Briefing paper

More evidence that money matters in education

Schools Education Australia Great Britain


A new review of research studies on the relationship between expenditure on schools and education outcomes has challenged the common view that more expenditure does not lead to better school performance. The review published by the UK Office for Standards in Education shows that numerous international studies conducted since the early 2000s show a positive impact of increased expenditure in schools, especially for disadvantaged students. The study adds to the weight of evidence supporting the new Gonski school funding model.

A strong conclusion of the new review is that increases in resourcing are usually more effective in disadvantaged schools and/or on disadvantaged students. The review concludes that this implies that “it is more efficient (as well as equitable) to target resources at these students”.

The common view that increasing expenditure on schools does not lead to better school outcomes is largely due to an influential review of research studies by the Stanford University economist Eric Hanushek in the late 1980s and updated in the 1990s. This view has long prevailed even though Hanushek’s main conclusion was refuted by a re-analysis of his review of research studies by academics from the University of Chicago. They found that the vast majority of studies with statistically significant effects show a positive relationship between expenditure per student and student achievement. Their conclusion was in sharp contrast with that of Hanushek:

....a broad range of resources were positively related to student outcomes, with ‘effect sizes’ large enough to suggest that moderate increases in spending may be associated with significant increases in achievement”.

The Ofsted review shows that many more recent studies have come to a similar conclusion. The study separately reviews the UK and other evidence for primary and secondary schooling. The following is a summary of the review.

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