A Real Education Revolution: Options for voucher funding reform

EXECUTIVE SUMMARY

The federal government's "education revolution" perpetuates the waste, inefficiency and perverse incentives that come with funding micro-management.

• The current school stimulus package is a prime example of this, with a range of ill-suited, cost-padded infrastructure works being laid out across the country.
• If Australia wants a real education revolution, it should ensure that government funding follows the student and not the preferences of education ministers or bureaucrats.
• One way to unlock the funding chains would be to introduce a school voucher, empowering parents to make educational choices and tackling systemic educational disadvantage.
• This paper explores a wide variety of voucher options.  It is estimated that vouchers could cost federal and state governments anywhere from an extra $700 million to $10.3 billion each year.
• The fiscal cost of seven national voucher schemes is outlined below.

Voucher scheme	Estimated additional fiscal cost ($ billions)
Universal voucher ($12,000 for each student)	6.9
Differential voucher (students with disabilities) ($12,000 for students without disabilities;  $15,000/$25,000/$40,000 for students with disabilities depending on disability severity)	8.0
Differential voucher (indigenous students) ($12,000 for non-indigenous students;  $15,000 for indigenous students plus $7,000 relocation allowance for rural/remote area indigenous student)	7.2
Differential voucher (low-income students) ($12,000 for students from medium to high income families earning more than $1,000 per week;  $15,000 for students from low income families earning less than $1,000 per week)	10.3
Targeted voucher (students with disabilities) (current funding for students without disabilities; $15,000/$25,000/$40,000 for students with disabilities depending on disability severity)	1.5
Targeted voucher (indigenous students) (current funding for non-indigenous students;  $15,000 for indigenous students plus $7,000 relocation allowance for rural/remote area indigenous student)	0.7
Targeted voucher (low-income students) (current funding for students from medium to high income families earning more than $1,000 per week;  $15,000 for students from low income families earning less than $1,000 per week)	5.2

• Far from being radical, vouchers are a mainstream policy pursued in 30 countries around the world from the United States right through to developing countries such as Columbia.
• There is sufficient empirical evidence that vouchers encourage more choices in schooling, improve academic outcomes and are highly popular with parents.
• One of the greatest advantages of vouchers is that they allow children from disadvantaged backgrounds to access high-performance schools.
• Many vouchers around the world are specifically earmarked for students from low-income families or minority backgrounds, or students with disabilities, that deserve the best education available.

INTRODUCTION

Since November 2007, the federal government has proceeded to implement its much-touted "education revolution" platform.

Critical policies in this area have included laptop access for all students from years 9 to 12, trade training centres in schools, more investment in teacher quality and a national curriculum.  In the 2008-09 budget, the government announced at least $6.5 billion in new measures. ⁽¹⁾

Earlier this year, the government also announced a three-year $14.7 billion "Building the Education Revolution" stimulus package.  Under the program, any of Australia's 9,540 schools are eligible for funds to build infrastructure on campuses.

The reality is that the government's policies largely amount to a continuation of funding methods firmly entrenched at both the commonwealth and state levels.  The so-called "revolution" in education amounts to little more than maintaining, and in some cases consolidating, the already heavy degree of centralised control over education.

This control gives the appearance that the government is "doing something" in education, yet at the significantly increased risk of waste, inefficiency and perverse incentives often associated with micro-managed government programs.  The current schools stimulus package is a prime example of this, with a range of ill-suited, cost-padded infrastructure works being laid out across the country. ⁽²⁾

The criticisms of the schools stimulus have come thick and fast, but they could be readily extended to other centralised school funding models used in Australia.  Experts have variously panned the initiative as a "fake education revolution" ⁽³⁾ and a "squandered opportunity," ⁽⁴⁾ with the spending having more to do with "political opportunism and spin than raising standards, improving outcomes and delivering a more effective and responsive education system." ⁽⁵⁾

Even principals and school councils, who would normally accept government funding, come what may, have criticised various elements of the government's stimulus spending program. ⁽⁶⁾

To engender a real revolution in the education system, there is a need to break down the walls of centralised school funding.  Parents need to be empowered in their choice of schools, and schools and teachers need incentives to become more responsive to the diverse needs of their students.

One of the most enduring suggestions to break down government control in education is to ensure that its funding follows the student, and not the education ministers or bureaucrats.  This method of funding is commonly known as portable school funding entitlements, or a "voucher" system.

In essence, a voucher system provides each parent with government funds to spend at the school of their choice.  By separating government financing of education from the operation of schools, vouchers can help break down monopoly control over school services delivery and promote competition between government and non-government schools.

As has been increasingly understood by both sides of the political spectrum, vouchers also represent a powerful tool to tackle educational disadvantage.  This is because parents of children with special education needs, or from low-income families, are financially empowered to take their children out of failing schools and into high-quality educational institutions.

This paper examines key aspects of potential voucher reforms for the Australian school system.  The next section will discuss some of the basic mechanics of voucher funding schemes.

Some potential voucher options, and their budgetary cost to governments, will be canvassed.  Other issues will then be explored, including the impact of federalism and distributional issues.  An examination of the international literature on the effectiveness of school vouchers will also be undertaken.

As will be noted below, for less than the total cost of the government's education revolution spending to date, Australian governments can embark on real funding reform -- via a voucher system -- that unlocks constraints on choice and meaningfully tackles educational disadvantage in our communities.

WHAT ARE VOUCHER FUNDING SCHEMES?

The basic attributes of a school voucher funding model were explained by Nobel Prize winning economist Milton Friedman in a classic 1955 article on the role of government in education:

"Government, preferably local governmental units, would give each child, through his parents, a specified sum to be used solely in paying for his general education;  the parents would be free to spend this sum at a school of their own choice, provided it met certain minimum standards laid down by the appropriate governmental unit.  Such schools would be conducted under a variety of auspices:  by private enterprises operated for profit, non profit institutions established by private endowment, religious bodies, and some even by governmental units." ⁽⁷⁾

In practice, different voucher mechanisms are used in an effort to promote parental schooling choice and break educational disadvantage:

• Universal voucher -- all parents receive a voucher worth the same amount of money towards the education of their child
• Differential voucher -- all parents of school children receive a voucher, for example adjusted either for the income level of the family or the costs of educating children with special educational needs (e.g. indigenous students, students with disabilities, students with a language background other than English, or geographically isolated students)
• Targeted voucher -- only certain households or children receive a voucher.  For example, vouchers could be confined to low income households, poorly performing students or students with disabilities.

These vouchers could either be provided directly to parents to spend on their child's school education, as Friedman originally suggested, or the voucher entitlement could be sent directly to the school of a parent's choice upon enrolment of the student.

More than 30 countries have adopted voucher-type schemes to fund the school education of young people.  This reality demonstrates that the voucher system of funding is feasible to implement and has become mainstream education policy.

HOW MUCH WOULD DIFFERENT
NATIONAL VOUCHER SCHEMES COST?

An important consideration for any proposed policy change is its expected impact on the government budget.

This section provides costings for a variety of hypothetical voucher schemes funded in a collaborative fashion by the commonwealth and state governments.  The information presented is based on 2006-07 school demographic data, unless otherwise specified, and relates to the recurrent costs of educating children in Australian schools.

For the purpose of this section, an assumption is also made that the voucher schemes do not induce a shift in enrolments by school sector.  As will be noted later in this paper, however, the experience of school vouchers in other countries suggests that they do encourage significant movements in school enrolments.

UNIVERSAL VOUCHERS

One voucher option would be to fund each Australian school student on an equal per capita basis, ending any sense of funding discrimination between students.

Table 1 provides indicative costings for a scheme whereby the commonwealth and states provide a $12,000 universal voucher for each student.

Table 1:  Indicative costs of universal voucher scheme, $ billions

	Govt schools	Non-govt schools	Total
Current funding (a)	26.9	7.3	34.2
Universal voucher ($12k) (b)	27.3	13.8	41.1
Change (b) - (a)	0.4	6.5	6.9

Figures are based on publicly available data, and should be regarded as indicative estimates of cost magnitudes only.  Excludes capital funding.  Sub-totals may not sum to totals due to rounding.

Source:  SCRGSP, 2009, Report on Government Services 2009,
Productivity Commission;  Author's calculations.

It is estimated that this voucher package would cost governments an additional $6.9 billion per annum.

DIFFERENTIAL VOUCHERS

Another strand of school vouchers are differentiated schemes that segment and vary the amounts of funding parceled out to groups of students.  In this paper, it is assumed that all mainstream students would receive at least $12,000 per annum and, in different cases, students with disabilities, indigenous students and students from low-income families would receive extra funds.

Students with disabilities

Governments currently provide additional resources to students with disabilities, with students assessed as having more severe disabilities generally receiving more funds than their less disabled counterparts.

Even so, there are significant variations between the states in terms of how much funding is directed to each disabled student. ⁽⁸⁾  It has also been observed that there exists a large government funding shortfall for students with disabilities in non-government schools. ⁽⁹⁾

One way to ensure consistency in how students with disabilities are funded is to create a national differential voucher where these students receive additional fund loadings on a standardised basis.

Table 2 provides indicative costings for such a voucher.  In this scenario, $12,000 is given to each student without a disability with extra funding allocated to students with disabilities according to three hypothetical categories of disability severity (level 1 $15,000, level 2 $25,000, level 3 $40,000). ⁽¹⁰⁾

Table 2:  Indicative costs of differential students with disabilities voucher scheme, $ billions

	Govt schools	Non-govt schools	Total
Current funding (a)	26.9	7.3	34.2
Differential voucher ($12k non-disabled)   Differential voucher ($15k level 1 SWD)   Differential voucher ($25k level 2 SWD)   Differential voucher ($40k level 3 SWD) Total differential voucher (b)	25.8 0.9 1.4 0.1 28.2	13.4 0.2 0.4 0.0 14.0	39.2 1.2 1.8 0.1 42.3
Change (b) - (a)	1.3	6.7	8.0

Students with disabilities = SWD.  Figures are based on publicly available data, and should be regarded as indicative estimates of cost magnitudes only.  Excludes capital funding.  Sub-totals may not sum to totals due to rounding.

Source:  SCRGSP, 2009, Report on Government Services 2009,
Productivity Commission;  Author's calculations.

It is estimated that this voucher package would cost governments an additional $8 billion per annum.

Indigenous students

There has been widespread public concern about the persistent (average) academic achievement gap between indigenous and non-indigenous school students across Australia.

According to a compendium to the latest Productivity Commission Report on Government Services, the proportion of indigenous students that did not achieve national literacy and numeracy testing benchmarks was substantially higher than the proportion of all students. ⁽¹¹⁾

Although this achievement discrepancy is not a standard phenomenon across the country, ⁽¹²⁾ a number of proposals has been canvassed in recent years to help close the average school performance gap.  These include scholarships for indigenous students to attend high-achievement non-government schools, ⁽¹³⁾ greater flexibility for schools servicing primarily indigenous students, ⁽¹⁴⁾ improved curriculum standards and better school attendance rates.

A policy proposal that has been largely overlooked so far is a voucher that enables indigenous students to move from poorly performing to high-performance schools.  This would represent a demand-side reform helping to lift school participation and academic performance, complementing the largely supply-side solutions described above.

Table 3 provides indicative costings for a voucher whereby $12,000 is given to each non-indigenous student with extra funding allocated to indigenous students ($15,000).  Given the lack of diversified school supply in remote and very remote areas, the voucher scheme will be complemented by a one-off allowance ($7,000) for each eligible indigenous student to relocate to a metropolitan school if his or her family so chooses.

Table 3:  Indicative costs of differential indigenous students voucher scheme, $ billions

	Govt schools	Non-govt schools	Total
Current funding (a)	26.9	7.3	34.2
Differential voucher ($12k non-indigenous)   Differential voucher ($15k indigenous) Total differential voucher (b)	25.7 1.9 27.6	13.5 0.3 13.8	39.2 2.2 41.5
Change (b) - (a)	0.7	6.5	7.2

Voucher amount includes $7,000 relocation allowance for indigenous students residing in remote and very remote locations, calculated by weighting total number of indigenous students by the proportion of total students attending schools by remote/very remote geo-locations.  Figures are based on publicly available data, and should be regarded as indicative estimates of cost magnitudes only.  Excludes capital funding.  Sub-totals may not sum to totals due to rounding.

Source:  SCRGSP, 2009, Report on Government Services 2009,
Productivity Commission;  Author's calculations.

It is estimated that this voucher package would cost governments an additional $7.2 billion per annum.

Students from low-income families

While Australian schools are recognised for providing a world-class education compared to many other OECD economies, concerns have been raised about student underperformance in our education system.

According to a federal government study, Australia has too long a "tail" of underperformance linked to disadvantage. ⁽¹⁵⁾  This outcome is concentrated amongst students from low socioeconomic status (SES) communities, with the difference between students from the lowest SES quartile to those in the highest equating to more than two years of schooling in both reading literacy and mathematics.

To address this, governments have embarked on a range of measures including an emphasis on improving teacher quality, strategies for improved student engagement and retention and improving school transparency and accountability.

An appropriately designed differential voucher scheme should also be on the policy agenda, because it can give students from low SES backgrounds a better chance in life by accessing quality education in high-performance schools.

Taking the income levels of students' families as a proxy for SES, Table 4 provides indicative costings for a voucher whereby $12,000 is given to each student from a middle- to upper-income family and extra funding ($15,000) allocated to students from low-income families.

Table 4:  Indicative costs of differential lowincome families voucher scheme, $ billions

	Govt schools	Non-govt schools	Total
Current funding (a)	26.9	7.3	34.2
Differential voucher ($12k middle to upper income)   Differential voucher ($15k low income) Total differential voucher (b)	16.3 13.6 29.9	10.5 4.0 14.6	26.9 17.7 44.5
Change (b) - (a)	3.0	7.3	10.3

Voucher allocated to students from families earning less than $1,000 per week.  Figures are based on publicly available data, and should be regarded as indicative estimates of cost magnitudes only.  Excludes capital funding.  Sub-totals may not sum to totals due to rounding.

Source:  Barbara Preston, 2007, "The social make-up of schools";  SCRGSP, 2009,
Report on Government Services 2009, Productivity Commission;  Author's calculations.

It is estimated that this voucher package would cost governments an additional $10.3 billion per annum.

TARGETED VOUCHERS

The final type of voucher reform considered in this paper are those exclusively targeted at specific elements of the school population.  The intention of such vouchers is to provide students with additional education needs a financial opportunity to access the best schooling options available.  Remaining students are assumed to remain on the funding programs that currently exist at the commonwealth and state levels.

Students with disabilities

Table 5 provides indicative costings for a voucher allocated to students with disabilities, that vary in accordance to three hypothetical categories of disability severity (level 1 $15,000, level 2 $25,000, level 3 $40,000).

Table 5:  Indicative costs of targeted students with disabilities voucher scheme, $ billions

	Govt schools	Non-govt schools	Total
Current funding (a)	26.9	7.3	34.2
Funding (non-disabled)   Targeted voucher ($15k level 1 SWD)   Targeted voucher ($25k level 2 SWD)   Targeted voucher ($40k level 3 SWD) Total targeted voucher (b)	25.5 0.9 1.4 0.1 27.9	7.2 0.2 0.3 0.0 7.8	32.8 1.1 1.7 0.1 35.7
Change (b) - (a)	1.0	0.5	1.5

Students with disabilities = SWD.  Figures are based on publicly available data, and should be regarded as indicative estimates of cost magnitudes only.  Excludes capital funding.  Sub-totals may not sum to totals due to rounding.

Source:  SCRGSP, 2009, Report on Government Services 2009,
Productivity Commission;  Author's calculations.

It is estimated that this voucher package would cost governments an additional $1.5 billion per annum.

Indigenous students

Table 6 provides indicative costings for a $15,000 voucher allocated to indigenous students.

Table 6:  Indicative costings of targeted indigenous students voucher scheme, $ billions

	Govt schools	Non-govt schools	Total
Current funding (a)	26.9	7.3	34.2
Funding (non-indigenous)   Targeted voucher ($15k indigenous) Total targeted voucher (b)	25.4 1.9 27.4	7.3 0.3 7.6	32.7 2.2 34.9
Change (b) - (a)	0.4	0.3	0.7

Voucher amount includes $7,000 relocation allowance for indigenous students residing in remote and very remote locations, calculated by weighting total number of indigenous students by the proportion of total students attending schools by remote/very remote geo-locations.  Figures are based on publicly available data, and should be regarded as indicative estimates of cost magnitudes only.  Excludes capital funding.  Sub-totals may not sum to totals due to rounding.

Source:  SCRGSP, 2009, Report on Government Services 2009,
Productivity Commission;  Author's calculations.

It is estimated that this voucher package would cost governments an additional $0.7 billion per annum.

Students from low-income families

Table 7 provides indicative costings for a $15,000 voucher allocated to students from low-income families.

Table 7:  Indicative costings of targeted low income families voucher scheme, $ billions

	Govt schools	Non-govt schools	Total
Current funding (a)	26.9	7.3	34.2
Funding (middle to upper income)   Targeted voucher (lower income) Total targeted voucher (b)	16.2 13.6 29.8	5.7 4.0 9.7	21.8 17.7 39.5
Change (b) - (a)	2.8	2.4	5.2

Voucher allocated to students from families earning less than $1,000 per week.  Figures are based on publicly available data, and should be regarded as indicative estimates of cost magnitudes only.  Excludes capital funding.  Sub-totals may not sum to totals due to rounding.

Source:  Barbara Preston, 2007, "The social make-up of schools";  SCRGSP, 2009,
Report on Government Services 2009, Productivity Commission;  Author's calculations.

It is estimated that this voucher package would cost governments an additional $5.2 billion per annum.

ASSESSING THE OPTIONS

It is clear that an Australian school voucher scheme will require additional taxpayer resources to implement successfully.  According to the case studies outlined above, a voucher could cost anywhere between an additional $0.7 billion and $10.3 billion per annum for commonwealth and state governments.

A broader perspective of voucher fiscal costs can be gleaned from a sensitivity analysis where the voucher funding rate, for each of the cases studied, is progressively increased (Figure 1).

Figure 1:  Voucher funding rates compared to base case

Base case is defined as each of the voucher schemes examined in this paper.  For differential vouchers, funding rates for non-mainstream students are adjusted only.  Increases in funding rates for students with disabilities vouchers are averaged out across the three levels of disability severity.  Indigenous voucher schemes include $7,000 relocation allowance.  Figures are based on publicly available data, and should be regarded as indicative estimates of cost magnitudes only.  Excludes capital funding.

Source:  Barbara Preston, 2007, "The social make-up of schools";  SCRGSP, 2009,
Report on Government Services 2009, Productivity Commission;  Author's calculations.

While a $12,000 universal voucher is less expensive than the differential voucher options -- that provide funding of $12,000 for each school student as a minimum amount -- the universal funding option becomes prohibitively expensive as its base rate increases.  Indeed, across most of the funding rate scales the universal voucher is the most expensive reform option.

By far the most cost-effective voucher options would be the targeted schemes for students with disabilities or indigenous students, reflecting the relatively small numbers of these students in the overall student population.

This analysis shows that a national voucher scheme would impose additional costs upon governments that already spend a collective $39.3 billion on primary and secondary education. ⁽¹⁶⁾  Whereas school vouchers might be rejected on a "smaller government" policy criterion alone there are other considerations to bear in mind, not least the expected beneficial outcomes arising from vouchers. ⁽¹⁷⁾

ARE THERE ANY OTHER ISSUES FOR
SCHOOL VOUCHERS IN AUSTRALIA?

Some other voucher-related policy issues to consider include the status of commonwealth-state funding relationships, distributional issues, and school fees and parental contributions in a voucherised funding system.

HOW WILL THE COMMONWEALTH-STATE FINANCIAL DIMENSION AFFECT VOUCHERS?

The state and territory governments are constitutionally responsible for providing education to children of school age.  They own and manage government schools, and provide substantial funding to this sector.  They also regulate, and provide funds to, non-government schools.

In practice, the state government school funding system is heavily skewed towards their own government schools.  In 2005-06, the states injected about $23 billion in taxpayers' funding into government schools (Figure 2).

By contrast, states provided only $2 billion to non-government schools.  In other words, the states' funding contribution to government schools was almost 13 times that provided to Catholic and independent schools combined.

Figure 2:  Recurrent funding for school education, 2005-06

Source:  Independent Schools Council of Australia, "Snapshot 2008".

Although unilateral commonwealth action in the past has been decisive in promoting choice and quality -- for example, the SES model encouraged the growth of low-fee independent schools -- the prevailing distribution of funding by the states distorts parental choices in favour of "free" (direct to individuals) government schools.  In effect, a "choice penalty" is applied to those parents who prefer to send their children to Catholic or independent schools.

If the full benefits of vouchers are to be realised, it is important that a voucher governs both the commonwealth and state government education funding streams.  Indeed, this is the very reason why this paper has examined the financial implications of national schemes.

Clearly, a negotiation process will need to be conducted by governments if a national voucher is to become a reality.  For example, one way to parse out a differential voucher model across the levels of government would be for:

• the states to fund a basic voucher amount (per capita entitlement) for all mainstream students, in both government and non-government schools;
• the commonwealth to fund additional voucher amounts for students with identified educational needs, either students with disabilities, indigenous students or students from low income families. ⁽¹⁸⁾

Apart from ameliorating the additional funding burden faced by any one level of government, there could be other advantages in this commonwealth-state voucher split.  A basic state voucher for mainstream students would mean that they could no longer discriminate between children in different schooling systems.  A voucher mechanism would also modernise the confusing and, at times, archaic funding formulas currently used by the states.

For its part, the commonwealth can more effectively target its funding toward needs students.  This would be consistent with its implied constitutional role of addressing equity concerns more generally.

Other suitable arrangements could be agreed by the commonwealth and states for universal or targeted vouchers respectively.

WHAT ABOUT DISTRIBUTIONAL ISSUES, OR THE "MORE MONEY FOR KING'S" ARGUMENT?

Despite the defeat of the Mark Latham-led federal opposition in 2004, and with it its notorious schools "hit list" policy, ⁽¹⁹⁾ political controversy remains about the distribution of school funding.

There remain occasional public bouts of antipathy within some segments of the community, including public sector teacher unions and other government school education lobbies, about high-fee independent schools receiving government funding for their enrolled students.

It is quite conceivable that any funding change which could accelerate the enrolment drift from government schools may renew debates about funding to the non-government school sector.  The aforementioned vested interests may be particularly vocal in their opposition to change, potentially weakening political support for voucher reform.

The political ramifications of such criticisms could be ameliorated if the voucher was provided directly to parents.  This arrangement would underline the fact that it is the exercise of choice by parents on behalf of their children, and not by governments or any other interest, that is paramount under a voucher system.

The amount of government revenues received by schools would become a by-product of parental choice.  Therefore, any adverse funding shift felt by government schools, or any other school for that matter, would be directly related to their inability to respond to the demands of ordinary Australians concerning the quality of education.

SHOULD SCHOOL FEES AND PARENTAL CONTRIBUTIONS STILL PLAY A ROLE?

In a number of countries, governments have stipulated conditions to ensure schools are not permitted to charge tuition fees on voucher-carrying students.  Similarly, parents are in some instances prevented from topping up government voucher funding with their own contributions.

Such conditions might save parents some of their disposable income (although this could be offset by higher taxes used to fund vouchers).  However, there are good arguments for fees and voluntary contributions to remain in a voucher funding environment.

A transparent fee structure, as currently applied by non-government schools, effectively serves as an important signal to consumers of the quality of educational services provided.  For example, a higher tuition fee charged by a school is generally a marker of better educational quality that many parents are willing to pay.

Any government ban on charging fees, as part of a voucher system, would effectively remove price signals from school education hampering informed school choices by parents.

Many Australian parents, who send their children to non-government schools and pay taxes to pay for other children to attend government schools, willingly make financial sacrifices reflecting their commitment to their child's future.  This behaviour puts in practice the old proverb that "you do not value anything you do not pay for".

It can be reasonably argued that the retention of a fee and contributions structure in Australian schooling will ensure that parents maintain a keen level of interest and engagement in student academic performance and school efficiency.

DO VOUCHERS WORK IN SCHOOL EDUCATION?

Milton Friedman's ingenious idea of 1955 still evokes often passionate debate, even in those countries that have embraced voucher-style reforms.

Not surprisingly educational researchers have played a large role in this, as they attempt to tease out some of the effects of voucher funding.  This debate is likely to continue for some time, nonetheless there is sufficient evidence to back claims that school vouchers are beneficial in a number of ways.

VOUCHERS PROMOTE CHOICE IN SCHOOLING

Vouchers have the potential to dramatically expand the suite of attainable schooling options for children.  By promoting school choice, vouchers give parents a greater sense of empowerment over the education system and makes schools more responsive to student learning needs.

In Sweden, the introduction of a universal voucher in 1992 has led to the number of private schools expanding from 70 to about 800 today. ⁽²⁰⁾  The share of students that attend private schools quadrupled in ten years. ⁽²¹⁾  As noted by UK social policy expert David Green, "the whole point of the Swedish voucher scheme was to stimulate the opening of new schools so that parents in poor localities had the power to choose." ⁽²²⁾

There are instances where the relaxation of voucher eligibility constraints has fuelled a spike in demand for this type of school funding.  The Milwaukee low-income voucher was subject to a strict cap of one per cent of the city's public school population prior to 1998, which was lifted in 1998 and again in 2006.

The lifting of the Milwaukee voucher cap helped to raise the numbers of students benefitting from the program (Figure 3), in turn increasing enrolments in private schools.

Figure 3:  Milwaukee Parental Choice Program recipients, 1990-91 to 2008-09

Data based on headcounts as at September of each year.

Source:  Wisconsin Department of Public Instruction (accessed 19 June 2009).

VOUCHERS IMPROVE EDUCATIONAL OUTCOMES

Voucher programs around the world have been shown to improve the academic performance of students.  This is because vouchers give parents the freedom to choose schools that work best for their children, and creates incentives for schools to improve their educational performance.

In a non-randomised study of the impact of the Cleveland voucher scheme, Metcalf found that recipients had significantly higher test scores than public school students in reading, writing and science. ⁽²³⁾

Peterson, Howell and Greene found that voucher students "had gains of 7.5 national percentile points in reading and 15.6 NPR in math.  These gains were achieved even through the students ... were among the most disadvantaged students in Cleveland." ⁽²⁴⁾

Similar test score gains by voucher recipients were found in Milwaukee. ⁽²⁵⁾  In addition, a study by Warren found that students participating in the voucher program enjoyed better school completion rates than those in public schools. ⁽²⁶⁾  It is estimated that if the graduation rates in public schools equaled that of voucher students from 2003 to 2007, the number of public school students graduating during that period would have been about 20 per cent higher.

An important finding in the literature is that vouchers also tend to improve the academic performance of students that remain in public schools.  In the words of American education economist, Caroline Hoxby, vouchers are a policy akin to a tide that raises all boats. ⁽²⁷⁾

In 2005, the US state of Ohio introduced the EdChoice Scholarship Program that offers vouchers to students in underperforming public schools across the state (excluding Cleveland, which has its own voucher).  A recent study by the Friedman Foundation for Educational Choice found that this voucher has improved the performance of failing schools, with reading and mathematics scores all improving due to voucher competition. ⁽²⁸⁾

Before being struck down by a court, Florida provided a voucher to students in failing schools. ⁽²⁹⁾  A number of studies have backed the proposition that this performance-based scheme improved outcomes in public schools.  For example, Greene found that student achievement improved at a faster rate in schools that received the lowest F rating. ⁽³⁰⁾

VOUCHERS TACKLE EDUCATIONAL DISADVANTAGE

Apart from facilitating greater choice in schooling, there has been growing recognition that vouchers present a powerful tool to redress various dimensions of educational disadvantage affecting young people.

Many of the American public voucher programs are specifically designed to target disadvantaged groups in the community.  For example, in 2004 the US federal education department established a voucher scheme for low-income students in the Washington DC area.  Over 94 per cent of users during its first year of operation were African-American students. ⁽³¹⁾

A study of the Milwaukee voucher by Witte found that it serviced disproportionate numbers of students from low-income, African-American, Latin American or single parent families:  "the MPCP ... [Milwaukee Parental Choice Program] ... was established and the statute written explicitly to provide an opportunity for relatively poor families to attend private schools.  The program clearly accomplished that goal." ⁽³²⁾

It is notable that vouchers have been implemented to help the disadvantaged in an increasing number of developing countries around the globe.  For example, a targeted voucher has been used in Colombia since 1992 to defray the cost of providing a school education for poor families.  Within two years of its introduction nearly 91,000 low-income students were serviced by the program. ⁽³³⁾

As outlined above, vouchers have been associated with an improvement in student academic performance.  Such results have not only been detected for students accessing vouchers, but also for disadvantaged students that do not move to another school.  This is because all schools must improve their educational services for enrolled students in a voucher funding environment, if they are to avert the threat of exit.

VOUCHERS COME WITH HIGH APPROVAL RATINGS BY PARENTS

It is clear that wherever vouchers have been implemented they have been met with an overwhelmingly positive response from parents.  This is not only illustrated by the increasing numbers of students receiving vouchers worldwide, but by surveys of parental satisfaction.

An evaluation of the Milwaukee voucher program indicated that 53 per cent of parents with children enrolled in voucher schools gave the school an "A" grade, compared to 34 per cent of parents in public schools. ⁽³⁴⁾

For the Washington DC voucher about 66 per cent of parents who were offered a voucher gave their child's school an "A" or "B" grading, compared with 63 per cent of parents who were not offered a voucher. ⁽³⁵⁾

Closer to home, New Zealand implemented a small, pilot voucher scheme for children from low-income families in the late 1990s.  Surveys showed that 97 per cent of parents were either "satisfied" or "very satisfied" with their child's progress at the school of choice.

Teachers and principals were also reported to be enthusiastic about the benefits of the scheme for students.

CONCLUSION

Access to a quality school education is widely recognised by researchers and policymakers as a vital ingredient for full economic and social participation by young people as they transition into adulthood.

Australia provides a standard of education that is highly regarded around the world.  In other words, it makes a good fist of getting towards the world-class system that parents, teachers and school administrators strive to achieve.

Nonetheless, there is scope for improvement.  Our school funding systems are a hodge-podge of complexity that effectively discriminate between various groups of students.  One only has to appreciate, for example, the funding plight of students with disabilities in non-government schools to know that the way Australia funds its schools needs to change.

Despite many funding streams being badged with the word "targeted" they merely throw money at problems without addressing their root causes, such as the lack of sufficient incentive for schools to vigorously compete against each other in providing high-quality, tailored education solutions for children.

Current funding models conveniently keep the education bureaucrats at work, but at the cost of greater waste, inefficiency and perverse incentives as currently witnessed by the problems with the federal government's "education revolution".

It is for all of these reasons that Australia should seriously investigate the adoption of voucher funding for the school system, taking control out of the hands of distant education officials and back into the hands of parents.

Enabling funds to "follow the student" to whichever school they end up is a simple, yet powerful, idea that has been shown internationally to promote choice, improve student outcomes, tackle educational disadvantage and improve parental satisfaction in schooling.  Voucher experiments around the world have clearly shown that they work, for parents, principals, teachers and students alike.

So, without further ado, let the real education revolution of vouchers begin!

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ENDNOTES

1.  Hon Julia Gillard MP, 2008, Education Revolution 2008-09, Budget Ministerial Statement (accessed 18 June 2009).

2.  Some of the key issues have been raised by Gavin Lower and Natasha Bita, 2009, "Millions handed to axed schools in stimulus debacle", The Australian, 12 June;  Natasha Bita, "Hall costs go through the roof", The Australian, 13 June;  Natasha Bita, 2009, "$2m handed over as closure looms", The Australian, 15 June;  Justine Ferrari, 2009, "Kevin Rudd's local school gets $3m for double-ups", The Australian, 16 June;  Gavin Lower, 2009, "Plans axed as pledged funds fall short", The Australian, 19 June;  and Paige Taylor and Justine Ferrari, 2009, "$250,000 hall for remote Yulga Jinna Remote Community School 'a waste' ", The Australian, 20 June.

3.  Ken Wiltshire, reported in Justine Ferrari, 2009, "Schools infrastructure fund under fire", The Australian, 13 June.

4.  Louise Watson, reported in Ibid.

5.  Kevin Donnelly, "School marks not fixed with bricks", The Australian, 15 June.

6.  Henry Grossek, 2009, "Schools' pride felled by bullying bureaucrats", The Australian, 18 June;  Justine Ferrari, 2009, "Randwick Public School P&C says it's out of time", The Australian, 19 June.

7.  Milton Friedman, 1955, "The Role of Government in Education", in Robert A. Solo, ed., Economics and the Public Interest, Rutgers University Press, New Brunswick.

8.  Fran Ferrier et al, 2007, Investigating the Feasibility of Portable Funding for Students with Disabilities, Monash University Faculty of Education.

9.  Jennifer Buckingham, 2009, "Private hurdle for kids", The Australian, 21 April.

10.  There is little information on the distribution of students with disabilities in different jurisdictions according to assessed severity.  This paper uses the (strong) assumption that a nationally observed distribution of students of disabilities, according to support need, is consistent with previously published information for NSW.  See Fran Ferrier et al, 2007, op cit.

11.  SCRGSP, 2009, Report on Government Services 2009, Indigenous Compendium, Productivity Commission.

12.  The development economist Helen Hughes has led research that shows indigenous students learning in mainstream metropolitan and major regional centre schools are generally performing markedly better than their counterparts in rural and remote areas.  See Helen Hughes and Mark Hughes, 2009, Revisiting Indigenous Education, CIS Policy Monograph No. 94.

13.  Noel Pearson, 2004, "No danger of another stolen generation", The Australian, 5 November.

14.  Julie Novak, 2006, School Autonomy:  A Key Reform for Improving Indigenous Education, CIS Issue Analysis No. 72.

15.  Commonwealth of Australia, 2008, Quality Education:  The Case for an Education Revolution in our Schools, Department of Education, Employment and Workplace Relations.

16.  ABS, Government Finance Statistics, Australia, 2007-08, cat. no. 5512.0.

17.  According to Buckingham, "these extra outlays would, at least in part, be offset by the efficiency of directing funding through families, and the downward pressure on schooling costs as a result of competition between schools." See Jennifer Buckingham, 2001, Families, Freedom and Education:  Why School Choice Makes Sense, CIS Policy Monograph No. 52, p. 32.

18.  Appropriate burden sharing may entail the commonwealth dedicating voucher base amounts for needs students in excess of those quantified in this paper.

19.  Mark Latham and Jenny Macklin, 2004, "Great Australian Schools", Australian Labor Party Policy Document for 2004 Federal Election Campaign.

20.  Michael Sandström, 2006, "School choice reforms in Sweden", in James Stanfield, ed., The Right to Choose? -- Yes, Prime Minister!, Adam Smith Institute, London.

21.  Johnny Munkhammar, 2007, "How choice has transformed education in Sweden", The Telegraph, 25 May.

22.  David Green, 2007, "Enhancing education vouchers", Prospect Magazine 140.

23.  Kim K. Metcalf, 1999, "Evaluation of the Cleveland Scholarship and Tutoring Program, 1996-1999", cited in Herbert J. Walberg, School Choice, Cato Institute, Washington DC.

24.  Paul E. Peterson, William G. Howell and Jay P. Greene, 1998, "An Evaluation of the Cleveland Voucher Program After Two Years", Harvard University Program on Education Policy and Governance, Working Paper.  This study was based on a small sample of two private schools, even though they represented 25 per cent of voucher students who transferred from public schools.

25.  Jay P. Greene, Paul E. Peterson and Jiangtao Du, 1998, "School Choice in Milwaukee:  A Randomized Experiment", in Paul E. Peterson and Bryan C. Hassel, eds., Learning from School Choice, Brookings Press, Washington DC;  Cecelia Elena Rouse, 1998, "Private School Vouchers and Student Achievement:  An Evaluation of the Milwaukee Parental Choice Program", Quarterly Journal of Economics 113 (May):  553-602;  Caroline M. Hoxby, 2006, School Choice:  The Three Essential Elements and Several Policy Options, New Zealand Education Forum, Wellington;  Rajashri Chakrabarti, 2007, "Can Increasing Private School Participation and Monetary Loss in a Voucher Program Affect Public School Performance?  Evidence from Milwaukee", Federal Reserve Bank of New York Staff Report.

26.  John R. Warren, 2008, "Graduation Rates for Choice and Public School Students in Milwaukee, 2003-2007", School Choice Wisconsin.

27.  Caroline Minter Hoxby, 2001, "Rising Tide", Education Next 1 (4):  69-74.

28.  Greg Forster, 2008, "Promising Start:  An Empirical Analysis of How EdChoice Vouchers Affect Ohio Public Schools", Friedman Foundation for Educational Choice.

29.  Under the former statewide "A+ program", the overall achievement levels of schools were graded from A to F.  Students in schools that received two F ratings in any four-year period would be offered a voucher to use at any other public or private school.

30.  Jay P. Greene, 2001, "An Evaluation of the Florida A-Plus Accountability and School Choice Program", Manhattan Institute.

31.  Patrick J. Wolf, 2008, "School Voucher Programs:  What the Research Says About Parental School Choice", Bringham Young University Law Review (July):  415-446.

32.  John F Witte, 2000, The Market Approach to Education:  Evidence from America's First Voucher Program, cited in Ibid.

33.  James Tooley, Pauline Dixon and James Stanfield, 2003, Delivering Better Education:  Market Solutions for Educational Improvement, Adam Smith Institute, London.

34.  John F. Witte et al., 2008, "MPCP Longitudinal Educational Growth Study Baseline Report", SCDP Milwaukee Evaluation Report No. 5, February.

35.  Patrick Wolf, Babette Gutmann, Michael Puma, Brian Kisida, Lou Rizzo and Nada Eissa, Evaluation of the DC Opportunity Scholarship Program:  Impacts After Two Years.

Voucher system would be a real education revolution

There has been so much talk about an education revolution from the federal government, one could be forgiven for thinking that we are back to the heady days of a crumbling Berlin Wall.

The big education talk started before the 2007 federal election.

The opposition, led by Kevin Rudd, said in a discussion paper:  "Australia needs nothing less than a revolution in education".  This required "a substantial and sustained increase in the quantity of our investment, and the quality of our education".

There is no doubt that since its election in November 2007 the Rudd government has thrown more taxpayer resources into school education.  Some of the big-ticket items have included student laptops, school trade-training centres, teacher quality and a national curriculum.  Last year the government costed these measures at more than $6.5 billion.

Far from being a revolution, however, these measures basically amount to a continuation of policies pursued by previous federal and state governments.  This year a $14.7bn Building the Education Revolution scheme was tacked on to the government's main education plans.

Under the program, any of Australia's 9540 schools are eligible for funds to build infrastructure on campus.  Building plaqued school monuments such as new halls, gyms and libraries may make for good politics.  The government is undoubtedly hoping for a big tick from school sector representative organisations, principals, teachers and parents for the many construction sites laid open with federally borrowed money.

Instead, what we are seeing is a litany of problems caused by the government's eagerness to shower money on government and non-government schools.  As has been reported during the past month, there are instances of duplicated infrastructure under a "use it or lose it" funding approach.

Some of this infrastructure is being developed for schools earmarked for closure or for remote schools already struggling to fill capacity.

Unsurprisingly, building costs are being inflated by a combination of state government project management protocols, a lack of competition for alternative building contractors and a price premium on account of urgently needed works.

With reports of governments paying double the industry rate for school halls, the school stimulus fiasco seems to confirm American economist Gordon Tullock's hypothesis that the private sector on average pays half the cost of providing comparable government services.

The underlying problem is that the Rudd education revolution rests on continuing the already heavy degree of centralised government control over education.

While the additional spending may give the appearance that the government is doing something on education, it comes at the greater risk of waste, inefficiency and perverse incentives often associated with micromanaged government funding.

There is a need to break down the walls of central controls if school education is to be systemically improved.  Parents need to be empowered in their choice of schools, and schools and teachers need greater incentives to become more responsive to the educational needs of students.

For a real education revolution, governments can look no further than voucher funding that seamlessly follows the student to a government or non-government school of choice.

With students receiving sufficient funds to cover their education costs, a voucher removes in one fell swoop the grab-bag of archaic and often discriminatory existing school funding programs.

One of the other aspects of vouchers that are increasingly hard to ignore is that it can be a most powerful tool to overcome educational disadvantage.

If a voucher system is weighted with more funds for students from low-income families, indigenous students or students with disabilities, then parents of children from these groups can take their children out of failing schools and place them in high-achievement schools.

Far from being in the realm of theoretical fantasy, vouchers are mainstream policy in more than 30 countries.  There is also sufficient evidence from these countries that voucher schemes work.

Vouchers, together with supply-side reforms, have greatly expanded choices for students in a wide variety of places such as Sweden and the American cities of Cleveland, Milwaukee and Washington, DC.

Developing countries such as Bangladesh, Cote d'Ivoire, Colombia and Guatemala are also using vouchers in an effort to improve educational outcomes for the disadvantaged.

They also have been shown to improve the academic performance of students.  Students receiving a voucher have recorded improvements in literacy, numeracy and science test scores in the US.

Importantly, students who remain in their original schools also have registered test score gains.  This is because all schools have a greater incentive to improve their educational packages to maintain their enrolments.  In the words of American education researcher Caroline Minter Hoxby, vouchers are like a beneficial tide lifting all boats.

Studies have shown that vouchers effectively have serviced disproportionate numbers of disadvantaged students in the US.  These have included children from African-American and Latin-American backgrounds, and from low-income and single-parent families.

With students observed to register academic improvements in a voucherised environment, this funding reform promises to redress educational disadvantage in ways that previous efforts have failed to do.

There is also little doubt that vouchers come with a big tick of approval from parents, as evidenced by surveys in several countries.

Accepting that vouchers can make a difference, the next question to ask is how much would it cost?  I estimate that a national school voucher could initially cost at least $700 million a year, depending on voucher design.

For example, an effective approach that groups targeted vouchers for indigenous students and students with disabilities together could cost governments an initial $2bn.

This funding commitment is based on present enrolments and the removal of the funding discrimination between government and non-government schools.

However, vouchers have the prospect of delivering cost savings in the long run as schools discover new ways to deliver education more efficiently.

So, for less than the Rudd government's education revolution, a voucher could be introduced to spur excellence in schooling.

To improve our education system even further, governments need to think outside the existing funding paradigms.  For Australia to introduce a school voucher would represent nothing short of a revolution in how we fund students.

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Let's bin the overcooked moralising

When MasterChef announces its winner tonight, it will have done more than inspire a few home chefs to cook half a pig's head, as third-place winner Chris famously did.

MasterChef takes an overwhelmingly positive perspective on modern food and home cooking.  This is actually pretty rare.  A lot of the discussion about modern food is highly political and deeply pessimistic.  Even popular shows that try to celebrate food can't quite welcome the base pleasure of good cooking.  Gordon Ramsay won't stop mumbling about "local produce" and the evils of imported ingredients, and Jamie Oliver seems just as desperate that we grow our own vegies for the good of the planet as he is that we make our own pasta sauce from scratch.

Cultural critics have spent the past decade trying to convert our dinner into an ideological statement.  We're told we face a future torn between a diet of instantaneously prepared frankenfood made primarily of transfats, or a diet that is richer in politics than flavour -- with a functional, expensive and bland mixture of local, organic, slow, GM-free and fair-trade food.

So it's refreshing to watch a food show that doesn't even pay lip service to all the over-cooked moralising about the "ethics" of food.  You get the impression that even if a MasterChef contestant used ingredients that were artificially grown in a chemical factory by robot arms, the only thing the judges would be interested in would be taste, texture and presentation.  You know, the reasons why we enjoy eating.

And MasterChef recipes almost always involve some nutritionally mischievous ingredients -- sugar, butter and the ubiquitous salt.  This, too, has upset some people.  One nutritionist, Catherine Saxelby, was particularly concerned that the show has "no regard for health or nutrition", arguing that MasterChef makes "the basic chop, potato and two veg look boring when there's actually nothing wrong with it from a nutrition point of view".

That makes sense:  a dish consisting of a chop, a potato and two vegies is extremely boring.  If nothing else, MasterChef will have encouraged a few more people to think carefully about food preparation and variety.  After all, it is often out of boredom with home-cooking that we go for takeaway alternatives or just defrost frozen food.

The variety of food cooked by the MasterChef contestants -- and the high standards they are able to achieve with easily sourced ingredients -- also reflects the powerful consumer revolution in food that is changing what and how we eat.  It's no secret that the food we eat is different from the food our parents and grandparents ate.  Sushi and home-cooked burritos would have been completely alien to most Australians just a few decades ago.  The way foods have migrated because of globalisation is a story of long-term developments in food culture.  But it's not hard to find examples of how our tastes are rapidly expanding right now.

In my local Brunswick supermarket in the past month, the chorizo sausage has gone from being a niche delicacy, offered only as single, vacuum-packed sausages tucked away near the freezers, to being offered in large, fresh multipacks proudly displayed with the other meat.  They're now just opposite the mince.  And you can't get more mainstream than mince.

Incidentally, this new location also puts the chorizo within a sausage-throw of the okra -- a weird, slimy fruit used primarily for gumbo, a Cajun and Creole stew.  Many Australian-born generations before us would have had no idea of what okra was, let alone what to do with it.  Yet it sits comfortably in suburban supermarkets, where space is at a premium.

Seemingly inconsequential technological developments are providing us with fresher produce at the humble supermarket.  Lettuce and baby spinach is now most commonly available in pre-packaged, sealed plastic bags, rather than exposed for consumers to grab at.  This began in Europe in the 1980s but has only recently had a big impact here.  A seemingly minor change, sure, but it's the little things that count.  According to Packaging magazine Australia (it's "Australia's premier packaging news"!), most of the innovation in packaging is developed for the food industry -- like "oxygen scavengers", those weird little sachets that come with pre-made tortillas.

These changes in technology and taste have made it possible to narrow the distance between elite restaurants and home cooking, changes without which MasterChef would not be as engaging and relevant to the nearly 2.5 million Australians who watched the show's final week.  We are served a lot of ideological pessimism about contemporary home cooking.  But MasterChef shows that the proof is in the eating.

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Innovation the loser from book "expropriation"

The Productivity Commission has recommended terminating restrictions on the parallel imports of books.  Such restrictions require the permission of the author's agent, usually the publisher, for the import of the author's books.  This allows different prices to be charged in different markets, bringing authors increased remuneration.  Higher returns for authors mean more incentive to innovate (the reason for granting patents and copyrights in the first instance).

Copyright is a form of property right and, like all such forms, allows its owner to obtain benefits from its exclusive use.

An owner's entitlement to sell or otherwise dispose of a product as he/she sees fit is fundamental to economic efficiency.  This entails charging what the market will bear and, to the extent that it is possible, selling into different markets at different prices.

In an Orwellian interpretation of "liberalisation", trashing copyright to bring about lower prices has already been used to justify withdrawing parallel import restraints for compact discs.

The Productivity Commission recommends a similar approach to authors' property rights.  While this is closer to expropriation than liberalisation, it is plagued with practical considerations.

Arranging and sustaining price differentiation is seldom straightforward.  Even though buyers place different values on a product, price uniformity is likely where markets are linked.

Enforcement practicalities often undermine discriminatory price attempts.  Price differentiation is easier to arrange with goods that cross political frontiers, since the additional layer of government enables contract enforcement, a basic government function.

However, many governments are reluctant to co-operate when it means higher domestic prices.

Moreover, of particular importance to book importing, the blurring of geographic boundaries, particularly with the growing use of Amazon and eBay, is making it harder to enforce contracts that entail price discrimination.

A reconsideration of the marketing approach for, books is perhaps inevitable as it becomes increasingly difficult to prevent arbitrage across borders.

This hardly means the removal of parallel importing restrictions on books should be cause for celebration.  In reducing writers' ability to price-discriminate, it may lower prices.  But reduced returns to authors will discourage, provision of new material.

An unwillingness or inability of governments to assist enforcement of contracts that allow price discrimination between markets has considerable implications for the pharmaceutical industry.

International price differentials are vital to the present arrangements in profitably developing new drugs.

Pharmaceutical firms have historically earned high prices in the unregulated US market but are often forced to accept lower prices where buyer monopolies are in place, as in Australia arid Canada.  And the firms themselves, for humanitarian reasons or simply to maximise profits, will often sell patented products at cheaper prices to Third World countries.

Increasingly, price, convergence undermines this.  Once the products can be imported (or, as is often the case, re-imported) into the US, multiple prices are replaced by a single-price structure.  Where this results in the US price becoming the sole price, customers outside the US will pay more and the supplier will see reduced sales.  If prices shift towards those in the lower-priced markets, volumes will rise, though at the expense of profits.

Copyright owners of books and CDs may well have to acquiesce in the erosion of parallel importing protections and the reduced innovation incentive this entails.

For pharmaceutical firms, market segmentation and price discrimination is even more important.  The end of price discrimination would require revolutionary changes in their approach to research and development.

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Death of author unlikely

The biggest barrier to the Australian book industry's success won't be the demise of parallel import restrictions;  it'll be the cultural cringe spruiked by authors and the publishing industry that stops it being globally competitive.

Yesterday the Productivity Commission released its final report recommending the scrapping of import restrictions for books.  The final report's recommendations went well beyond the draft report's recommendations and proposed the abolition of import restrictions after three years.

In response to the inquiry, book publishers and printers whipped authors into a tizz.  And authors have been used to oppose liberalisation by pulling at the heartstrings of consumers and their sympathy for Australiana.

For example, after Tim Winton recently received his fourth Miles Franklin Award for his book Breath, he used the platform to claim that import restrictions helped foster local authors and end the cultural cringe that pervaded Australian books pre-1980.

But the claims are baseless.

In its review the Productivity Commission asked for evidence since the removal of parallel import restrictions on sound recordings in Australia and most copyrighted works, including books, in New Zealand.

Both occurred in 1998 and the evidence is overwhelming.

Data from the Australian Performing Rights Association shows that since the liberalisation of sound recordings the total royalties paid have more than doubled and the number of artists paid increased by more than 50,000.  Meanwhile the average price of CDs has collapsed by 32 per cent, while total sales have remained relatively stagnant.

Book prices may not collapse as much, but the data from the CDs shows that Australia's cultural industries can still thrive without protectionism.  Evidence from a NZ government-commissioned report found there was no appreciable decline in the publication of local works after the country scrapped import restrictions.  And in 2004 an industry spokesperson conceded that since liberalisation there was an increase in the number of NZ books published.

The case is so clear that Melbourne University Publishing chief executive Louise Adler walked out of a radio debate against Dymocks board member Bob Carr, who simply repeated these facts against the publishers' and authors' claims.

Opponents of decreased liberalisation also argue that without protection the printing industry won't have the economic certainty necessary to invest in the technology that will make the industry more competitive.  But post-liberalisation the NZ printing industry has continued with comparable investment as the manufacturing sector overall.

Arguments that printing industry jobs will be protected also have beenshown up.  An analysis of printing jobs in Australia and NZ shows both are in decline;  the only difference is that Australia's have declined faster, and we are the ones with import restrictions.

The other claim from industry interests and authors is that removing import restrictions will undermine territorial copyright.

But even if import restrictions are in the Copyright Act, they are not necessary to protect copyright.

In every book there are two property rights.  The first is the physical book:  the cover, pages, binding and ink.  The second is the copyright, which is the order of the text on the pages.  So long as a book is printed in a country that is a party to international copyright treaties, import restrictions don't do anything for copyright;  they only protect the publishing and printing industries and unnecessarily hike the price of books.

But the real problem for the industry is that by opposing book imports it is sticking its head in the sand.  We all know the direction of retail book sales isn't just through the local bookstore.  The real growth of sales is through the internet.  Pending foreign exchange fluctuations, books are regularly cheaper to buy on Amazon and import into Australia, even with postage costs.

The recommendations from the Productivity Commission review should have been a wake-up call to industry that government-sponsored protection in a global economy won't last forever.  Instead of trying to perpetuate protection, the industry should be using the remaining three years of protection to make structural adjustments and become globally competitive.  And the best way to do that is to find ways to reduce costs and pass on the benefits to consumers.

The book industry may fear the removal of import restrictions, but consumers won't want imported books if those produced in Australia are the same price or cheaper anyway.

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Fighting Climate Change with Patents

World leaders are talking a lot about climate change, not least in their flashy statement on controlling global temperatures at the recent Group of Eight summit in Italy.  One of the smarter ways they can put this determination into effect will be to protect the intellectual property of green innovators from a growing onslaught by developing-world politicians and mistaken activists.

Intellectual property rights are the underappreciated link in the environmentalist chain.  By rewarding inventors and entrepreneurs, well-enforced patents provide the right incentives for the innovation that will produce technologies necessary to manage climate change.  Yet this fact is getting lost.  Access to low carbon technologies has become a central issue in international climate change negotiations as rich countries put more pressure on the poor to cut their emissions.  Understandably the poor aren't prepared to do so unless they are given cheap access to technologies.  Patents are increasingly viewed as the main obstacle to cheap technology transfer.

So a representative of the Brazilian government, Haroldo Machado Filho, this week told a World Intellectual Property Organisation conference in Geneva that leaders should consider the possibility of allowing "compulsory licensing" for green technologies.  This would be a new loophole in international intellectual property rules that would allow developing-country governments to break patents "for the public good";  such a loophole already exists for pharmaceuticals.  In a similar vein, Indian Climate Change Minister Shri Ramesh asserted late last month that access to intellectual property for low-carbon technology is a "global public good".  This kind of thinking lays the intellectual groundwork for patent violations down the road.

Most worrying, opponents of patents have succeeded in having included in the current negotiating text for a post-Kyoto agreement paragraphs to undermine patents.  The final text won't be finalised until at least the December U.N. Copenhagen meeting, but current proposals range from "compulsory licensing" to the "creation of a global technology pool for climate change" that would socialise intellectual property.

These proposals fundamentally misunderstand why low-carbon technology is expensive.  A January report by Copenhagen Economics, a consulting firm, found that the high prices are most likely a result of the immaturity of technologies, not patents.  New technologies are generally more expensive when there are fewer products competing in the market.  As more technologies are innovated the price is likely to drop.  Most promising green technologies are so new they simply haven't had time to decline in price yet.

The Copenhagen Economics report also notes that weakening intellectual property for green technologies would be bad for the developing world countries whose governments advocate such measures.  A growing number of patents on these technologies are held by developing-country innovators.  China is one of the largest owners of solar and fuel-cell technology patents.  The balance is still in favour of developed-world innovators, but the gap is narrowing fast.  Allowing entrepreneurs in poorer countries to profit from their discoveries will be good both for the environment and for developing-country economies.

Undermining patents won't help access to technologies, but it will stop the next generation of technologies being invented, and with it a long-term solution to achieving the twin goals of developing countries to reduce emissions and alleviate poverty.  Rather than breaking patents, policy makers could re-evaluate tariff regimes and other barriers that can add up to 165% to the cost of some imported green technologies, according to a 2007 World Bank study.  The best path to a green future is not to break free-market principles, but to return to them.

Time to cut cost of running government

Tasmania's demographic time bomb is ticking.  The Tasmanian Chamber of Commerce and Industry's analysis of Tasmania's demographic time bomb clearly illustrates that the State Government will need to tighten its belt.

The time bomb will hit the Government on two broad fronts.

First, the population of the island state is projected to age significantly over the next four decades.  This is expected to lead to increasing demand for age-related services such as health care.

The second component of the time bomb is the impact of declining labour market participation on government revenues.  To put it simply, if there are fewer people of working age, then per-head fiscal burdens will skyrocket.

According to the TCCI analysis, if current policies are left unchanged then the cost of running the government would exceed the size of the entire Tasmanian economy by about 2050.

To avoid this time bomb, the productive capacity of the economy will need to expand significantly over time.  This requires nothing less than a state government dedicated to cutting red tape and easing business costs whenever and wherever possible.

This productivity enhancement agenda would need to be complemented by reforms that cut government costs.

I stated in a report prepared for the TCCI last year that more efficient government services can deliver long-term cost reductions.  But to increase efficiency, the government has to allow private sector providers to compete for the delivery of services.  One way to do this is to allocate government funds, say in education and health, on the basis of a level playing field.  When funding follows the student, or the patient, then the efficient private sector can deliver more services.  This would deliver consequent savings to Tasmanian taxpayers.

The greater competition in government services will also pressure public providers to become more responsive to the needs of people throughout the state.

The need to cut costs through greater efficiency extends right through to government business enterprises and state-owned corporations.  The TCCI study found that only four of 16 entities achieved returns exceeding the cost of capital.

Appointing administrators who can recommend ways for government business enterprises and state-owned companies to deliver better value for taxpayers could be the first step to achieve systemic cost reductions.

Ensuring that government finances remain in a sustainable position into the future will play a key role in avoiding the demographic time bomb.  An annual balanced budget rule, combined with a requirement that government revenues not exceed state economic growth, will be vital in keeping the government on a fiscal leash.

The time bomb is starting to tick and there are many questions that need to be answered if the state is to avoid the economic double-whammy of population ageing and falling workforce participation.

Do people want a strong, growing economy with a diverse private sector that invests and creates attractive jobs?  Should the government leverage the expertise and efficiency of business in delivering the services that Tasmanians want?  Is it worthwhile to keep government budgets honest in the difficult circumstances ahead?  How Tasmanians respond will determine whether or not the state can defuse the time bomb.

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Is Palin manoeuvring to make a run for the White House?

The "Hockey Mom" Governor of Alaska's decision to quit office has raised more questions than it answers.

Sarah Palin's decision earlier this month to resign as Governor of the US state of Alaska remains a mystery.

Is the Republican vice-presidential candidate in 2008 setting the scene for a tilt at the White House in 2012?

Or is the 45-year-old mother of five bowing out of politics altogether, devoting her life to family, some book writing and even hosting her own reality television show?

Who knows?  But two things seem clear:  Palin's premature resignation shows she is not ready for the more demanding rigours and scrutiny as president.  Nor does her decision to quit politics reflect the conventional path to the White House.

First, some history.  Since at least World War II, all but three presidents have hailed directly from elected office, and those who did not had far more impressive CVs than the two-and-a-half year Alaska governor.

Ronald Reagan was a successful two-term governor of California (1966-74) who spent the next six years as the patron saint of conservatives before his 1980 landslide election.  Richard Nixon was a congressman, senator, two-term vice-president who became a Republican Party elder statesman for eight years in the political wilderness before his 1968 triumph.  And Dwight Eisenhower was a 5-star US general who rescued Western Europe from Nazism before winning the White House in 1952.

Palin's record -- small-town mayor, governor of a remote and lowly populated state, failed campaign for vice-president, quit job with nearly 18 months remaining in her first term as governor -- is hardly in the same league as all of the above.

But if she runs for the White House in 2012, her decision to quit politics will merely reinforce doubts about her ability to handle what the Americans call prime time.

In last year's election campaign, the firebrand failed numerous economic and foreign policy tests, and her responses to several all-important issues sounded more like mealy-mouthed spin than sound judgment.

Charismatic and impressive though she was at first glance, as the campaign gathered steam more and more voters became uneasy about the prospect of Palin being a heartbeat away from the presidency -- a concern that took on extra meaning when John McCain would have been the oldest man ever elected to the White House.  True, her anti-abortion, pro-gun and anti-tax views, together with her folksy, gut-level appeal to lower middle-class Americans ("Reagan Democrats", or in Australian parlance "Howard Battlers"), provided ideological red meat for the Republican Party's social conservative base that had grave misgivings about her running mate.

It is also true none of her weaknesses as a candidate has justified the Left's irrational hatred of the glamorous governor.

It is bizarre, indeed disturbing, how Palin -- a working mum who was only the second female vice-presidential candidate in US history -- has driven feminists and so-called progressives into fits of condescension and contempt.  Still, Palin's decision to resign has reiterated widespread concerns about her policy depth and personal judgment.

The consensus among even Republicans now is that she is unfit for office.  So much so that the leading conservative columnist David Brooks has argued the anti-intellectual populist is "a fatal cancer to the Republican party" because her inclination "is not only to scorn (left) liberal ideas but to scorn ideas entirely".

With Sarah Palin not up to the task and seemingly out of contention for the Republican presidential nomination, the onus is now on other conservative politicians to do the hard policy work and sound philosophical thinking to present a credible alternative to Barack Obama in 2012.  The signs are not looking good.

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Public sector spending binge costs us dearly

It is the private sector that brings economic growth and high living standards.  Government is required to keep the peace and ensure the law is upheld.

Other valued government functions involve spending on common facilities such as roads and on basic health and education.

But for the most part, government spending and its close relative, business regulation, detract from economic growth and wealth.

Quantifying the adverse effects of business regulation is notoriously difficult.

But governments have set up deregulation units to help reduce costs and the enterprise-smothering effects that their regulations cause.

In claiming successes in federal deregulation, minister Lindsay Tanner could identify only 30 redundant regulations that he had managed to put to the sword.  Unwittingly he illustrated that there was little substance in the supposed achievements.

Eradicating redundant regulations is almost pointless since the regulations themselves are rarely enforced.

Genuine deregulation requires the elimination of government measures that distort business decisions.

The confusion that Mr Tanner and his colleagues share regarding the need for less regulation is demonstrated in wages policy.

Last week, the Fair Pay Commission ruled against a mandatory wage increase.  That decision recognised the fragility of the economy and the risks to jobs from a mandatory wage increase.

Julia Gillard's "Fair Work" Bill already requires employers to increase wages in vulnerable areas such as retailing.

Unsurprisingly, she regretted the Fair Pay Commission's decision against an automatic pay rise, demonstrating a distressing preference for higher wages rather than keeping people in jobs.

Excessive spending is the other government activity likely to impair incomes.

Recognising this, over the past 20 years governments of many big-spending countries, such as Canada and Sweden, have considerably pruned their budgets.

Unfortunately that has not happened in Australia.

Government spending across all jurisdictions has rocketed and little of the increase has been on productivity enhancing infrastructure.

Recently, Australian government spending has been boosted, especially as a result of Kevin Rudd's spendthrift policies.  State governments have also been no slouches in profligate spending.

The Brumby Government's expenditure this year will be 15 per cent of state product, up from the 12 per cent level it inherited from the Kennett days.

In relative terms that's a massive 20 per cent increase in the size of government and takes the state once more down the path that made us a laughing stock of bad government under Joan Kirner.

Australia and Victoria can and should get by with far less government spending.

Greater spending discipline is needed in Australia if the economy is to remain resilient.

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