn interesting idea but it is dangerously altered by the fact that you have considered average rather than marginal effects. A tax, as you say, will reduce private school pupil numbers and so their need for teachers. But this will not see the best teachers moving, but the worst (and they won't necessarily move into state schools). The pupils who won't go are the poorer ones, the ones who have to do the cba rather than those who do it as a matter of course, or class.
ReplyDeleteInequality is much more complex than other externalities because the social cost of it necessarily various person. Improving the lot of a slightly rich person by X adds less to inequality than doing the same to a very rich person. As such private schools are not like cigarettes and a pigouvian tax is an extremely blunt way to deal with them.
This is only one of a list of difficulties: How do you begin to work out the value of the inequality externality - beyond techincal difficulties it is surely hugely affected by the subjectve choice of welfare function. Education itself is of course a positive externality, how is this affectected overall - for instance a small number of highly educated people might be more efficient (i don't know). Also, comprehensive schools naturally become unequal, with the best (richest) students and teachers self-fullfillingly congregating at the same ones. A pupil premium would just start to address this but money is a small factor compared to the attitudes of parents.
In response to Charles, the argument clearly doesn't apply better to grammar schools: A tax on these would stop the poorest going, further increasing inequality; it would also be unlikely to be able to generate the same revenue as taxing poorer people. Whislt grammar schools do lead to similar problems they have the massive advantage that they are selected in terms of ability meaning that there is equality of opportunity (relatively speaking - rich 11 year olds have already had a huge advantage), and so can encourage social mobility in a way private schools never could.
To my mind these problems cannot be addressed whilst the mantra of choice is still popular. Equality and liberty are necessarily opposing ideals. Whilst most political academics recognise this democracy, for all its virtues, prevents politicians from accepting it.
Charles - I don't think you see the point of my argument. Rich people have paid lots of tax, yes, and part of that does go towards education. I am saying that if their child is not taking up their place at a comprehensive school (whether or not they have 'paid for it') then they are causing some (albeit small on the individual level) harm to society. This is behaviour that should be discouraged through a tax. Just because rich people have paid a large amount of tax before doesn't mean they shouldn't pay tax on petrol.
ReplyDeleteEdwin - I agree with alot of what you said. Yes, the tax would work at the marginal and not aggregate level, however, if the pupil premium was spent of increasing the salary for teachers in deprived comprehensive schools then this would do something to encourage some of the better teachers to transfer to the state system too.
I know a pigouvian tax is a very blunt way of dealing with the externality. I guess that I can't really see any better option to deal with social immobility apart from investing a huge amount of money into more deprived schools - but that's not really a viable option when you have a huge budget deficit!