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Summary.  The paper makes use of newly linked administrative education data from England to understand better the determinants of participation in higher education (HE) among individuals from low socio‐economic backgrounds. The data are unique in being able to follow the population of two cohorts of pupils in England—those who might have entered HE between 2004–2005 and 2006–2007—from age 11 to age 20 years. The findings suggest that, although large differences in HE participation rates and participation rates at high status universities by socio‐economic background remain, these differences are substantially reduced once prior achievement is included. Moreover, these findings hold for both state and private school pupils. This result suggests that poor achievement in secondary schools is more important in explaining lower HE participation rates among pupils from low socio‐economic backgrounds than barriers arising at the point of entry to HE. These findings are consistent with the need for earlier policy intervention to raise HE participation rates among pupils from low socio‐economic backgrounds.

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It is well known that children growing up in poor families leave school with considerably lower qualifications than children from better off backgrounds. Using a simple decomposition analysis, we show that around two fifths of the socio-economic gap in attainment at age 16 can be accounted for by attainment at age 11, suggesting that circumstances and investments made considerably earlier in the child's life explain a sizable proportion of the gap in test scores between young people from rich and poor families. However, we also find that differences in the attitudes and behaviours of young people and their parents during the teenage years play a key role in explaining the rich-poor gap in GCSE attainment: together, they explain a further quarter of the gap at age 16, and two fifths of the small increase in this gap between ages 11 and 16. On this basis, our results suggest that while the notion that "skills beget skills" implies that the most effective policies in terms of raising the attainment of young people from poor families are likely to be those enacted before children reach secondary school, policies that aim to reduce differences in attitudes and behaviours between the poorest children and those from better-off backgrounds during the teenage years may also make a significant contribution towards lowering the gap in achievement between young people from the richest and poorest families at age 16. JEL codes: I20, I32

This paper investigates the financial implications of the higher education funding regime to be introduced in English universities in September 2012. The analysis is based on simulated lifetime earnings profiles among graduates, linked to imputed information on parental incomes and institution and course choices. We find that, on average, total gross tuition fees will increase by over £15,000 as a result of the reforms; nevertheless, students will be significantly better off while they study due to the increased generosity of student support. The average graduate will be roughly £8,850 worse off over their lifetime, while universities will, on average, be better off as they are more than able to make up for the loss of substantial amounts of direct public funding through higher fees. The taxpayer is set to lose 33p of every £1 loaned to students (up from 25p under the current system) because of the generosity of the loan repayment terms, although the new regime is still expected to save the taxpayer around £2,500 per graduate overall. The reforms involve a substantial shift in the incidence of the cost of higher education away from the public sector and towards the private sector. In terms of the likely implications for social mobility, our work confirms that the new funding regime is actually more progressive than its predecessor: the poorest 29 per cent of graduates will be better off under the new system, while other graduates will be worse off. Moreover, the richest 15 per cent of graduates will pay back more than they borrow, while others will be subsidised. If prospective students from poorer backgrounds are aware of these facts, then, in theory, the new funding system should not dissuade them from applying to university – and thus it would increase, rather than reduce, social mobility in the long run. However, this will require a lack of debt aversion amongst students from the poorest backgrounds, and the ability for the government and universities to provide students with clear information about the likely costs of going to university.

SummaryEducation spending has risen by an average of 3.9% per year in real terms under Labour. This is substantially faster than under the Conservatives between 1979 and 1997 (1.5% per year), but only slightly faster than the long-run historical trend before Labour came to power (3.7% per year). Schools, the under-fives and further education institutions have seen the most generous funding increases under Labour, with spending on higher education growing much more slowly.In 2006, the UK had the eighth largest level of education spending as a share of national income amongst 26 industrial countries. This follows a period between 1995 and 2006 when the UK saw the fourth largest increase in spending as a share of income amongst this group. Only the United States, Denmark and Mexico increased spending as a share of national income by more. UK education spending as a share of national income now exceeds its mid 1970s peak and is at a higher level than at any point since (at least) the mid 1950s.Within the education budget, the UK is a comparatively 'big spender' on early years education and services. In 2006 the UK had the 2nd highest level of spending per pupil in the preprimary sector amongst the 26 OECD countries for which comparable data are available.England's early years spending includes free part-time nursery care for three and four year olds, and the Sure Start programme, providing health and education information to parents with children under five. The Conservatives have pledged to support the provision of free nursery care for pre-school children, while the Liberal Democrats have expressed a long-term ambition to increase the hours of provision funded by the government, and extend the age range at which it is available. They have not, however, stated when they would seek to implement this extension.

It is well known that children growing up in poor families

• Schools in England currently receive the bulk of their funding via local authorities, which each have their own funding formula. These formulae can be myriad and complex: different local authorities take into account different factors and fund particular types of schools differently. • School funding exhibits wide variation. Last year, most primary schools received between £3,000 and £6,000 per pupil, while most secondary schools received between £4,000 and £7,000. This variation arises largely because schools differ in their characteristics, but funding levels also vary across schools with similar characteristics. • In 2010-11, we find that primary schools received, on average, an implicit premium of about £2,000 extra for poorer pupils (defined as those eligible for free school meals). In secondary schools, the premium was roughly £3,400 extra. This system is 'progressive' in that schools with poorer pupils are funded more generously. While the progressivity has increased over time, schools' finances also depend on historical factors, such as funding in previous years. Funding can thus adjust slowly to changes in pupil needs. * The authors are grateful to the Esmée Fairbairn Foundation for funding this work (grant number 11/0357) and to the Economic and Social Research Council for providing support through the Centre for the Microeconomic Analysis of Public Policy (grant number RES-544-28-0001). The authors would like to thank Carl Emmerson, Paul Johnson and members of the advisory group for their comments and thoughts, and Judith Payne for copy-editing. Any views expressed are those of the authors only, and any errors and omissions are their responsibility.