Is education vital?

If Labour were to spend massively on every school, would the results justify the cost? Lucy Hodges finds out whether economic success can be bought in the classroom

We are all familiar now with Tony Blair's three big ideas: education, education and education. We know the Labour leader wakes up each morning with a phrase adapted from Bill Clinton: "It's the education system, stupid". We know he has promised to focus like a laser beam on homework, class size and home/school contracts. But do we really know how important education is?

It is considered axiomatic that more money spent on education will make us more prosperous in the long run. But will it? A group of economists at the London School of Economics is sceptical. And last week at a lunchtime seminar they gave Margaret Hodge, Labour MP for Barking and an LSE governor, a piece of their mind.

What they are questioning is the assumed link between education and economic performance. Mr Blair, and many educationists, see a connection between the two: the economy is performing relatively poorly; so is the education and training system; therefore the two are related.

Peter Robinson, a research officer at the LSE's Centre for Economic Performance, is dubious. He has correlated the science and maths test scores of 14- year-olds in 26 countries with the gross domestic product of those countries and found that there is a very weak link between them. The United States, for example, has the most dynamic economy in the world, yet its 14-year- olds are below par in maths and mediocre in science. Germany, another successful economy which is thought to have a superior education system, performs at about the same level in maths as the US and England (see table: the differences between the three countries in maths are not statistically significant).

A glance at the table for how 14-year-olds do in science shows England to be significantly above average - ahead of those powerhouses, America and Germany. So, we may be poor at maths but we are rather impressive at science. Perhaps we should be patting ourselves on the back rather than beating our breasts. Our schools are clearly doing a good job here. Given such evidence, why is it that Mr Blair & Co keep banging the education drum?

"Education and training are like motherhood and apple pie," says Mr Robinson. "You can't not be in favour of education and training. We all think it's important, and a politician who talks about it is, in a sense, on safe ground. So, one cynical interpretation would be that when politicians talk about education and training, it allows them not to talk about other things which are much more contentious but perhaps just as relevant, such as the single European currency and social policy."

Other economists are similarly sceptical. Howard Glennerster, professor of social administration at the LSE, thinks that what matters for economic growth may be not so much the average education level, but educating the best brains to university level and beyond. He points out that although America may have fairly low average achievement in maths and science, it has very high performing students at the top. These are the nerds who attend universities such as Harvard, MIT and Berkeley. Moreover, the US invests large sums in research for these brainboxes - unlike the UK.

"It may be that economies that have quite a lot of good research institutes and highly educated people at the top who are flinging ideas around and innovating and have enough of a university-educated population for these ideas to spread to be taken up by small business - maybe those sort of economies work rather well," he says.

The fact is that economists don't know why one country is successful and another is not. Richer nations have more educated workforces than poorer ones, but no one knows whether education was the key or whether it simply followed economic development. One thing on which most are agreed is that a market economy is an essential prerequisite.

Mark Blaug, emeritus professor of economics at Exeter University, says the attitudes of the people are also vital. The desire to achieve, combined with thrift, are crucial traits. So we are talking here about the general culture. "Schools reflect that rather than produce it," he says.

Some educationists share the economists' scepticism. Professor Gareth Williams of London's Institute of Education is agnostic on the issue. "The relationship between education and economic growth is extremely unclear," he says. But, for reasons of equity, it is difficult to deny people the education that a small elite in Britain have enjoyed for a long time.

Most education experts, however, disagree strongly with the LSE economists. A spokesman for David Blunkett, shadow Education Secretary, was incredulous at their ideas. "Education is absolutely crucial if we're going to get people back to work and off the dole queue," he said. "You can have academic discussions about issues but the reality is that, as far as business people and individuals are concerned, education is vital. If we take the attitude that it doesn't matter - it is not the most important issue - we will be letting down future generations, and we will be letting down this country."

Mr Blunkett's spokesman invoked the example of Singapore. "If you look at Singapore, which will overtake us in the next 10 years in terms of income, you have a strong link there between the education system and the economy."

Not surprisingly, educationists tend to support Tony Blair. Sir Christopher Ball, director of learning at the Royal Society of Arts, thinks the Labour leader has got the right big idea. "Learning pays," he says.

Margaret Hodge accuses the LSE academics of complacency. "We're not prospering terribly well relative to other economies," she says. "We have to do better and raise our skills if we're to retain world-class status. We don't spend that much less as a proportion of GDP on education than our competitors, yet we're not performing on certain indicators as well as other countries. The latest example of our shortcomings was published in a report only last week, showing British adults were worse at doing simple sums than adults in Sweden, France, Holland, Denmark and Australia."

Many observers, including Mrs Hodge and Professor Glennerster, believe that there is one key area where Britain should be spending more, because it has been shown to be effective in improving educational performance. That is in the early years - the under-fives. Our Continental neighbours have invested in this area with impressive results. And an American project, Highscope, has illustrated how much can be achieved with disadvantaged children by providing them with education and health care from an early age.

It is now received wisdom among governments of all political colours in OECD countries - those that are the most highly industrialised - that improvements in education and training are needed to cope with long-term structural changes in economies, according to Donald Hirsch, an OECD consultant. "The fact that it's very difficult to find a simple correlation between education and economic performance doesn't disprove that there is a connection."

We need to think how as a country we're going to compete in the world, says Professor Alan Smithers, of Brunel University. We cannot compete on cheapness, because Korea, China and the Pacific Rim outperform us. "Our best bet is through value-added, that is, through making high-quality products which require high levels of skills and education. That is the route the Germans have gone down, and it is probably the route for us."

None of which washes with Peter Robinson of the LSE. The Asian tiger economies are doing very well economically, he agrees. But the reason is that they're playing catch-up with the rest of us. Once they've caught up, their economies will slow down, just as Japan's has done.

And although he agrees that the British economy and its education system have problems, he doesn't believe they are that terrible. The UK economy is not in dire shape. It is mediocre, he says. The Labour Party is putting too many eggs in one basket in its emphasis on education and training. "What about the health service and community care for the elderly and the disabled?" he asks.

There are problems with maths in schools which deserve to be discussed in a sober fashion. "But we're not likely to get that sober debate if we're in such a panic about it all. Panic tends to lead to bad public policy".