Funding cuts could cost UK #163;4.5 trillion in future growth, top economists warn

12th February 2010 at 00:00
Education spending is investment in tomorrow's workforce, OECD tells DCSF officials

Cutting education spending because of today's downturn could cause the economy to lose out on trillions of pounds in the long term, government officials were warned this week.

Instead, by investing in schools and following the example of countries like Finland, which achieve good outcomes across all social classes, the Government could spark UK growth equivalent to three times the size of today's economy, research shows.

The study, by the Organisation for Economic Co-operation and Development (OECD), was presented to an audience of academics and officials from the Department for Children, Schools and Families on Tuesday. The report says: "Relatively small improvements in the skills of a nation's labour force can have very large impacts on future well-being."

It argues that the benefits of education spending will "far outstrip the value of the short-run business-cycle management".

"This is not to say that efforts should not be directed at issues of economic recession, but it is to say that the long-run issues should not be neglected," the report, written by economists from Stanford and Munich universities, says.

It follows warnings from Schools Secretary Ed Balls that schools will face "tougher budgets" and a refusal by the Conservatives to ring-fence education spending in their plans to cut the budget deficit.

The OECD represents the world's leading industrialised countries. Its research used economic modelling to measure the impact that an improvement in a population's cognitive skills would have on a country's economic growth.

The study concludes that bringing the UK up to the level of Finland - the best-performing education system among the OECD nations - over the next two decades would create growth of around #163;4.5 trillion by 2090.

John Bangs, head of education at teaching union the NUT, said: "This is important for the forthcoming election because it shows that the economic consequences of parties' continuing commitment to education have not been thought through.

"Countries that are distracted by economic circumstances are likely to take their eye off the ball when it comes to education and that could cost them trillions in the long run."

The study accepts there is "uncertainty" in making such long-term projections and that improving schools and educational performance through investment is "a difficult task".

"Countries that have attempted reforms of schools have often found that the results in terms of student achievement are relatively modest," it acknowledges.

But it holds up the examples of "high equity" countries like Finland, Canada, Japan and South Korea that have shown that "doing better is possible".

Previous OECD education studies have shown the UK as a relatively low-equity country in terms of education outcomes.

The lates report concludes: "There is one message from these calculations: past experiences suggest that there are enormous economic gains to be had by OECD countries that can improve the cognitive skills of their populations."


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