How lotteries could make school admissions a whole lot fairer

The standard of education that your child receives still depends on how good you are at getting around the system

The Labour government has done much to improve the justice of our education system. Its willingness to court unpopularity by intervening with failing schools is impressive, and the gradual increase of resources to the early years, especially of those most in need, has done much good. We all have our own complaints, but the overall balance sheet is positive.

The Labour government has done much to improve the justice of our education system. Its willingness to court unpopularity by intervening with failing schools is impressive, and the gradual increase of resources to the early years, especially of those most in need, has done much good. We all have our own complaints, but the overall balance sheet is positive.

In its second term, though, Labour must deal with the central injustice in the school system: the "equality deficit". The fundamental problem is that the market-oriented reforms of the Conservative years ensure that children get better or worse schools depending on how effectively their parents can negotiate the system. To some extent this is inevitable in any system that allows parental choice. But three particular features of the Conservative reforms, which Labour has left in place, make this worse than it need be.

The first is that there is a divide between successful schools that teach already advantaged pupils, and unpopular schools which, with fewer effective resources, teach less-advantaged children.

Two problems interact to exacerbate the division. On the demand side, the parents of advantaged children can choose more effectively on their behalf, and are less affected by distance. Parents must normally pay the cost of transport to school if there is another within a specified range, making the opportunity costs of choosing the "best" school greater for less wealthy than for wealthier parents.

On the supply side, schools have strong incentives to attract brighter or better-behaved pupils, who are easier and less expensive to teach. The funding formula gives oversubscribed schools clear incentives to choose advantaged children, and all schools an incentive to market themselves to the parents of such children. Less popular schools take children who are harder to educate, without more funds.

The funding formula does not account for high fixed operating costs, so popular schools (which can choose more advantaged pupils) can devote more resources than unpopular schools to classroom teaching; unpopular schools face a vicious circle where as they lose pupils they lose even more resources.

Contrary to popular belief, the Tory reforms were not exclusively designed to create inequality: after all the system they replaced effectively allowed choice only for parents who could afford to move between catchment areas or use private schools. The main impetus was the desire to make schools more efficient by making them more accountable to the choices of parents.

In theory, perfect markets are efficient because firms must respond immediately to consumer preference, so that everyone gets what they want within their budget constraint. The idea was simple: schools would respond to a greater vulnerability to parent choices by educating children better, just as car manufacturers improve their product in response to consumer choices.

But educational markets are not, and cannot be, perfect. Schools must be above a certain size to be viable, so supply is inevitably restricted, and none will be exactly what the consumer wants. This is a market imperfection. So is the fact that once a child is at a school there are huge costs (to the education of the child, which is what matters) associated with moving the child somewhere better.

Another is the fact that schools can select pupils. Economic theory assumes that firms are all price-takers: ie that they have to offer their product at a market price and cannot choose their customers. So schools have excessive market power, far more than firms in perfect markets: efficiency must suffer.

What, then, should the Government do? It could abandon the idea of markets altogether, and return to what Kenneth Clarke called "selection by mortgage" (in the current system selection by mortgage survives, but is mitigated by the system of parental preference). This would be politically unpopular and extremely costly, heralding another decade of disruption and demoralisation.

The alternative is more interesting: accept the market idea, but reform it to mimic perfect markets in various ways. The reforms I propose enhance efficiency by mimicking perfect markets, and enhance social justice in education by helping disadvantaged parents to choose good schools for their children.

This would require oversubscribed schools to select their intake from applicants by a lottery, and create financial incentives for a school to achieve, or approximate, a prescribed mix of class backgrounds and ability levels among its pupils. Lotteries evoke suspicion, perhaps because they are associated with gambling. But they are impartial selection mechanisms, which generally achieve a mix of pupils roughly mirroring the mix of applicants. They are not novel: the Milwaukee Public Choice Program in the USA, which uses state-funded vouchers to send children from low-income families to private schools, requires oversubscribed schools to select by lottery, the fairest method.

Lotteries would have at least one bad effect: increasing the incentive for targeted marketing to increase the proportion of "desired" pupils in the applicant pool. So financial incentives to encourage schools toattract an appropriate mix of children are necessary. For example, per-pupil allocations for children eligible for free school meals could be double the normal amount; or the per-pupil allocation for high-income or high-performing students could be reduced. The lottery and financial incentives would combine to prevent the congregation of high-need students in some schools and low-need students in others, and to mimic the economic ideal that firms should not be able to choose their customers.

Help could also come through funding the costs of transporting low-income children to chosen schools past the first two miles, so that transport costs do not discourage low-income parents from choosing good schools. The rule should be that low-income parents can have their children's transport funded to any of the nearest six schools to their home (10 in the larger cities), ensuring that none of those schools has the advantage of merely being cheaper to get to. This measure is vital for mimicking market perfection: it makes schools more sensitive to the choice-making of parents, since low-income parents no longer face undue budget constraints.

The Government should establish a commission to determine the reasonable fixed operating costs of each school, and require the LEAs to provide those funds independently of the per-pupil allocation, so that temporary reductions in pupil numbers do not force a school into a spiral of decline. Long-term declines of pupil numbers, of course, should be addressed separately.

Any of these reforms would go some way to ending inequality: jointly they are the best that can be done short of dramatically increased funding or a complete reorganisation of education, the first of which Labour will not do, and the second of which it should not.

The writer is professor-elect of Philosophy of Education at the Institute of Education, and author of Educational Equality and the New Selective Schooling (PESGB, 2000) and School Choice and Social Justice (OUP, 2000).