Poor pupils could make you rich
It is the question politicians have had to wrestle with ever since they began to introduce market-style reforms into the education system. Allowing schools with the best reputations to benefit from their popularity among parents enables them to thrive, with greater pupil numbers attracting higher levels of funding.
But what happens to the pupils and schools that get left behind, deserted by the middle classes and locked into a spiral of decline?
Education action zones, the Fresh Start scheme and Excellence in Cities have all been employed by the Government to try to tackle the problem. None has been an unqualified success.
The jury is still out on its latest attempt, academies. But many fear that even if they do succeed and bring the middle classes flocking to former sink schools they will only transfer challenging pupils to their neighbours.
Now there is a swell in support for a much more dramatic but theoretically very simple solution: attach extra funding to the most disadvantaged and under-achieving pupils and let the market do the rest.
The idea is that schools with the highest concentrations of the toughest pupils will soon find themselves with swollen budgets, allowing them to pay for more staff and better facilities to raise standards and pull themselves out of decline. Meanwhile, elite state schools with middle-class intakes would find themselves at the losing end of the funding regime and disadvantaged pupils would be a much more attractive proposition.
Details vary but the basic principle has just become Liberal Democrat policy and influential Labour and Conservative figures also back the idea.
It has been around for a while. Professor Julian Le Grand of the London School of Economics suggested what he describes as the "positively discriminating voucher" in 1989.
He still believes it is relevant. In a seminar last month the LSE social policy professor defended the theory of school choice, describing it as "the least worst way" to drive up standards, by ensuring they were responsive to the demands of parents.
But he admitted there was a downside. "Long queues of pupils will build up at the most popular schools and the schools will choose the pupils rather than the pupils choosing the schools," he said.
His solution is to give schools a financial incentive to admit pupils from poorer areas. As Tony Blair's personal adviser on choice in the public services, and latterly health, between 2003-05, Professor Le Grand was perfectly placed to persuade the Government to adopt it.
He told The TES he had discussed the theory with Andrew Adonis, the schools minister, who was then Mr Blair's education adviser. "I don't know why it hasn't been taken up," Professor Le Grand admitted. "It seems like such an obvious idea."
But there are signs that other New Labour figures have paid it more attention. In April it was reported that Alan Milburn, the former health secretary, was planning to call for Labour to introduce a form of voucher for poor children at sink schools.
Of course, the Government does already take account of deprivation, with those in disadvantaged areas supposed to receive more money. But, as Professor Le Grand points out, this is calculated at school rather than individual pupil level.
And, as the Government itself has admitted, the system has major flaws - mainly because some councils do not pass the extra funds on to schools.
Central government divides deprivation funding between local authorities according to their overall levels of disadvantage.
In December a joint Department for Education and Skills Treasury review of school deprivation funding reported problems when the money reached local authorities. They have considerable discretion over how they pass it on and there was a tendency to give less weight to social need than other factors.
"Local authorities and schools forums sometimes have little understanding of the national system of deprivation funding, and of the intended purpose of this funding at a local level," the review reported.
"Some authorities are unaware that they receive funding specifically to meet the costs of deprivation."
The result is huge variations in funding depending on a school's location.
The review found that differences in per-pupil funding of up to pound;1,200 between secondaries with the same proportions of pupils eligible for free school meals.
Ministers have responded by instructing all local councils to review how they fund deprivation in schools, with the threat of intervention if they do not get it right.
The Liberal Democrats are advocating a "pupil premium" as a more radical solution.
The basic idea is the same as Professor Le Grand's, as Sarah Teather, the party's education spokeswoman explained. She believes funding can be targeted at individual pupils rather than schools, through local authorities providing the correct data is available.
But will the extra money really encourage schools to admit these pupils? Professor Anne West from the LSE points out that pupils with statements of special needs already come with extra funding attached, yet her research has found that comprehensives that can control their own admissions still admit fewer of them.
"So my argument is that you would probably need to pay on an awful lot of money to encourage schools to take on pupils who were difficult," she said.
That presents politicians with a very tricky choice. They can either find the extra money through tax rises or spending cuts elsewhere. Otherwise they are faced with having to redistribute existing school funding with the inevitable consequence that the electorally important middle classes will lose out.
The Liberal Democrats seem prepared to bite that bullet. "Middle-class children with fewer problems would have less money going to their school, we recognise that could be what we are saying," said a party official.
What is perhaps more surprising is that some Conservatives are keen to land themselves with the same dilemma. Rob Wilson MP, is lobbying hard for his party to adopt a policy that would give pupils on free meals 30 per cent extra funding to make them "more attractive to the better schools".
He is not alone. Michael Gove, another of the party's 2005 intake and a well known confidant of David Cameron, the Conservative leader, argued for a similar policy in October, before he was made shadow housing minister.
He took his inspiration from James O'Shaughnessy, head of research at Policy Exchange, the think-tank which is said to be closest to Mr Cameron's thinking.
Mr O'Shaughnessy uses the same principle as Professor Le Grand but applies it in a more focused way to avoid what he describes as the "dead weight" of providing extra money for disadvantaged pupils already attending good schools. Instead his "advantage premium" only applies to pupils attending schools that have been judged by Ofsted to be failing for two continuous years.
The premium effectively initially doubles their funding with an extra Pounds 6,000 a year per secondary pupil or pound;4,000 per pupil, tapering off to zero over four academic years.
But it only comes into play if they move to another school or the existing failing school acquires new management. So there is no perverse incentive for heads to encourage failure to attract more funding.
So, influential Tory thinkers are coming to a similar conclusion as the likes of Tim Brighouse, the Government's progressive chief London schools adviser, who in 2004 also proposed a financial incentive for schools to take on poorer performing students.
There are differences: notably that both Mr Wilson and Mr O'Shaughnessy propose that the extra funding for disadvantaged pupils could be spent in independent schools. But the general idea of giving them the financial leg-up they need to participate in the state schools market is gaining support from all directions.
So what do the heads, who the extra funding is supposed to attract, make of it? John Dunford, general secretary of the Association of School and College Leaders, is broadly supportive. "It is a significant factor that 50 per cent of deprived pupils do not live in deprived areas and the schools that educate them are missing out on most, sometimes all, of the funding streams supposed to helping them," he said.
"If the deprivation funding was targeted at individual pupils then these schools would be able to make better provision for them."
But the one thing he is certain about is that funding needs to be targeted more accurately. The Government cannot, as he argued earlier this year, continue to spray funds around like "Dick Cheney on a quail shoot".