The Education Act 1902 (2 Edw. 7. c. 42), also known as the Balfour Act, was a highly controversial act of the Parliament of the United Kingdom that set the pattern of elementary education in England and Wales for four decades. It was brought to Parliament by a Conservative government and was supported by the Church of England, opposed by many Nonconformists and the Liberal Party. The act provided funds for denominational religious instruction in voluntary elementary schools, most of which were owned by the Church of England and the Roman Catholics. It reduced the divide between voluntary schools, which were largely administered by the Church of England, and schools provided and run by elected school boards, and reflected the influence of the Efficiency Movement in Britain. It was extended in 1903 to cover London.

The act was a short-term political disaster for the Conservatives, who lost massively at the 1906 general election. However, G. R. Searle has argued that it was a long-term success. It standardized and upgraded the educational systems of England and Wales and led to a rapid growth of secondary schools, with over 1,000 opening by 1914, including 349 for girls only. The Church schools had financing from local ratepayers and had to meet uniform standards. Eventually, in the Education Act 1944, the Anglican schools were brought largely under the control of local education authorities.

The "Cockerton Judgment" of 1901 caused a crisis by undermining the lawfulness of "higher grade schools" for children over the age of twelve. A temporary fix allowed the schools to operate one more year. A second issue involved the 14,000 church schools, called "voluntary schools". The term is derived from the funding of the schools through voluntary subscriptions and contributions. These were run chiefly by the Church of England and including some Roman Catholic schools. They were poorly funded and did not receive a share of local taxes, but they educated a third of school children.

Under the Education Act 1902 the existing overlapping jurisdictions, with 2,568 school boards set up by the Elementary Education Act 1870 (33 & 34 Vict. c. 75), as well as all existing school attendance committees, were abolished. Their duties were handed over to county councils or county borough councils, as local education authorities (LEAs). The 328 LEAs fixed local tax rates. The LEAs could establish new secondary and technical schools as well as developing the existing system of elementary schools. These LEAs were in charge of paying schoolteachers, ensuring they were properly qualified, and providing necessary books and equipment. They paid the teachers in the church schools, with the churches providing and maintaining the school buildings and providing the religious instruction.

The Church Party, a Conservative faction strongly supportive of the Church of England, largely shaped Conservative educational policy. Under the leadership of Lord Cranborne, it was determined to stop the spread of secularism in education. With John Gilbert Talbot, Cranborne organized opposition to the Education Department and the radical spokesman Arthur Acland from 1894. They blocked the Education Department's attempts to slow the growth of Anglican schools. They successfully passed the Voluntary Schools Act 1897, an interim measure. They demanded long-term legislation in 1897–1901, and scored their great victory in 1902.

The design and drafting of the bill was the work of Robert Laurie Morant, a civil servant in the Education Department. He worked closely with Arthur Balfour (who became Prime Minister in succession to Lord Salisbury in July 1902) and Church leaders in 1901 .

Joseph Chamberlain's support base was threatened by Balfour's introduction into Parliament of the Education Bill. This bill was framed with the intention of promoting National Efficiency, a cause which Chamberlain thought worthy. However, the Education Bill proposed to abolish Britain's 2,568 school boards established under W. E. Forster's Elementary Education Act 1870 (33 & 34 Vict. c. 75), bodies that were popular with Nonconformists and Radicals. Liberals opposed the act, arguing that the board schools had outperformed the voluntary Anglican schools. In their place, Balfour proposed to establish local education authorities, which would administer a state-centred system of primary, secondary and technical schools. Furthermore, the bill would grant ratepayers' money to voluntary Church of England schools. Chamberlain, religiously a Unitarian, was anxious about the bill's proposals, aware that they would estrange Nonconformists, Radicals and many Liberal Unionists from the government.

However, as Colonial Secretary in the Conservative-Liberal Unionist coalition government, Chamberlain could not openly oppose the bill. Chamberlain warned Robert Laurie Morant about the probability of Nonconformist dissent, asking why voluntary schools could not receive funds from the state rather than from the rates (local property taxes). In response, Morant argued that the Second Boer War had drained the Exchequer of finances.^{[citation needed]}