The week before the Budget, the Government announced that there would be an extra $512 million of funding for education over the next four years. Judging off the headlines this week, one would think that $512 million was being removed from Vote Education. However it is a problem, largely of the Government's own making.

As part of announcing the $512 million extra funding for education, the Government said it was going to make a "small" change to teacher/student ratios. This would free up $43 million a year, which would be reinvested into improving teacher quality.

The impact on schools was heralded as minor, specifically that "90 per cent of schools will either gain, or have a net loss of less than one Full Time Teacher Equivalent".

At the time of the announcement, there was little reaction. A loss of no more than one teacher per school over the next five years was seen as a reasonable trade off to improving the quality of teachers. There is in fact a wealth of evidence that teacher quality has a far larger impact on educational outcomes than class sizes.


The Grattan Institute in Australia has calculated that a 10 per cent increase in teacher effectiveness would add $90 billion to the Australian economy. As a contrast they note a 41 per cent increase in funding to reduce class sizes over the decade to 2006 saw no real improvement in student performance. In fact reading performance declined.

One of the world's top educational economists, Eric Hanushek, has done a study of 277 different studies on class sizes. 72 per cent found no statistically significant impact on educational outcomes with reduced class sizes, 15 per cent found a positive impact and 13 per cent a negative impact.

Reports cited by the New Zealand Treasury have concluded a high performing teacher, compared to an average teacher, is equivalent to a ten pupil decrease in class size. In New Zealand there has been a 20 per cent increase in per child funding, and no significant improvement in educational outcomes.

The assertion that teacher quality is more important than class size probably resonates with most New Zealanders. I doubt many of us can recall which classes we attended had the smallest size, but almost everyone can instantly recall the teachers who connected with us, and inspired us.

A belief that teacher quality is far more important than class size, is not restricted to the centre-right of politics. The Grattan Institute is non-aligned and primarily government funded. Also Australian Labor MP Andrew Leigh has blogged:

In research with Chris Ryan, we found that Australian numeracy scores had failed to improve from 1964 to 2003. Since then, Australia's scores on the international PISA test have fallen. At the same time, the academic aptitude of new teachers - relative to their classmates - has declined. One possible reason for this is that Australia chose to focus on reducing class sizes rather than attracting the best teachers.

Leigh continues:

If we're learned anything from the economics of education over the past few decades, it's that the relationship between spending and outcomes is extremely weak.


Leigh is the Federal Labor MP for Canberra. He is also a former professor of economics, and has worked as an advisor and researcher to left wing parties and think-tanks in Australia, the United Kingdom and the United States.

So if the policy announced the week before the Budget is the best way to achieve better educational outcomes, why did the Government announce a partial retreat this week?

The answer is because that for some schools, the impact was not minor. A reduction over time of one teacher is a barely noticeable impact. However it seems the Government did not realise that some schools would face losing six or seven staff, representing up to 15% of the total staffroom. It was a bad look for the Government that the details were not fully known or understood by Ministers and MPs.

As parents received school newsletters detailing the impact, the letters, phone calls and e-mails to MPs started. This resulted in the Government announcing that they would not move fully to the new funding ratios, but ensure no school lost more than two teachers over the next three years. They are hoping this will dampen the impact of the changes. However teacher unions can smell blood, and are ramping up campaigns to try and get the Government to do a total capitulation.

This is not surprising. The biggest beneficiaries of smaller class sizes are teacher unions. They gain more members and more funding.

The Government has stumbled over the implementation of their policy to divert some funding from class sizes to improving teacher quality. Hopefully though they will not back down entirely. The focus on quality, rather than quantity, is the right one.