Policy making has always been a matter of making choices, managing trade-offs and balancing multiple goals and priorities to make complex decisions with budgetary implications. But against this background, the past few years have seen an unprecedented surge in the number of new priorities facing policy makers. While ageing populations and the impact of changing demographics on social and health public expenditure is a well-established trend, the past two decades have also seen the emergence of digitalisation and climate change as key areas of interest and intervention for public policy and investment.

The fiscal response of OECD governments to the COVID-19 crisis has been swift, strong and decisive. Across the OECD, governments have committed billions of dollars to support public health systems, and protect their economies and populations from the economic impact of the crisis. While the impacts of the pandemic are still lingering, Russia’s war of aggression against Ukraine has been dragging down global growth and putting additional pressure on inflation. Global Gross Domestic Product (GDP) stagnated in the second quarter of 2022 and output declined in the G20 economies while high inflation is persisting longer than expected.

On 16 February 2022, the OECD Secretary General, Mathias Cormann, opened a virtual High-Level Seminar on Value for Money in Post-COVID School Education that brought together high-level decision makers from Ministries of Education and their counterparts from Ministries of Finance, including several Vice-Ministers and Directors-General. The event was convened at the initiative of the French authorities, under the auspices of the OECD Directorate for Education and Skills and the OECD Economics Department on the one hand, and the government of France on the other.

Human capital is widely regarded as a fundamental input in growth theory. Furthermore, recommendations to boost human capital feature prominently among structural policy priorities identified by the OECD for a number of countries. However, the empirical evidence linking human capital with macroeconomic outcomes has been problematic. This chapter first provides an overview of the role of human capital in determining economic outcomes and reviews existing evidence on this topic. It then presents a new measure of human capital based on OECD education data surveys, which better incorporates both quality and quantity dimensions. Drawing on the proposed measure of human capital, this chapter suggests a substantial scope for long‑run productivity gains from human capital, with a larger effect from quality as compared to quantity improvements, although the lags are typically much longer than for other policies that boost productivity.

High-quality education that translates into better and more relevant skills pays off for individuals, communities and societies in significant and diverse ways. It leads to higher earnings, increased productivity, innovation and sustained economic growth. Beyond these economic outcomes, high-quality education also generates a wide range of social returns. Better-educated individuals live longer and healthier lives. They become more engaged citizens and are more likely to take action for collective well-being. Sustained high-quality education supports communities in proactively addressing emerging challenges, such as climate change but also making the most of new opportunities, such as the digital transformation. This chapter provides an overview of the broader social outcomes of education. Such returns span a continuum, from private benefits (e.g. better health, better opportunities for one’s children) to societal ones, as private benefits translate into positive externalities and collective benefits. The social outcomes of education can thus be considered as an outcome in themselves or as a crucial channel towards better economic outcomes.

Efficient and equitable resourcing of schools is the foundation for quality education and marks a key challenge for education systems. Beyond a sufficient level of funding, effective resourcing requires adequate governance arrangements and well-designed allocation mechanisms for education funding. This chapter examines whole-system approaches to managing the complexity of school funding governance in the context of fiscal decentralisation and growing school autonomy. It also presents a series of questions that need to be addressed when designing school funding allocation mechanisms, highlighting the potential of needs-based funding formulas. Finally, the chapter underlines the importance of adequate regulatory frameworks for the public funding of private providers to mitigate unintended consequences and harmful effects on equity.

Most countries explicitly aim to improve access, quality, equity and efficiency in their education systems. However, fulfilling these objectives at the same time is a challenge for policy makers. The pursuit of equity and efficiency in particular has often been presented as a trade-off when it comes to the allocation of resources in education. Nevertheless, efficiency and equity can go hand in hand and this chapter examines how the two can be brought together. It presents insights and promising policies from OECD countries in four areas that can help improve both equity and efficiency: Investing in high‑quality ECEC; investing in teacher quality; reducing educational failure; and adapting school networks to changing demand.

A challenge for school systems is to ensure that school funding is spent most efficiently and in accordance with policy priorities. Planning, monitoring and evaluation processes are essential to reflect upon previous expenditure in education and future resource needs in order to develop financially sustainable education budgets that support the provision of high-quality education and effectively address policy priorities. This chapter discusses how education and finance authorities can work together to ensure the alignment of budget planning procedures with strategic education priorities; and the effective use of evaluation and monitoring to inform future uses of school funding.