Photo from Mission Heights Primary School

Failed Schools: How to Fix the Education System

New Zealand’s education system should be the pride of the nation, a place of rigourous and world-leading teaching and learning and an avenue of social mobility through which children born of the worst-off parents can become leaders of the nation. This ideal was somewhat achieved in the earliest years of state education in New Zealand, characterised by a decentralized approach in which headmasters and school boards had substantial freedom to innovate and teach their students in whatever way they saw fit. This early era saw the emergence of such great schools as Auckland Grammar School (and its various offspring, like Epsom Girls Grammar), Wellington College and Otago Boys/Girls High School, which continue to lead the state sector and fiercely defend their remaining independence.

The Current Situation

New Zealand’s income mobility is about average, but educational mobility is low. Short term income mobility is significant, with many households with low incomes at any point experiencing higher incomes within a short time, though there is also a group that doesn’t. … But the link between parents’ socioeconomic status and a child’s educational outcome is very high in New Zealand compared internationally, suggesting that New Zealand’s education system does not lean against socioeconomic background as much as the education systems of other countries

– The New Zealand Treasury: Living Standards  – Background Note: ‘Increasing Equity’

However, the egalitarian ideal detailed in the introduction has been left behind with the vast growth in Government intrusion and centralization in the education system. Now those great schools and many other top-tier state and state-integrated schools like them have become the preserve of the wealthy, who can afford to live in their exclusive zones, the product of Government and teachers’ union intervention. All the while, state schools in less well-off areas of New Zealand, like South Auckland, are left to flounder, and not because of any fundamental difference in students or teachers but because of a failing educational system.  Such anecdotal examples of tremendous educational inequality are backed up by empirical evidence. According to a 2015 OECD report5, New Zealand’s inequality in educational outcomes attributable to socioeconomic status at the mid-high school stage is worse than economically comparable nations like the United States, Australia and Canada and far higher than the OECD average.

This tremendous discrepancy in educational outcomes is not only antithetical to the fundamental New Zealand value of equality of opportunity, it is also a good example of government failiure. Systematic educational inequality, which is rife in New Zealand thanks to various government failiures detailed herein, essentially results in a misallocation of resources, by assigning our limited educational resources to students based not on their academic merit and the future returns of the societal investment in their education but on the ability of their parents to purchase a home in a desirable location. It follows logically that if we limit the opportunities avaliable to capable children, born in worse-off circumstances, while expanding those avaliable to less capable children born into wealthy families, we aren’t allocating our limited resources efficiently.

Other social costs of the socioeconomic inequality in the New Zealand education system include its impacts on crime rates and the increased pressure on social services it causes. A British study in 20086 found there was a significant correlation between increasing educational inequality and juvenile crime rates. Many other studies7 detail the costs of educational inequality and have found reducing it would have many and varied positive societal impacts, including higher tax reciepts and lower health and welfare expenditures.

Given the wealth of evidence, it is the view of the Institue that the systematic educational inequality in New Zealand is undesirable. We also believe it is the responsibility of Government to fix it, given they created the problem in the first place.

Our Solution

The fix to the system we propose is simple: let parents and teachers choose. It is our belief that parents are best placed to choose where to send their children and that teachers are the best experts on how to teach children. It is also our belief that such choices shouldn’t be restricted to the upper classes of society, as is the case now, who can move into desirable neighbourhoods and send their children to private schools. Our belief in choice is fundamentally based in our liberal ideology and our belief that central planning is inherently flawed. It is also backed up by evidence. A report 8by the Academies Comission of the United Kingdom, which is comprised of educational experts, found that the academies program in the United Kingdom, in which schools were granted far greater independence and parents given more choice, had “provided much-needed vitality to the school system” and that overseas examples, for example public charter schools in the United Sates, had done much the same there. However, the same report reported concerns about accountability and the particular performance of certain schools in the program. Such concerns are addressed in our proposal, which aims to create a liberal, decentralized marketplace for education in which schools and other providers compete, leading to improved educational outcomes for all, not just the wealthy, and improvements in efficiency.

First, every state school would be privatized. This process would be relatively simple and would involve every school being made into a new legal organization independent of the Crown called a School Trust. These trusts would be run by a Board of Governors, elected in the same manner as existing school Boards of Trustees and with the some composition of members, and would be non-profit. This process would ensure the independence of each school from the Crown and their full autonomy. Each one of these School Trusts would have a Constitution, identical between schools at the beginning of the process but ammendable by a vote of the parent body. They would also sign an Education Provider Contract with the Crown, establishing their requirement to maintain a basic level of quality and the various other obligations set out later, as well as an ability for the Crown to take over the Trust in cases of gross failiure.

Most of the auxilary functions of the Government in education would also be privatized. Education Review Office would be privatized into an Indepedent Education Inspectorate (IEI). The NZ Qualifcations Authority would also be partially privatized, with a new body called Assessment NZ formed to manage the setting of exams, while the NZQA would maintain overall responsibility for the wider qualifications framework in New Zealand.

The IEI would be an independent not-for-profit organization, funded by an annual compulsory contribution from each education provider and a small Government grant. It would be lead by a board of leading educationalists, half elected by provider management, half appointed by the Government and chaired by an independent person elected by this board and would assess the quality of each educational provider, including all schools. The assessments of each provider would be written in plain English and made publically avaliable to all. In addition to these public reports, IEI would also report to the Secretary of Education the names and details of any provider it found to be significantly underperforming. The Secretary, with the advice of the Commerce Commission and an expanded team of educational economists at the Ministry, would then perform an evaluation of how quickly the market would take care of the quality issue and if he found this to be unsatisfactory, report to the Minister of Education, who would make the final decision on whether to withdraw Government funding from the provider, to hasten its demise or improvement, or, if a School Trust, to implement Crown control. IEI would also, using data from Assessment NZ and other exam boards and assessment providers, compile annual leage tables, released publicly, detailing the impacts various providers had on the educational outcomes of students. Providers would be required to provide all prospective students and parents a copy of their most recent IEI quality report and league placement and disclose, verbally before enrollment, any areas of significant concern raised in the report.

Assessment NZ would also be an independent not-for-profit organization, formed from the NZQA and curriculum and assessment branches of the Ministry of Education. It would create curricula, assessments and examinations for schools (i.e. maintaining National Standards, the NZ Curriculum and NCEA or developing its own new approach). It would be funded by any prices it charged schools per exam or to use its syllabi. It is important to point out that no part of the Assessment NZ programme would be compulsory and new exam boards and innovative curriculum approaches competiting with Assessment NZ would be permitted and encouraged. The organization’s Board of Directors, responsible for setting the direction of its operations, would be comprised of a representative of Universities NZ, a representative of other further education providers, the Secretary of Education (or his delegate) and two representatives each of industry and the schools. Assessment NZ’s Executive Director, responsible for the day-to-day management of the organization, would be a prominent educational leader appointed by this board.

Each New Zealand Citizen/Permanent Resident under the age of 18 would then have an Educational Provision Account established for them. These interest-bearing accounts would resemble a bank account and would be managed be managed by a new Crown Provsion Corporation called the National Education Fund, which would invest the funds saved in low-risk assets like central/local Government debt. The legal guardians of the account holder would be given signing authority over it, however funds could only be spent with accredited providers who had signed an Education Provider Contract with the Crown, including schools, transportation providers, uniform shops, tutelage firms and stationery shops.

These Educational Provision Accounts would now form the backbone of the new school funding system. Schools wouldn’t be funded based on their roll anymore but rather paid the prices they charge by parents, who would pay out of these accounts. Each child would recieve an Education Grant each quarter into his EPA, calculated by the Ministry of Education with IRD data based on his parents’ income and the average price of educating a similar child (which would depend on the student’s stage of education [i.e. whether he was in Year 3 or 13] and any special needs he had). The higher the income of his parents, the lower the fraction of the expected price provided by the state. While the perverse incentives from this setup are undesirable, the way it somewhat evens the amount avaliable for educational expenditure is, in our view, sufficently positive to merit this.

All schools, including new and private schools, would be eligible to recieve funding from these EPAs so long as they met and continued to meet certain quality requirements assessed by the IEI and agreed to an Educational Provider Contract. These Contracts would include requirements that school not discriminate against candidates to attend based on their ability to pay and wealth and limitations on legacy preferences in admissions. If a student was accepted into a school the fees and other miscellaneous expenses for which he (and his parents) was unable to pay, he would be able to apply for special government funding to attend. In such cases, the Ministry would calculate the students’ total need for the year and would cover 30% of this with the school being required to cover the remainder. This would function as a disincentive for schools to charge high fees and if they did, as a cross-subsidy in which those who could afford to attend the school would fund the less-well-off students.

Others would also be able to pay into EPAs for students, including parents and other family and scholarship funds. Payments into EPAs could be claimed against a contributor’s taxable income and there would no limit to annual contributions. Withdrawls from EPAs would be prohibited until the account holder reached the age of 18 and declared his intention not to pursue any further education and in such cases, only remaining privately-contributed funds (which would be exhausted first, before Grants) would be eligble for withdrawl and would be taxed at the account holders’ average tax rate.

At the conclusion of a students’ secondary education, universities and other further education providers would also be eligible for EPA payment, including from remaining Education Grant funds and any other grants, however tertiary education is beyond the scope of this report.

On the teacher regulation front, schools and educational providers would be permitted to hire any person they saw fit to teach students, however each of these people would have to first register with the Ministry of Education and have a background check performed to ensure student safety.

Anaylsis of Our Proposal

Our proposal of an educational marketplace, in which students not from wealthy families were financially supported by the Government, will expand choice for the less-well-off in society. Rather than being limited to the local school in his area, which may or may not suit his particularities as a student, each student in New Zealand would have the entirety of the educational landscape opened to him. Elite schools would be able to select based on ability not on address. Schools catering to specific needs and desires could be set up, allowing each child to access an education customized to himself, unlike the one-size-fits-all approach common in the state system today. This system would allow a poor kid from Manurewa and a wealthy farmer’s son from Morrinsville to attend the same school and dramatically increase social mobility in our country. Educationalists would also be able to innovate and create new schools and parents, not unaccountable government bureaucrats, would become the ultimate arbiters of quality.

Though our more radical liberal side is annoyed at the inclusion of a perverse incentive structure with regard to the Education Grants and the requirement for public supervision of these schools, we feel that, given the need for taxpayer funding for schools to ensure equality of opportunity, these are neccesary evils to ensure that those in need are able to afford high-quality education and that taxpayer money is spent in a responsible manner.


  1. Organisation for Economic Co-operation and Development – Economic Survey of New Zealand 2015
  2. Ricardo Sabates, Leon Feinstein and Anirudh Shingal (Centre for Research on the Wider Benefits of Learning, Institute of Education [University of London]) – Educational Inequality and Juvenile Crime: An Area Based Analysis
  3. Aletha C. Huston – Children in Poverty: Child Development and Public Policy
  4. Academies Comission – Unleashing Greatness: Getting the best from an academised system
  5. Organisation for Economic Co-operation and Development – Economic Survey of New Zealand 2015
  6. Ricardo Sabates, Leon Feinstein and Anirudh Shingal (Centre for Research on the Wider Benefits of Learning, Institute of Education [University of London]) – Educational Inequality and Juvenile Crime: An Area Based Analysis
  7. Aletha C. Huston – Children in Poverty: Child Development and Public Policy
  8. Academies Comission – Unleashing Greatness: Getting the best from an academised system
  9. Organisation for Economic Co-operation and Development – Economic Survey of New Zealand 2015
  10. Ricardo Sabates, Leon Feinstein and Anirudh Shingal (Centre for Research on the Wider Benefits of Learning, Institute of Education [University of London]) – Educational Inequality and Juvenile Crime: An Area Based Analysis
  11. Aletha C. Huston – Children in Poverty: Child Development and Public Policy
  12. Academies Comission – Unleashing Greatness: Getting the best from an academised system

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