Annamari Ylönen

Anne West

English

Research Papers in Economics

MARKET-ORIENTED
REFORMS IN SCHOOL-BASED
EDUCATION IN ENGLAND
AND FINLAND1
ANNE WEST* AND
ANNAMARI YLÖNEN** 
Introduction
Interest in market-oriented reforms in school-based
education has been growing in recent decades.
However, the meaning of “market-oriented reforms”
varies from country to country. This is important in
light of increasing interest in international compar-
isons of education systems, policies and educational
outcomes. There is a tendency to assume that com-
parisons of this sort can be carried out without diffi-
culty and that apparently similar policies and con-
cepts have similar meanings in different contexts.We
focus in this paper on two countries: England and
Finland. In both countries notions of choice, diversi-
ty and autonomy underpin the school-based educa-
tion reforms but the policies differ significantly.Thus
we argue that policies implemented in different coun-
tries, given their differing contexts, need to be con-
sidered with care and precision. This is particularly
important for both researchers and policy makers
when making comparisons across countries.
In a variety of European countries there have been
moves towards liberalising the welfare state. Both
England and Finland have increased school diversity
and, in theory at least, parental choice. In addition,
certain functions have been decentralised to lower
levels of the education system, and different levels of
autonomy are apparent.Some elements of “markets”
have been incorporated into the school systems in
both cases. However, there are clear differences in
terms of the nature of the policies introduced (West
and Ylönen 2010). This affects the extent to which
generalisations can be made about the effectiveness
or impacts of choice policies in school based educa-
tion. In short, whilst there are apparent similarities,
there are differences in terms of the type of choice
policies that have been introduced, the extent of
school autonomy and the financial control exerted by
the central and local government.
Institutional context
In both England and Finland comprehensive schooling
was introduced in the 1960s although in different ways
and with differing consequences. In Finland, the 1968
Comprehensive School Act was aimed at achieving
equality of outcome not merely equality of opportuni-
ty.The previous socially and regionally inequitable sys-
tem of private and publicly-funded schools was radi-
cally changed to bring about a near universal compre-
hensive education system. In England, in 1965, follow-
ing the election of a Labour government the previous
year, local authorities were requested to submit plans
for the introduction of comprehensive education.Even
though the Conservative government elected in 1970
withdrew this request,proposals for comprehensive re-
organisation continued to be submitted by local au-
thorities and by the early 1980s comprehensive educa-
tion was nearly universal.However,the system differed
across the country and academically selective grammar
schools were retained by some local authorities.
Education policy from the 1980s
From the 1980s onwards in both England and Finland,
major education reforms, albeit different in kind, were
introduced. An extensive programme of decentralisa-
tion had begun in Finland in the 1980s. In 1993, local
authorities started receiving previously earmarked
funds from central government in a lump sum, and
they could thus decide how funds were divided be-
tween different services (Rinne et al. 2002).
The situation was not dissimilar in England until
2006–07. Since then the government has provided a
CESifo DICE Report 4/2011 50
Reform Models
* London School of Economics and Political Science.
** University of Exeter.
1 Special thanks to Piia Seppänen and Janne Varjo for providing
details of recent policy developments in Finland.CESifo DICE Report 4/2011 51
Reform Models
Dedicated Schools Grant to local authorities to fund
school-based education. In England, the goals of
decentralisation and cost-cutting were less significant,
where market principles were introduced into school-
based education with the aims of increasing education-
al standards and improving economic competitiveness.
The 1980 Education Act gave an increased emphasis to
parental choice of school and the 1988 Education Re-
form Act established a national curriculum and testing
programme and significantly,created a “quasi-market”
in the school system. Parental “choice”, formula fund-
ing of schools based primarily on pupil numbers, the
requirement for schools to admit pupils to their physi-
cal capacity and the publication of public examination
and national test “league tables”2 resulted in the incen-
tive structure changing so that schools sought to max-
imise their levels of funding,and pupils’ test and exam-
ination results (West and Pennell 2000).
In summary, the reforms in England were clearly
market-oriented, with major incentives to maximise
test and examination results and levels of funding.In
Finland, the reforms focused on a programme of
decentralisation to a local level, but school diversity
and choice were significant elements of the reforms.
Choice, diversity and funding
Market-oriented education reforms are generally
associated with parental choice and school diversity
– with funding typically following pupils – which
encourages schools to compete with one another for
pupils and thus increase their income.
Finance
In Finland,although local authorities are responsible
for the allocation of resources to schools, there is no
regulation about how funds should be allocated to
schools.Indeed,there can be much diversity between
the funding methods chosen by different, and highly
autonomous,local authorities.In the capital Helsinki
per capita funding of schools was introduced in 2007
with each pupil bringing a certain level of resource
to the school she or he attends.With funding follow-
ing the pupil, a stronger school market has devel-
oped, with schools having incentives to compete for
children to attract more funding.In other municipal-
ities the situation is very different. In one municipal-
ity outside Helsinki,for example,the funding system
has been partly designed to restrict the expansion of
schools which had become more popular than other
local schools; associated with this, there has been a
restriction of parental choice and school diversity. In
this case, equity considerations, together with finan-
cial and demographic considerations have affected
decision-making (Ylönen 2009).
In England, the government allocates funds to local
authorities to fund schools;as in Finland the amount
allocated to different local authorities varies (e.g.,on
the basis of pupil numbers and different levels of
need). Using formulae devised by local authorities
and in accord with government regulations, funds
are distributed to schools:the allocation is based pre-
dominantly on pupil numbers. Thus, the English
financing system is heavily controlled, with central
government regulating the funding methods.
Parental choice and school diversity
For school choice to be exercised there has to be a
diversity of providers. In both England and Finland
there is a relatively small private fee-charging school
sector. Within the publicly-funded school sector
there is diversity in both countries. In Finland, diver-
sity was introduced following the new National Cur-
riculum in 1994.This resulted in a shift from a stricter
national curriculum to more variable school-based
curricula, and it encouraged schools to specialise
(Norris et al. 1996).
Parental choice was made explicit with the 1998
Basic Education Act. Local authorities were consid-
ered as one large “district”,and parents could choose
a school of their choice within the municipality
(Ahonen 2003).However,it is significant that only if
there are places left after local pupils have been
assigned to a particular school can parental choice
be taken into consideration (see Rinne et al. 2002).
The local authority is obliged “to arrange basic edu-
cation for children of compulsory school age residing
in its area” and to assign the child to a neighbour-
hood school ensuring that travel to and from school
is “as safe and short as possible” (Finlex 2011).
Parents may apply for a place for their child at a
school other than the local school and schools with a
special emphasis on one or more subject areas may
admit pupils on the basis of an aptitude test. How-
ever,even in this case,the municipality can prioritise
2 These are intended to provide information to enable parents to
make informed preferences about the school they would like their
child to attend (West and Pennell 2000).children living in the local area; this also applies to
specialist classes (Finlex 2011).
In the large cities it appears that local authorities have
in fact assisted the development of competitive school
markets by deciding that some catchment areas in city
centres should be so small that, in practice, a large
majority of pupils can be “selected in” through admis-
sions policies (Seppänen 2001).Subsequently,the most
popular schools, which have strong specialist agendas
and tend to be located in close proximity to city cen-
tres, have become “selective” as most pupils are not
from the local catchment area (Seppänen 2003).
Evidence about the outcomes of market reforms in
terms of equity and social justice is limited to small-
scale research carried out in the largest cities, partic-
ularly Helsinki, where competitive educational mar-
kets in compulsory education have been introduced.
The research suggests that it tends to be largely mid-
dle class parents who have exercised their ability to
choose, and also that some popular schools have
been able to “select in” advantaged intakes of pupils
(Seppänen 2001; 2003). Seppänen (2006) also found
that parental choice has led to segregation of the pu-
pil population in secondary schools on the basis of
parents’ education, socio-economic status and in-
come,and to a greater extent than would be the case
with school catchment areas.
In England, there was some diversity in the publicly-
funded school system prior to the 1980s, with volun-
tary schools (predominantly with a religious charac-
ter), comprehensive schools, and in some areas gram-
mar (academically selective) schools. The 1988 Edu-
cation Reform Act allowed for “independent” city
technology colleges to be established, with capital
costs (in theory) being met by private sector sponsors
and running costs met by the government. Publicly-
funded schools could also “opt out” of local authority
control and become “grant-maintained” and funded
by central government. Schools were also able to spe-
cialise in certain subject areas and select children with
aptitude in particular subject areas. The focus on
“choice” and “diversity” in England continued under
Labour administrations (1997–2010), although there
were some changes. Grant-maintained schools be-
came, in the main, “foundation” schools and the spe-
cialist schools programme was expanded. Publicly-
funded independent schools, known as academies,
were introduced.These were initially set up to replace
schools with low levels of pupil attainment. They re-
quired a financial contribution from a donor with rev-
enue costs being covered by the government. (Most
city technology colleges also converted to academy
status.) The Conservative-Liberal Democrat Coalition
Government,elected in 2010,continued the academies
programme but also changed it to encourage schools
judged “outstanding” by the schools inspectorate to
convert to academies (with no sponsor) in accordance
with the 2010 Academies Act. In addition, under the
same legislation, parents and other bodies are able to
set up “free schools”, another form of academy (i.e.,
publicly-funded independent schools).
Parents are required to specify “preferences” for the
schools of their choice, and children must be admit-
ted to a school,on demand,up to the physical capac-
ity of the school.3 The decision about which child
attends which school is made either by the local au-
thority or by an individual school (in the case of vol-
untary-aided and foundation schools and acade-
mies). If there are more applicants than places avail-
able, the published admissions criteria are used to
decide who should have priority for a place. Local
authorities and schools responsible for their own
admissions decide on their oversubscription criteria,
with guidance being provided by the government.A
key factor is that admissions criteria should be clear,
fair and objective (West et al. 2011).
Concerns about access to different types of school
have been raised. Schools with responsibility for their
own admissions are more likely than others to use cri-
teria that enable pupils to be selected in and out of
schools – for example voluntary-aided schools gener-
ally select on the basis of religion and a higher propor-
tion of foundation schools select a proportion of pupils
on the basis of aptitude or ability (West et al. 2011).
Significantly, areas where there is school allocation –
by religion, aptitude in a subject area, or payment of
fees – have been found to have higher levels of segre-
gation (in terms of poverty; Gorard et al. 2003).
Discussion and implications for policy 
There are clear differences between the systems and
their development in Finland and England but in both
cases elements of markets have been introduced into
the compulsory school system emphasising notions
such as parental choice, school diversity and schools
competing for pupils. The rationale for introducing
education reforms from the 1980s varied. In Finland
CESifo DICE Report 4/2011 52
Reform Models
3 Except in the case of fully academically selective grammar schools.CESifo DICE Report 4/2011 53
Reform Models
decentralisation was a key factor.The system was seen
to need modernising and the introduction of elements
of the market provided a suitable solution.In England,
a key focus was to increase competition between
schools with the aim of raising standards. There was
also a desire to reduce the power of local authorities
and increase the autonomy of individual schools.
The Finnish legislation gives local authorities a key
role in determining the school to which pupils are
allocated. The priority is to ensure that every child
has a place at a local school if that is what parents
want and also to ensure that travel to school is as
safe and as short as possible. Parental choice is re-
stricted in Finland.Thus, although parents can make
a request to go to another school, this can only be
granted if there are places available after having al-
located pupils who live near the school.
There are no formal published “league tables”of test
or examination results to inform parental choice.Nev-
ertheless, there are some similarities between Fin-
land and England in relation to selection and spe-
cialisation. Finnish comprehensive schools can spe-
cialise and select pupils,although even here the local
authority can decide to give priority to children re-
siding in its area. In England, legislation is less pre-
scriptive in relation to access and admission than in
Finland – the local authority has a more limited role.
However, in relation to funding schools, the legisla-
tion is more prescriptive in England.
Regulations relating to school access and school fi-
nancing vary in England and Finland. In Finland,
strong legislation relating to school access is applicable
across the country, restricting variation between
schools and municipalities. This is the legacy of the
stronger interpretation of equality of opportunity as
practised in the comprehensive school system of the
1960s. However, there is no such legislation relating to
the financing of schools, which can create inequities
within the system. Thus, there is considerable autono-
my for municipalities to design education services in
different local contexts according to different circum-
stances and priorities. This autonomy explains why
some municipalities such as those in the south of the
country, particularly in Helsinki, have been able to
introduce more explicit school markets than others
where development priorities have been different
(Ylönen 2009).Whilst in principle,local authorities can
decide that funding follows pupils, in practice this may
only be feasible in larger cities where there is a higher
number and greater diversity of schools. In England,
legislation relating to school access is underpinned by
guidance and limited regulation, allowing for signifi-
cant variation between schools and local authorities.
However,legislation relating to school funding is more
prescriptive.Thus Finland and England vary along the
two policy dimensions of access and admission on the
one hand and school finance on the other.
In conclusion,recent education reforms in England and
Finland, although similar in some respects, reflect dif-
ferent historical and political contexts. In Finland, local
authorities play an important mediating role in relation
to school access and admissions: they have clear duties
and responsibilities laid down by the law.This is not the
case in England. However, in Finland, local authorities
have more autonomy and power in relation to the allo-
cation of resources to schools than they do in England.
Our analysis demonstrates that it cannot be assumed
that the notions of choice and diversity are similar
across countries. Moreover, the outcomes of such re-
forms of the school-based education system cannot be
assumed to be similar. Policy goals, policy instruments
and policy implementation are all significant factors
when making comparisons between jurisdictions.
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Market-oriented Reforms in School-based Education in England and Finland

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Market-oriented Reforms in School-based Education in England and Finland

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