Why can’t the government spend more on Education?

It sounds like a really numpty question, doesn’t it?

Why can’t the UK government put more money into education?

Education isn’t like the NHS, or social services or crime prevention. Education has an end product. A student that comes out of a system able to contribute to society, work in the private (or public) sector, pay taxes and spend earnings. So, what would make a government, with finite resources, fund a two man Olympic bob-sleigh team (for example) rather than increase funding to education? I’m still trying to work it out…and don’t expect any answers here, but this is the thought process I have gone through in an effort to work it out in my own head.

First of all, I need to get my head around what money is. I’d never really thought about it before in any depth, but money is just a promise. A promise that the five pound note in your pocket can be exchanged for goods in the supermarket, a promise that the salary paid into your bank account every month can be transferred to your mortgage lender, your utility company, your child’s piano teacher or Boot’s the Chemist Ltd. (OK, that one might just be me.) It’s the same with credit. You don’t actually see anything tangible, just a promise that goes from the bank, to your account, to the kitchen fitter, to his supplier, to his employees and to Her Majesty’s Revenue and Customs.

So credit and public funding goes, usually via the private sector in the goods and services that we buy, back to the government in the form of taxes. Private sector profits then go into economic growth, investment and capital improvement. Basically, there isn’t anything tangible, apart from that new Railway Station. What I mean is, there aren’t any piles of gold ingots lying in a safe representing the money you get out of the cash machine. It’s just paper (or plastic nowadays).

So, if the above is true it would stand to reason that the funds that the government has access to, are in theory, unlimited. Only, of course they aren’t. Because if the Government increases the money supply, inflation follows and everybody suffers.

If the consumers in a country are keen to save their earnings (erm, I’m not including myself in this), there is a greater ability for the private sector (either domestic or foreign) to buy the government’s debt in the form of their Government Bonds. These are like shares, usually pay a good rate of return and are seen as a secure investment. However there are situations when the investors may not feel quite so secure in purchasing Bonds;

  • Political uncertainty
  • Investors feeling that the government is too stretched and might default on what they owe
  • Increasing inflation which devalues the investment

If a government’s actions or overspending results in any of the above, their ability to finance their debt in the future from Government Bonds will reduce, making it more difficult for the government to borrow as the interest rate increases.

So, while the government doesn’t want to go on a spending spree, they also cannot reduce their spending in order to cut the deficit. Because reducing their spending results in less money going into the economy, leading to lower economic growth, lower investment and ultimately an increase in inflation because business owners have to raise prices to account for the fact that I haven’t got so much money in my pocket and I’m being a little bit more choosy about what I spend it on.

The whole thing seems to go around in circles and is an almost impossible balancing act.

Back into my small, safe corner of the world. If the “value” of my academy trust is £10 million mostly held in its capital assets (school buildings) then it stands to reason that I should be able to borrow against this asset, because if I couldn’t make the repayment installments, I could always realise (sell) a capital asset to pay back the loan. Only, in reality, the capital asset doesn’t belong to me, (although it rather annoyingly sits on my balance sheet) it belongs to the government, who have likely already borrowed against it in order to service their own excess of spending over income.

I’m rather blithely assuming that there isn’t any risk that they are going to sell off my Academy to pay back their debt, they’ll just call it the “National Debt” and push on through. But it does mean that if I, as an Academy, go into deficit, I haven’t got anything to sell to pay it back, my cash flow will eventually go to pot and I’ll be left unable to pay my staff salaries without a bailout (anyone?)

So what do I do if I have made every reasonable, and unreasonable, cut in the provision of education at my Academy? What if I’ve shrunk my curriculum, run my non-front-line staffing (e.g. pastoral, admin, technicians, site and TAs) down to an absolute minimum, looked the other way at the age of the IT and flung a tarpaulin over the roof?

You’ve guessed it. The answer is to follow the government’s lead and look for private investors, and that is you, parents. You will, of course, be aware that your investment in your child’s school won’t give you a return on your money but it will give you an educated offspring, who can reach and maintain independence, find employment, contribute to society and pay their taxes.

Only, parents in the UK have yet to accept this demand on their income, expecting quite reasonably for a state education to be funded by…well…the State. I’m in no doubt that eventually, and as a parent myself I am sorry to say this, we are all going to have to recognise that there needs to be an increase in investment in schools if we are going to keep the whole national circular system moving.

The thing is, if the family of every student in an average sized secondary Academy paid £50 per month to their school, it would increase the budget by £600,000. Updated IT, roof repair, classroom resources and one more TA, here we come. And before you jump down my throat, I know not everyone will be able to afford it, it will always have to be a “voluntary contribution”…but, let’s dream, what a difference it would make!

I did warn you at the beginning. I don’t have answers and I’m thinking that the answers I do have are not palatable. But at least I understand a little more clearly why the government won’t put any more money into Education and what they are hoping we will do about it.

Finally, in answer to my first question – that two man bob-sleigh team promotes sport (and therefore health) among its population, demonstrates a comfortable, healthy and happy nation to foreign investors and encourages private sponsorship and spending. Worth every penny?

Be gentle in your response.

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