Do private schools save taxpayers $4.9 billion a year?

As reported in today’s Australian, the Association of Independent Schools Victoria today released research showing that private schools saved taxpayers $4.9 billion in 2004-05, reflecting the lower subsidies paid on behalf of students at private schools compared to students at government schools. That’s very similar to a claim I made in a post last year.

Having done a lot of work on ‘big government’ since, I am no longer sure that this is quite the way to look at it. This is because while technically all students at private schools are entitled to more heavily subsidised places at government schools, we cannot assume that all students would switch even if private schools received no government money at all. Before state aid for private schools was introduced in the first half of the 1960s, nearly a quarter of students were in private – mostly Catholic – schools. It was trending down, and the Catholic schools were facing serious problems as the supply of brothers and nuns prepared to teach for a pittance shrank. But we cannot assume private school enrolments would have inexorably dropped without state aid. Not all private schools at the time even took the money straight away.

Nearly half a century on, in a much more affluent society, in which education is of greater significance for a child’s future, there would surely be considerable demand for private schools even without any subsidy. Some private schools recieve subsidies that are a fairly small percentage of government school subsidies in any case, and a smaller still percentage of total revenue per student.

A more accurate way of expressing the point would be that to fund private schools on the same basis as government schools would in 2004-05 have cost taxpayers another $4.9 billion, which is why I do not support a standard Friedmanesque flat voucher scheme. Sometimes there are tensions between introducing markets and keeping taxes down.