The OECD, in its economic survey of the United Kingdom, says that schools cannot fully respond to the dynamics of a true market: “The popular schools which are supposed to expand their enrolments in response to parental demand often do not want to do so, and are able to refuse when they are ‘full’. The unpopular schools which are supposed to close to release resources may be allowed to continue by public authorities to avoid political conflict.

“Some small schools facing closure by their LEA have been able to avert the threat by opting for grant-maintained status. Transport costs and community ties also limit competition.”

The report says that greater reliance on market forces in schools and training may increase inequality either by aggravating existing inequalities or by creating new ones.

It does, however, see some improvement, particularly in increased staying-on rates. In 1983-84, 47.8 per cent stayed on for at least one year after compulsory education, rising to 72.5 per cent in 1993-94. Also, the long-standing weakness in vocational training appears to have been addressed by the introduction of GNVQs and the modern apprenticeship scheme, although the OECD warns that there needs to be greater uniformity in these qualifications for them to be acceptable to employers.

In the past 10 years, the share of employees receiving training in the previous month rose from 8 to 14 per cent: “In contrast to education, however, the entire increase in training occurred during the 1980s. Economic recession held training activity below its 1990 peak until the end of 1993, albeit less severely than in the previous downturn.”

Underfunding of the system has had profound effects, says the report, on the quality of libraries, classroom equipment and particularly in the more costly types of vocational and scientific education. It questions to what extent the education system can increase productivity or make savings to compensate for cuts in spending - that is exactly how the Government decided this year’s teachers’ pay award would be funded.

“In education, as enrolments have risen strongly it is the quality rather than the quantity of output that bears the brunt.”

The OECD notes the paradox of the Government’s attempt to decentralise the system by introducing local management in schools and grant-maintained status, yet at the same time increasing centralisation by having a national curriculum and national tests.

“The adoption of the curriculum implies that parental power and inter-school competition are not considered capable of achieving such goals on their own,” it says.

The report concludes that despite recent improvements, more needs to be done to ensure that the United Kingdom develops its human capital at least as well as its main competitors, particularly for 16 to 19 year-olds: “However, progress in these areas cannot be achieved by legislative measures alone. Families will have to raise the value they place on education and training, and businesses need to view training as an investment rather than as a cost. ”