Paul Collier: Private v state: here's how to bridge the educational divide

My wife and I have just faced the familiar middle-class choice of whether to opt for state or private education. Usually this poses an ethical dilemma, but in this instance circumstances were liberating.

As guardians for young children who had suffered acute disadvantage and then been mauled by social services, we were in no doubt that they needed the best. Nor was there any doubt as to where the best was to be found: in the private sector the best was very good indeed. But ethical liberation also freed me to think dispassionately about the economic incentives which have structured our choice. Once I did so I realised that they were remarkably dysfunctional. Yet the solution that is technically obvious is politically so toxic that it has never been on the agenda. As British education policy goes into one of its periodic meltdowns, perhaps the unthinkable might have its time.

Why is the quality of private education so much better than state education? Given the structure of financing it cannot help but be. Parents are faced with a choice between a moderate quality of education which is entirely financed out of taxation, and private education which is financed entirely out of fees. Suppose for the moment that the quality of education is precisely related to its cost. A private school which offered only slightly better quality than a state school would attract no customers: if the basic model of a car was available for free, nobody would pay full price for the next model up the range. A market in purchased cars would still exist, but it would be confined to the luxury models whose rich purchasers were willing to forego the free basic model. So it is with our schools: this is why the increase in state spending on schools over the past few years has been matched by a similarly large increase in the fees charged by private schools. The choice with which the government faces parents guarantees educational apartheid.

Most likely, it also inadvertently results in a reduction in the overall quality of education. The absence of a middle range of quality forces people to choose either lower or higher quality than they want. All but a small minority choose lower quality because they cannot afford luxury quality. Most people probably want to spend something on the education of their children. At present the only ways they can do this are by purchasing housing in good catchment areas, and by buying "educational" toys. Both are highly inefficient ways of spending money on education compared with putting the money into schools.

The refusal to enable parents to supplement state provision of schooling is an ideological compromise between the statist left and the libertarian left. Private schooling cannot be abolished: after all, many of the left's own leaders have sent their children to private schools. The right is content with the compromise: educational apartheid does not look so bad as long as you are on the right side of it.

In the name of equity the majority of families are forced to accept the quality of education that only those parents least committed to their children would choose. Of course, the result is not equity. Instead of a gentle continuum of educational quality and cost there is a gulf between the state and private sector.

The refusal to allow supplementary funding for the education of the over-fives is in stark contrast to the government's approach to education for the under-fives. Here, three distinct subsidies provide parents with money with which they can purchase education, supplementing it with their own money as they choose. In conjunction they are complex yet irrational.

For example, entitlement to vouchers is not even related to the most elementary need factor: how many under-fives are in the household. Further, for the under-fives all provision is private. Yet for this age group private provision makes little sense. It ends up being needlessly small-scale, expensive and rationed. Education for the under-fives is ideally suited for public provision: what is needed is universal provision of a relatively standard and simple quality. Nor do we have to look far afield to see such a public system. While our son was under-five we lived in France and benefited from the superb Ecoles Maternels.

Britain has its education system upside-down. Where the state should be providing universal, free schooling there is subsidised market provision. But where the state is providing universal, free schooling of a quality such that those with sufficient money choose to opt out, there should be subsidised market provision. If we did that it would raise the quality of the average while narrowing differences: but, of course, it isn't even on the political menu.

Paul Collier is Professor of Economics at Oxford University