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Dale Bassett: OECD supports cuts and calls for more education reform

By Dale Bassett, Research Director, Reform

The OECD has just published its annual economic survey of the UK.  The top lines are its support for lower public spending and its call for education reform to go much further.

  • The OECD supports the cuts, and says that fiscal consolidation should be offset by keeping interest rates low, despite inflationary pressures. “The government has embarked on an ambitious and necessary fiscal adjustment ... The planned fiscal consolidation is needed to ensure that the fiscal position will be sustainable over time ... Monetary policy should hence remain expansionary, even if headline inflation is significantly above target, to support the recovery.”
  • The OECD calls for reform of VAT, along the lines that Reform proposed last year. “The United Kingdom has one of the least efficient VAT systems in the OECD, reflecting widespread application of reduced and zero rates. The VAT system became even more unbalanced when the standard rate was increased from 17.5% to 20% in January 2011 while low rates and exemptions remained unchanged. Ending exemptions and increasing lower rates would provide a more efficient system and raise more revenues, while targeted measures should be directed at compensating poorer households.”
  • The OECD echoes Reform’s call for all schools to have freedom over pay and conditions. “Locally maintained schools should have the same opportunities for hiring staff and negotiating wages as academies and Free Schools.”
  • The OECD calls for greater school choice to improve standards and reduce disadvantage. “User choice is also limited by low supply flexibility through entry and exit and high capacity utilisation, leaving locally maintained schools with a captive market. Entry of new schools should be encouraged even if it temporarily creates some excess capacity.”
  • The OECD endorses the rise in tuition fees and calls for further reform of university funding. “In view of the high levels of public subsidies students should pay a larger share of the costs. The government’s proposal to allow universities to increase tuition fees significantly switches some of the costs of funding higher education from taxpayers to graduates. The government could pursue reforms to further lower the public share of funding, e.g. through lower grants to universities.”


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