Education `helps to cut inequality'

HIGHER GOVERNMENT spending on education not only boosts the level of earnings, it also helps reduce income inequality. New research finds that a fall in UK education spending as a share of GDP to its current level of about 5 per cent can explain a doubling in the spread of earnings.

Economists have long known that more and better education translates into higher incomes. But the scale of the impact of education spending on income inequality, revealed in today's quarterly bulletin from the National Institute of Economic and Social Research, is surprising.

The researchers, Michael Biggs and Jayasri Dutta, report: "The long-run impact of modest changes to public education expenditures on the inequality of earnings is likely to be substantial."

Inequality in the UK increased during the 1980s and early 1990s, with the top tenth of the income distribution getting 26 per cent of the pie. There is evidence in the most recent figures that the dispersion has stopped getting worse.

Richer parents tend to opt out of the state system, sending their children to private schools.

These children would go on to earn 50 per cent more on average than their state-educated counterparts. Average incomes would be higher, but inequality far greater.

Increasing resources for state schools would raise average earnings and reduce inequality. The findings vindicate the Government's emphasis on the importance of education.