Monday, April 29, 2013

At last, it’s official: spending more doesn’t make public services better

New research suggests that cutting government down to size will leave Britain stronger and more socially cohesive

Last year, the Department for Education asked a firm of accountants to trawl its vast pupil database and find the secret of great state schools. Deloitte had access to the records of almost half a million pupils, factoring in everything from postcodes to ethnicity. It could examine the bizarre variation in spending per pupil, ranging from £4,500 in Lyme Regis to £10,000 in Salford. And the study would be useful in light of the Coalition’s policy for a “pupil premium”, offering £900 to help the poorest pupils. Or so it was assumed.

When the results came back, the conclusion was extraordinary. As one would expect, schools marked “outstanding” tended to achieve the best results. Poverty mattered, but not as much as Deloitte had expected. The biggest surprise, though, was the money: no matter how you split the figures, the amount spent didn’t seem to make the blindest bit of difference. “There is no correlation at all,” it concluded, “between the level of per-pupil funding and educational outcomes.” This was seemingly not what a cash-hungry department wanted to hear. The report was parked in an obscure part of its website, with no public comment.

The study’s conclusions are, of course, rather devastating to the Liberal Democrats’ flagship idea of pupil premiums. Pupils trapped in a sink school are unlikely to be helped by a bit of extra cash poured into a dysfunctional system. But the policy will go ahead because David Laws, the schools minister, is under orders to bring back a “win” for his party. His boss, Nick Clegg, wants applause lines in speeches boasting about the help given to poorer pupils. The Deloitte report, of course, confirms what is obvious to most parents: ethos is what matters most – and you can’t buy a good ethos. Head teachers who turn around a school are utterly priceless, in every way.

So it emerges that the whole premise of Labour’s education policy – that cash matters most – was false. A succession of Labour ministers stood behind a podium and boasted about “investing” in schools – and they did. Spending per pupil doubled. But still, Britain hurtled down the international league tables. Of the last 34 official studies into English state schools, not one looked at funding per pupil. Gordon Brown did not want to know. He had drawn a dividing line with the Tories and he wanted it hammered home: if you care, you spend. If you’re cruel, you cut. And did this actually help schools? Mr Brown didn’t seem to care that much.

The cost of all this is now hideously clear. The Labour years were an astonishing experiment in expanding the size and scope of the state. Over the past decade, the British government grew faster than any major administration, anywhere, over any other decade – apart from those preparing for war. The NHS budget more than doubled, transport and education spending almost doubled and the welfare bill rose by 50 per cent. Forget about the bankers. This was the madness that led to the worst economic overheating in Britain’s modern history and, ergo, the worst recession in living memory. The debt, which will take a generation to tackle, will be Brown’s only legacy.

It goes way beyond education. Other evidence of the spending myth can be seen across government. The police did worse than anyone (apart from the military) from the Brown bonanza and they were not “protected” from cuts by the Coalition. Yet crime is one of the rare success stories. Earlier this week a study found that Britain has seen a sharper drop in crime than anywhere in Europe over the past decade. Yesterday, we learnt that reported crime plunged 8 per cent last year alone. There are no comparable boasts of improvement from an NHS whose budget has been pushed to a record high. The headlines are about A&E waiting rooms jam-packed because GPs refuse to work weekends.

The Labour spending experiment has proven that Ronald Reagan was right to compare government to a baby: endless appetite at one end and no responsibility at the other. There is nothing to show for all this feeding, except a big mess. It might be forgivable if the splurge had bought, for example, a world-class transport network or the smartest welfare system in the West. Instead, we ended up with the world’s most expensive poverty. The unreformed benefit system is an example of state spending inflicting actual harm on communities, incentivising family breakdown and paving a road to dependency rather than work.

And yet the Conservatives seem curiously unwilling to break free of the failed logic. When David Cameron says he has “protected health” by ensuring the NHS is more expensive year after year, he is following the false trail set by his predecessor. The idea of “protecting” health and schools because you like health and schools has been described by the former head of the Audit Commission, Steve Bundred, as “completely insane”. When George Osborne inherits a government budget that grew by 60 per cent under Labour, and still feels unable to cut faster than 1 per cent a year, it suggests he still feels himself to be a prisoner of the old logic. Even Barack Obama is making faster progress cutting his deficit.

It is growing ever harder for Ed Balls to portray Mr Osborne as a crazed ideologue. For three years, the shadow chancellor has been making the same charge: that the Conservatives worship at the altar of austerity, and that the cuts are crushing the recovery. Yet Osborne has been borrowing massively – at least £120 billion a year. The Coalition’s deficit reduction programme has been suspended for two years, so it’s hard to accuse him of doing it too quickly. If extra debt was going to stoke a recovery, it would have done so by now. It was perhaps not intentional, but Mr Osborne has tested Mr Balls’s plan to destruction.

Slowly, Mr Balls is starting to look like the crazed ideologue. Spending money is his only solution to every given problem. Privately, both Labour and Tory MPs regard him as David Cameron’s greatest electoral weapon. His claim that more ambitious saving will choke a recovery is contradicted not just by theory but by history: a European Commission analysis of 49 fiscal consolidations in 14 countries found that they were as likely to spur growth as depress it. Just like money and exam results, there is no magic link.

But the association between spending and progress was comprehensively disproved by the last government, and this is a point that the Chancellor ought to make more often. Austerity will not be a phase of his career, but the mission that will define British politics for this decade and perhaps beyond it. In his coming Spending Review, the Chancellor will be asking Britain to settle down to several more years of lower spending, so what he had hoped would be a one-off dose of medicine will become the new norm. It will be time for him to make the moral case for a smaller state.

The adjustment is painful, but cutting government down to size is not just something to be done at the behest of the bond markets. It will leave Britain a better, stronger and more socially cohesive country. We are moving too slowly down the road to fiscal sanity, but this is better than speeding towards the abyss. The alternative that Ed Balls offers – borrowing, spending and not caring if it works – now stands exposed as the most dangerous ideology of all.


The Student Loan Bubble: A Crisis the Government Created

Privately held student loan debt surpassed 1 trillion dollars last November. More money is owed in student loans than in privately held credit card debt. This past year, bank write-offs of student loans are up almost 35% from the previous year. Almost every single market signal indicates a growing student loan bubble is on the verge of popping. Many economists agree the student situation is very similar to the 2008 housing crisis; the student loan industry is still receiving massive subsidies and false incentives by the federal government. In order to fully understand the student loan crisis we must first look at why tuition is skyrocketing, look at cultural influences swaying kids towards college and then examine alternative methods of education that might offer solutions to the problems facing higher education.

Government backed subsidies have been one of the key reasons the cost of tuition has grown faster than inflation every year since 1981. The intention of government backed loans is to lower or control the cost of tuition as well as increase access to college for millions of young Americans. It is important to note that government primarily subsidizes the students not the universities themselves. Government gives students the cheap capital they need to attend high priced colleges. Most educational spending from the federal level goes towards increasing access to low interest loans, instead of trying tackle increasing tuition costs.

Since colleges have no trouble filling seats and getting people enrolled in their university, they have no incentive to cut costs. Until the demand for college decreases, the cost of college has no indication of going down soon. This allows universities to be exorbitantly wasteful in their pending habits for no matter how much they charge, students will continue to take out massive loans to attend their schools.

If it was not for the low interest loans offered by the government, many students would not be able to afford these highly inflated tuition costs from these universities. Looking back to the 2008 housing crisis, when we began to give loans out to people who could not afford them, we saw high rates of foreclosed homes and people not being able to make their mortgage payments. The exact same principle applies with student loans, government is incentivizing people to go to schools they cannot afford by pushing loans to people that have little chance of paying them back.

New reforms in the student loan industry after the passage of Obamacare have credit risks among young adults much more common. Included in the Affordable Healthcare Act was a clause that allowed students to sign off on major loans without a co-sign from a parent or guardian. Without parents cosigning with their children on loans, it is up to the student to make the payments on time and be able to pay off their own student loan debt. This has resulted in massive amounts of extra loans being taken out under the students with increasing cases of non-payment.

Very few people saw the housing bubble coming, but countless economists and pundits are sounding the alarm about the upcoming student loan bubble bursting. Despite the poor governmental policy, there is always an underlying cultural aspect that we must challenge in regards to higher education. There is still a belief in the US that everyone must go to a four year university in order to be successful. This thought process is rooted in the same perverse belief as “everyone must own a home to live the American way of life.”

Make no mistake, the government created the housing bubble, just as it has created the student loan bubble. But we can’t ignore the fact that our culture has been pushing college beyond its limits the past 30 years. If we continue to fuel this idea that college is a mandatory right of passage, the bubble will only continue to get bigger, until it finally pops.

We lived through the perils of 2008. It is never pretty when a bubble bursts. But imagine being back in 2006 and knowing the bubble was coming. It is becoming more accepted that higher education is approaching a crossroads, and if we don’t approach this head on, we will live 2008, all over again.


Australia: Students face weekend detention and community service in crackdown on behavioural problems in Queensland schools

SATURDAY detentions and community service will be handed out to unruly children in the biggest shake-up of school discipline since the banning of the cane.

Education Minister John-Paul Langbroek said the measures were part of his Government's bid to crack down on behavioural problems in Queensland state schools.

A ban on detentions of more than 20 minutes at lunchtime or 30 minutes after school will also be lifted and work is under way to fast-track the exclusion process. It can take principals up to 25 days to exclude a child.

"This is about reducing the number of exclusions by giving principals more tools to nip poor behaviour in the bud before it escalates," Mr Langbroek said of the new measures, which are expected to be in place by January.

"I reckon some are going to get a shock the first time the principal says 'well, you're in for lunch' or 'I expect you to be here on Saturday morning'."

The move is part of the Newman Government's $535 million education reforms and comes after figures released earlier this month showed Queensland schools handed out more than 64,000 suspensions and exclusions last year.

The number of exclusions have jumped more than 50 per cent since 2008, from 804 to 1331 in 2012, the figures showed.

Mr Langbroek said schools would also be encouraged to partner with councils and community groups to enable problem students to undertake community service.

"It gives students a different perspective and maybe helps them to learn a bit more respect for others," he said of the community service interventions.

"The principals can decide exactly what it is they are going to do."

Teachers will be paid for the extra time they may need to spend supervising children handed a Saturday detention but Mr Langbroek said the cost would be covered within the department's existing budget.

"It's not going to be like The Breakfast Club. We don't expect there to be a lot of Saturday detentions happening around the state," he said.

Principals will also be encouraged to establish Discipline Improvement Plans or contracts of student behaviour with parents.

While the government is handing schools more power to discipline their students, Mr Langbroek said they would be audited this year and next to ensure the powers were not being abused. He also expected the number of exclusions to fall.

"We want to give the principals more tools . . . but we also need to make sure they are doing it correctly," he said.

The number of alternative learning centres for students with complex behaviour needs will also be expanded but Mr Langbroek said it was yet to be determined how many extra centres would be rolled out.

The Queensland Teachers' Union has called for more positive learning centres.

Queensland Secondary Principals' Association president Norm Fuller said earlier this month he would welcome "greater flexibility around student detention", but it is unknown if he would support Saturday detentions.

Mr Langbroek said he hoped the state's principals and teachers would embrace the changes.


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