Saturday, September 23, 2006


Talk to Cornerstones Conference, Sydney
September 23, 2006

By rights, what I should be giving you now is a learned and crystal clear exposition of federal-state funding of school education, about how crazy, unfair and irrational the Howard Government’s formula for funding non-government schools is and about how, when you look at it properly, what Howard and his cronies claim to be economic rationalism is actually quite irrational, bad for the economy in the longer run and, certainly, bad for the people in the economy.

This is what my friend and adviser, Lyndsay Connors, hoped I’d do but, unfortunately, I didn’t leave myself enough time to get on top of all the technicalities, so what I’m actually going to do is much easier - and possibly more interesting: talk about the politics of school funding and then say something more personal about my love/hate relationship with teachers and the Teachers Federation.

It’s true that the formula the Howard Government has adopted for determining its grants to non-government schools - independent schools, and Catholic systemic schools, but I’ll call them private schools for short - is quite appalling. For one thing, it sweeps away need as the basic criterion for assistance, making large payments to quite prosperous schools and doing so in a quite eccentric way so that certain schools, not necessarily the most prosperous, get more than other elite schools because of an accident of postcodes. One particular private school, only an associated school not a GPS school, with not a fraction of the social status of Cranbrook or the opulence of Kings, won the jackpot, getting an extra $25 million: Trinity Grammar. More of Trinity anon. For another thing, the formula is corrupt in that it’s self-multiplying. The more students drift to private schools, the more the average cost-per-student rises in the public schools because of the loss of scale economies, and the more the public per-student cost increases the more the per-student grant to private schools increases because the latter is indexed to the former. For a third thing, the formula ignores the competitive disadvantage the public schools face in being left with the poorest and least-able students, having to take the kids with behaviour problems rejected by the privates and having to stay open without enough students to remain viable if they’re the only school left in a district. For a fourth thing, the Howard Government doesn’t bother enforcing the funding formula whenever it would result in a reduction in a private school’s grant.

So the formula is completely rigged in favour of independent schools. Now, people should be studying these defects and shouting them from the rooftops to bring them to the public’s attention. But do you think it makes much difference politically? Politically, it’s beside the point. Do you think the defects are there by accident? Do you think the Howard Government can’t know about them or it would have fixed them? No, the formula is blatantly biased towards private schools because the Howard Government is blatantly biased towards private schools.

So, politically, what are the Liberals on about? It might look like they’re on about economic rationalism, but they’re not. They’re on about traditional Liberal ideology. They believe in private schools and want to see them expand and prosper. They may believe this will attract them a few extra votes at the margin - if so, it would only be in the swinging ‘aspirational’ seats in the western suburbs - but for the most part this policy is for the party heartland; for the party faithful who already send their kids to private schools and would see a greater subsidy to their school as a boon. If the increased subsidy attracts more kids to the private system, fine, but Howard would do it anyway because he shares the Liberals’ traditional support for private health insurance and private schools. Was the funding formula deliberately selected because it was so biased in favour of independent schools? Sure. Will Howard ever reform it? Why?

A similar analysis applies to Howard’s line that it’s vitally important parents be able to choose between public and private. Now, it’s probably important that somebody somewhere subjects this choice argument to critical scrutiny. The first point is that there’s choice and there’s choice. What does being free to choose mean? If it means that, in a capitalist economy, where for almost everything else, the more money you have the more you can buy and the better quality you can buy - where one dollar equals one vote - you simply can’t sustain a situation where people who can afford to buy their way out of public provision are actually prohibited from doing so. You can’t stop rich people sending their kids to expensive schools or being treated in expensive private hospitals. In that sense, yes, there should be ‘choice’ and we’ve always had it. But that choice is just the standard choice that exists in all markets: you can buy what you consider to better than standard issue provided you can afford the full cost. That is, this argument contains no implication that the private receives any public subsidy, just as private health insurance carried no public subsidy in the original concept of Medicare.

But that’s not what Howard means when he says people should be free to choose. He means that the private - whether it’s private schools or private insurance - must be generously subsidised so people are free to choose. It’s the same when he talks about mothers of young children being free to choose whether to have a job or not. What gives them the freedom is the extra family benefit paid to stay-at-home mums. What these three examples - private schools, private hospital insurance and stay-at-home mums - have in common is that they’re all things the Liberal middle-income heartland is already doing or wishes it could afford to do. So we’re talking straight taxpayer subsidy to the middle. All the fancy talk of choice is just a cover for Howard’s addiction to middle-class welfare.

How does Labor fit into this story of political motivations? I think federal Labor does have a firmer commitment to egalitarianism and equality of opportunity, so it could be relied upon in government to change the funding formula to something far less generous and more needs based, and that’s true pretty much regardless of its specific promises before the election. It would probably do this in the traditional way - that is, a hastily contrived budget blowout crisis immediately after the election, which is used as a cover while policies that favour the Liberal heartland are cleaned out and replaced with policies that favour the Labor heartland.

But I must add two qualifications. Labor, being the party that really got into ‘state aid’ under Gough, will be ‘working both sides of the street’ - seeking the public-school vote but also the private-school vote. That’s particularly true, of course, with special deals for the Catholic systemic schools. The idea of attracting the Catholic vote, of being photographed beside a beaming archbishop, is so enticing to politicians of both sides at both federal and state level that it will be a permanent feature of school funding for the duration. This is one reason it isn’t possible to try to simplify the terrible matrix of both federal and state levels funding both public and private sectors by having the states simply leave private school funding to the feds and focus exclusively on the public system. No state pollie would ever walk away from such a chance to buy the Catholic vote.

The second qualification is that the greater the drift from public to private, the more Labor will focus on winning and retaining the private school vote. It’s a straight numbers game. The greater the drift, the greater the political momentum it develops, making it harder to reverse.

If you enjoy feeling persecuted - and I suspect some of you do - you’d do well to note the message coming out of all the budgetary future-gazing exercises we’re seeing. Peter Costello kicked it off with the Intergenerational Report of 2002 (a revised version of which will be published with next year’s federal budget), then the Productivity Commission had a go and pretty much all the state governments, with NSW Treasury’s report on Long-term Fiscal Pressures as part of this year’s state budget. All these exercises involve projecting government spending and revenue out for the next 40 years to get an idea of how they’re likely to be affected by the ageing of the population. They all come to the same conclusion: in this country, ageing’s effect on the budget won’t be too terrible. Even so, all these reports end up pointing to the likelihood of significant and increasing pressure on budgets in coming years. Why? Because of the inordinate pressure on governments - state and federal - to increase spending on health care. Advances in medical technology are always expensive, but the public wants access immediately.

Why do federal and state treasuries keep producing reports that say this? Because they want to use them as a stick to keep the spending ministers in line. But there doesn’t seem much doubt that health care spending will come to dominate government budgets as never before. In NSW, for instance, it’s expected to go from second biggest item to first, from 26 pc of total recurrent spending to 37 pc. Why am I telling you this? Because as health spending expands, the main thing that’s supposed to contract to accommodate it is spending on school education. Student numbers will decline which ‘presents some opportunities to redirect spending to more pressing needs’. That will happen only if declining enrolments lead to fewer classes and the closing of whole schools. But education’s share of total state recurrent spending is projected to decline from 28 pc to 20 pc. You have been warned.

But here’s where the persecution complex comes in. What better way to ensure that education spending’s share of total spending does decline than to allow the drift from public to private to roll on forever? Now, Lyndsay Connors’ Public Education Council has argued persuasively that the individual student moving from public to private saves the public system very little - because most school costs are fixed costs rather than variable costs or, if you like, because the loss of an individual involves diseconomies of scale. But significant savings do come when the number of individuals lost reaches the point where whole classes or schools are lost.

Diabolical, eh? Just continue on our present path and the problem of education funding drifts away. Let all those silly parents, desperate for the social status of having kids at independent schools, pay extra for their kids’ education. Privatise government spending. Of course, the extent to which the drift to private schooling saves you money is determined by the extent to which you’ve ramped the public subsidy to private schools. And I’m not at all sure the Howard Government will resist the temptation to keep raising the subsidy.

That’s enough politics. Now to something more personal: my love/hate relationship with teachers and the Teachers Federation. In a nutshell, I love teachers and hate the federation. I have to be careful what I say in public about teaching for a range of reasons. The first is that I come from the teaching class. My sister’s a teacher, most of my friends at uni became teachers and a lot of my friends at present are teachers. So, if I had known my place, I would have been a teacher myself. Actually, I’m a frustrated teacher. If you examine my columns you find they’re much more pedagogical than most journalists’ columns. Sometimes I think I’m the most overpaid teacher in the country. Another reason I have to be careful what I say about teachers is that economics teachers are the local organisers of my fan club - and I know many of them.

Lately, however, I’ve acquired a special reason for watching what I say about teachers: my son, Sandy, has just become one (and, of course, a member of the federation). He’s on his first year out as a maths teacher - with a full load - at a high school in Albury, which he’s loving. I want to tell you about my son, mainly because I’m so proud of him, but also because I think it’s instructive in this context. Where did he acquire his ambition to be a teacher? Well, that’s his guilty secret: he acquired it at the unspeakably evil Trinity Grammar. Why did I, the product of two selective schools (Fort Street and Newcastle Boys) out of three high schools and five primary schools in all, not a believer in private schools, send my son to Trinity? I’ll tell you.

Why do I have a love/hate relationship with the federation? Because it combines the best and worst of trade unionism. Its best is its unwavering commitment to liberal values: its preoccupation with equity concerns, equality of opportunity, its belief in co-operation and suspicion of competition. When Howard said people want to send their kids to private schools because they wanted them to be given ‘values’ he implied that public schools lack values. Nothing could be further from the truth, and I’m sure Howard knows it. His problem is that he so dislikes the federation’s values. In particular, he wants everything done to foster competition between students. Liberals, economists and business people are great believers in the virtue of competition in reducing inefficiency and getting everyone to do their best. They think the competitive spirit is a fragile flower, perpetually at risk of dying out unless constantly ‘incentivated’. I used to believe that but, since I’ve read more evolutionary psychology, I’ve come to the view that competitiveness is hard-wired in our brains, particularly in males, and that it needs to be controlled and civilised rather than ramped up. So I’ve come to sympathise with the federation’s view that children should be protected from full-on competition and rather have their natural curiosity and love of learning fostered.

John Howard is a life-long Liberal warrior against the class enemy, the unions. You can see that in his enmity towards industry super funds and in WorkChoices, his ultimate attempt to stamp out unions forever. He would look at the public school system, see it as amazingly union-dominated (as I do), and be repulsed (as I’m not). But that brings me to the worst of the federation. At its worst it’s too keen to protect failed teachers, who should be gently shown the door, too into levelling down, where the best are required to subsidise the worst, too into rewarding seniority rather than merit, too resistant to being publicly accountable (always wanting to suppress information on the spurious argument that the media and parents are too ignorant to interpret it correctly), and too reluctant to share power with parents at the local school level. The federation is a reflection of teachers’ remarkable persecution complex and inferiority complex. Talk about defensive.

The bias in the Howard Government’s funding of private schools, and the state governments’ neglect of public school infrastructure, have made capital works the main battleground of the competition between the public and private sectors for the hearts and minds of parents. The generous funding of independent schools has had zero impact on the rapacity with which they raise their fees. They’re charging what the market will bear, and the market will bear big fee increases because education is both a ‘merit good’ and a ‘positional good’. This means they have huge funds to pour into lavish campus improvements. Maybe even the Catholic systemics have more funds for maintenance and capital works.

I’m sure many of you - with your shitty toilet blocks and rundown buildings - feel the injustice of this keenly. You’re terribly conscious of the competitive disadvantage at which it places the public system. It’s all true. But I’m here to say: hey, let’s not be too materialistic about this. Anyone who believes the thing that makes a good school is the quality of its sporting facilities or its music and drama wing is a fool. Anyone with any sense - any parent with any sense - knows instinctively what the research tells us: that what makes or breaks a school is the quality of its teachers and its teaching, plus the leadership skills of its principals.

So while you’re feeling your keen sense of injustice at the way the game has been stacked against public schools, while you’re despairing for the future of egalitarianism and equality of opportunity (as I am), while you’re waiting eternally for the political pendulum to change direction, you need to be out there competing, doing all in your power to halt the drift to private by raising the quality of public schools. That’s about raising the quality of teachers and teaching, doing more to encourage and reward excellence and responsibility, about putting the needs of students ahead of the needs of teachers (as I know many, many teachers do) and being more co-operative with well-motivated principals.