The leaked emails yesterday between the Department of education and the Office of Nick Clegg, the Deputy Prime Minister, reveals tensions over the costings of one of Clegg’s signature policies – the offer of free school meals to all 4-7 year olds. Michael Gove is essentially arguing that not enough money has been put aside for this by the Treasury, which means it must be paid out of Department of Education funds, which in turn means possible reductions in money spent on..well, educating people. It turns out with a little bit of further research this problem is greater than thought.

This is an issue which can be discussed through many lenses. The basic economic problem of opportunity cost, the progressive liberal ideology of equality of opportunity, the A2 economic concept of policies to deal with the effects of absolute poverty, the AS economic problem of merit goods (in that both education and what is likely to be the healthier school meal option have long term benefits that may not be being taken into account now), and, potentially the most interestingly, the possible government failure around the pupil premium that could be caused by the policy – an unintended consequence that seems to have taken many by surprise.

Let’s start with the idea behind the policy itself. The most important years of any child’s education is from age four to seven. Both of my children are between those ages and at the moment they are learning to read, write and do maths. To do these well they need to be able to concentrate and nutrition is an important part of that. Because a government can to some extent control what goes into school meals – but can’t for packed lunches – offering a free school meal for all pupils aged 4-7 makes sense as it means that there is no reason for them not to have one. So we can be assured that all our young people are offered at least one good, nutritious meal a day. The sad fact is that in this country there are many households in which breakfast is not given to pupils and dinners are a long way from nutritious, so the fact that the state can offer a free lunch to kids at such a vital age in their education makes sense as a solution for providing equality of opportunity (which is the progressive liberal ideology of Nick Clegg) and also a solution for some of the symptoms of absolute poverty. In the long term, the better skills pupils can pick up between 4-7 the better the long-term benefits to society, and if nutrition is part of that – then I’m not sure a great case can be made against the motive for the policy.

There is of course an argument against its universality. I’m happy to pay and can afford to pay for my children’s school meals and I’m slightly embarrassed that money is instead coming from taxpayers to provide that, which could go to, say, extra classrooms and teachers. But the counter to that argument is that it is about all children being offered a nutritional meal at such a vital age and even if they can afford it some parents, regardless of wealth, are giving their child packed lunches and I can see why it makes sense to give a nudge for that not to happen.

But the devil is in the detail, and sure enough there seems to be a shortfall in the sums done as to how the policy is going to paid for. The amount needed appears to have a portion of £80m that comes from “comes from maintenance funds that the Department for Education haven’t managed to spend elsewhere” (click here for details), which the Department for education denies exists, and are pointing out the possible opportunity costs of the policy – which could mean cuts from other parts of the education budget. The Lib Dems have countered by pointing out that the policy was agreed at the highest levels of government and will be funded, and those who are leaking the issues and questions are doing so out of ideology rather than real well-founded fears. Remember, the key to economics is understanding that every penny the government spends has an opportunity cost, but the key to top marks in economics is to understand that if some of the costs are short-term but the benefits of spending the money are long-term (as I believe these benefits are), then there is a case for those opportunity cost (if they exist) to be borne somehow.

But there is also an interesting bit of possible government failure here. Government failure is when government intervention worsens an existing market failure or causes a new one. Well here’s something that no-one has thought about. Jason Farrell from Sky News has reported that some schools who implement the policy may have to lay-off particularly important staff as a direct result of this policy (Click here to see report). The problem is basically with the ‘pupil premium’ – a payment of over £1000 to schools for each child they have enrolled who is eligible for free school meals (open to those on very low incomes). This £1000 is spent on specific interventions to aid these children’s education. But to receive it a parent has to apply for free school meals in the first place, giving up details of their financial circumstances, which many find difficult, undignified and stigmatising. . Once this happens though, the school receives the pupil premium and the child receives the free school meal – so it is worth it for school and parent. But parents with pupils aged 4-7 will have no incentive to do that anymore, and this could mean the school receiving less from the pupil premium, and having to make concurrent cuts to their provision. So a policy (free school meals for everyone 4-7) aimed at increasing equality of opportunity for all children could mean that another policy (pupil premiums) will be less effective, thus reducing equality of opportunity.

I have often said that a joy of economics is that there is no right answer. I have to say in this case I wish that weren’t true. Government is hard, and it is worth remembering that both the pupil premium and free-school meals policies are made with the best of intentions. I hope a solution can be found. Any ideas?