How big does the pupil premium need to be?

In 1996 a group of Oxford academics produced a book called Options for Britain. It was intended as a thought piece for an incoming (Labour) government. 12 years on, and with less clarity as to the makeup of the next government, we are working on a new volume along the same lines. To that end I have spent the last three days in Oxford at a policy conference.

The concept of pupil premium is was widely supported in the education session. I asked the obvious question: How large must the pupil premium be for the child of Somalian immigrants in Lambeth, compared with a child who is white, living in an affluent suburban area, and with well-educated parents, if we want both to have an equal chance of doing well at school?

No one at the conference knew: because we have never had a pupil premium in Britain we cannot know the answer. But there is some evidence from the United States, contained in Woessmann and Peterson Schools and the Equal Opportunity Policy.

In this book is the authors ask a different but related question: if we hold educational spending for whites constant, how much do we need to spend on the education of blacks for them to have equal educational outcomes? It turns out that the number is very large: spending on black pupils needs to be nine times as high as that on whites.

What does this mean for Liberal Democrats? If we imagine that one in three children received some element of the pupil premium, ranging evenly from almost nothing to nine times the baseline level of funding, then the policy would more than double expenditure on education, and would cost approximately £90 billion.

Of course the final figure could be less. Perhaps the correct figure for Britain will not prove to be nine times, perhaps it will only prove to be four times. Perhaps it will not need to go to one in three students, perhaps only to one in five. But even then the pupil premium would require £24 billion. Whatever the final figure, and we cannot find that out until we try it, it is clear that the £2.5 billion the party says that it will allocate to a pupil premium should be considered a down payment on a work in progress, not a policy completed.

This is not to criticise the party: it has done well to find £2.5 billion has a down payment. Nor should we underestimate the amount of money that a government can find over time. In the first 10 years of the Labour government, government spending rose by more than £140 billion in real terms. A government committed to better educating those who currently do badly in schools could certainly find £24 billion in normal economic circumstances over the duration of one parliament, provided that they made it an absolute priority.

It is worth asking whether such a policy would pass cost benefit analysis. The evidence from America, sadly, is no. In narrow economic terms, taking into account only the additional wages earned, and the greater cost of education, is that spending nine times as much on the education of blacks as whites would yield an investment return of just 1.2%. We could no doubt had a little for reductions in crime obesity and other social ills associated with poor education and resulting poverty. But it would be naive to say that such a policy will pay for itself over the long term.

Of course, there is more to life and economic and investment returns. Liberal Democrats believe that no one should be enslaved by poverty, ignorance or conformity. It says so on our party membership cards. But I think we also believe, well, most of us at least, that people should not be enslaved by the accident of their birth. To that end I think the pupil premium is a right and proper policy for the Liberal Democrats, even if the return is lower than the cost of capital. The challenge for the party is to find a proper sum of money to fund this policy: there is no doubt that we can transform the lives of millions of young people in Britain. But it will take real money to achieve that goal.

Tim Leunig is a lecturer at the London School of Economics, and writes a regular column on economics for Liberal Democrat Voice.

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This entry was posted in Op-eds.


  • Jon: For clarity, although diminishing marginal returns are common in every day life, the article has no evidence that they apply here. It is possible that the improvement in educational outcomes for kids from backgrounds associated with low educational outcomes are proportional to the money you spend on them.

  • Jo & Tim,

    Could you please explain more of what a student premium is and how that money will be spent? Also, in the countries where the premium has been introduced, what have the results been? Is this going to be value for money?


  • Paul Griffiths 2nd Mar '08 - 10:51am

    I think it is a mistake to characterise educational differences between students as being that between “clever” and “stupid”, “intelligent” and “unintelligent”, or “academic” and “good with their hands”. I call this the Morlock/Eloi syndrome (I’m sure you get the source.)

    We have, or used to have, a perfectly good word for this difference that is both more inclusive and less patronising: “docility” ( We don’t use the word with quite its original meaning any more, but it simply means that students will differ in their readiness and willingness to learn and be taught. And there can be many reasons for this, including – yes – innate intelligence, but also all the societal factors that posters have already mentioned. I also believe that docility can vary for different subjects, for different teaching methods, and over time. (With respect to the latter, I mean that people often seem to become more docile with age; this was why attempting to put people in either the Morlock or Eloi box at age 11 was so profoundly wrong.)

    If I understand it correctly, the supposition behind the pupil premium is that less docile students are costlier to educate. I think that this is likely to be true in the majority of cases. Although I want to make three observations.

    First, if this is true then I’m puzzled by the argument we sometimes hear, to the effect that the pupil premium will incentivise schools to admit more less-docile pupils, because of the extra funding they bring. The extra funding is supposed to be required to teach such pupils, so how is the school supposed to gain a net benefit? (Incidentally, I think one of the better arguments in favour of comprehensive schools – and non-selective education generally – is that the per-pupil funding of the docile students cross-subsidises the less-docile students.)

    Second, it’s arguable that gifted (hyper-docile, if you like) students are also more costly to teach, and therefore also deserve a premium. Now, I confess I’m sceptical about how many genuinely gifted students there are; I suspect many are merely precocious. But the argument still applies.

    Finally, as other posters have hinted, because docility can have so many, overlapping causes, we need to be careful to ensure that extra funding is really the right answer in each case. As I mentioned above, a change of teaching methods may be enough.

  • Paul Griffiths 2nd Mar '08 - 1:17pm

    Re competition: I hope we can all agree that both diversity and choice are important in education, not least because students differ in docility. However, (a) I’m not yet 100% convinced that competition is a necessary condition for either, and (b) even if it is, I think that competition within a school is likely to be more cost-effective than competition between schools. Unfortunately, a scheme for intra-school competition requires more thought and a much longer post than I have time for now!

  • Peter Bancroft 2nd Mar '08 - 6:41pm

    An interesting piece.

    Question for you though, Tim. Are the calculations based on increased monetary impact only, or also considering potential benefits from good schools being more attracted to pupils who receive the premium?

    Whilst it’s a bit unclear with our non-selection policy whether this would even be possible, a big driver of change from the original (pre-“free schools”) proposal was the increased attractiveness of socially deprived children to previously solid middle class schools.

    Your cost-benefit analysis suggests that overall it wouldn’t make sense for schools to do this (i.e. the increased cash wouldn’t cover the increased expense), but in practice many schools might have specific uses for increased funding and an ability to deal with socially deprived children at a lower than average marginal cost (e.g. already existing specialist services, currently under-utilised).

  • Dear all,

    Some clarifications in answer to questions:
    1) A pupil premium gives more money to schools if the pupil concerns meets certain criteria. An obvious one would be to pay £x more to the school than the usual allocation for each “free school meals” kid. This should have two effects. First, it makes these kids more attractive to schools, so that they are less likely to try to cherry-pick easy-to-teach kids from supportive backgrounds. This means that places in “good schools” will be spread around more evenly. Second, it gives the school more money to use to teach these kids.
    2) Whilst it would be possible for the state to prescribe what the school could do with the money, I assume that the LibDems would leave it up to the School. If we were talking about doubling, trebling, or multiplying funding by an even higher multiple, then realistically much of the money would be spent on staff. I assume that this would include improving the quantity of staff (smaller class sizes, or much great use of small group or individual teaching), and the quality of staff (these schools would be able to offer higher salary rates, thus attracting better staff)
    3) We have a sort of pupil premium in the UK already, in that shire counties (which have fewest kids from low attainment backgrounds) have the lowest levels of funding. In addition, a handful of kids in care are sent to private boarding schools (although some of the costs are offset by reduced costs of care home places). It is more explicit in the Netherlands, where I understand the ratio is 3:1 for the kid who gets the most, to the kid who gets the least. I am told that it is effective, but I am not sure what proportion of the educational gap is closed. I understand that CentreForum are thinking of doing some work in this area, and I think it would be brilliant if they did.
    4) The cost-benefit-analysis is for the govt as a whole. It simply looks at whether the costs are covered by the increases in wages later in life. It is not a CBA for the school. At (say) 3:1 funding levels I think that there would be real interest in taking in these kids at school level.
    5) At the moment encouraging kids from poor backgrounds to apply to Oxford and LSE is unlikely to be very effective, as very few kids from such backgrounds get the grades to get in, and succeed on arrival. Sad but true.
    I hope that this is useful: if people have any other points that they want answering, ask away, either via the list or to [email protected]

  • Simon: You are right that nothing in the pupil premium would stop the middle classes “clumping together” – not least because middle class housing tends to be clumped together. As such kids would still largely be educated with other kids of similar social backgrounds. Unless we are prepared to bus kids from Sunderland to Winchester, and vice versa, that will always be the case.

    But it would mean that schools no longer had a “league table” rationale for cherry picking middle class kids.

    Under the pupil premium kids from these backgrounds would (finally!) get the grades to end up as my students in decent numbers. I hope that they then would.

    But today the reason so many people at Oxbridge/LSE etc are from private schools (or selective state schools) is that so many of the students getting 3As+ come from those schools. This is one of those sad but true facts. Of course, at the margin, we want more of those who come from non-trad backgrounds and get high grades to go to top univs, but the big reason that there are so few people from such backgrounds at these univs is not lack of ambition, or discrimination, it is lack of grades. That is why a pupil premium is so important.

  • Small point – Wolverhampton Grammar School is a fee-charging independent school.

  • Grammar Police 3rd Mar '08 - 11:30am

    There’s also the case of preparation for Oxbridge interviews – from my experience, and anecdotally, most state schools don’t do preparation for interviews like many independent and public schools do . . .

  • Grammar Police 3rd Mar '08 - 2:43pm

    I was saved by the fact that we all had two separate interviews, I was then called for a third one – and then I was interviewed by a different college. The three interviews I’d just had made the last one much easier. There was no preparation by my school.

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