Financial incentives

The news today set me thinking.

Network Rail are fined £3.3m for safety / maintenance failings which led to the Potters Bar rail crash in 2002. The fault lay with its predecessor Railtrack, which was set up with perverse incentives built into its systems. By cutting costs, its senior management could add to their bonuses, even if safety suffered. Railtrack said of course that safety was its number one priority, but they didn’t walk the walk; the financial incentives involved were too powerful.

For years, schools and examining bodies have insisted that the standard of students passing GCSE and A Levels has been going up, but at the same time employers and universities have complained that increasingly young people coming to them have been less and less up to standard in basic literacy, mathematics, knowledge of science and so on. This basic difference of view refuses to go away. Again, there are financial incentives at the root of it. Because of the use of league tables, head teachers can benefit from good exam results in their schools, by justifying higher pay for themselves. So everything gets skewed towards the exam results, rather than to the quality of the education. If the government thought instead in terms of the various incentives, when setting up the system, we would be in a better place.