Independent schools, charitable status and public benefit

By Jim Sweetman / @jimbo9848

It has always appeared to be an anomaly that an independent school which provides selective education at a cost and for profit and which uses state trained teachers to deliver it (at a loss to the state) should benefit from the generous tax arrangements applied to charities. However, the principle that the schools existed to advance education – in general – used to be sufficient justification for them to describe themselves as charities. Charities for the advancement of religion and the relief of poverty were given the same umbrella charitable status by default.

That changed in 2006 when the Charities Act required that all charities should pass a public benefit test. The public benefit test does not mean that all of the public should benefit from their activities but that their activities should lead to some benefit for some people. The benefits do not have to be quantifiable but should be identifiable and specific in relation to their purpose.

It is difficult to precisely calculate the benefit of charitable status to the independent schools sector but it is well over £100 million today – a benefit highlighted recently by David Miliband’s campaign to end charitable status to private schools. Of course, the schools argue that by providing separate education for a large cohort of children they save the Exchequer a much greater sum. They also argue that while their fees have risen much faster than inflation, an increasing percentage of their students – currently around 30% – benefit from various forms of bursary and discount. Putting up the fees and then discounting them to parents allows the schools to maintain the pretence that they are helping to provide an independent education to families who are unable to afford it.

To meet the public benefit requirement, some schools responded by extending bursaries and free places but if these were predicated on an ability to contribute or on passing a test than the benefit was limited to certain people. That was a problem because if a school claimed to advance education then its public benefit had to do just that without being exclusive. Also, such innovations are always unpopular with trustees and paying parents who believe that their fees are subsidising others.

Early in 2009, it looked as if the Charity Commission was going to take a hard line. A couple of schools were criticised for conspicuously ignoring the public good and the charitable status was in danger of becoming a key political issue, but the commission has since backed off (following a consultation and a change of government) and the independent schools are going to be given up to five years to prove their public benefit.

At the same time, the discussion appears to be moving in the direction of a generous interpretation of educational advancement. So, letting the oiks from the local school use your playing fields, have some access to your swimming pool, attend your science fairs and receive master classes from your teachers are all now allowable. When you see local newspaper stories about such spontaneous acts of kindness it is reasonable to bear in mind the taxation profit delivered.

The Institute of Fiscal Studies has just produced an interesting report into the state of private schooling in the United Kingdom. Possibly the most chilling aspect of this report is not that the average fees are around £10,000, or that significant fee rises do not deter parents, but the tendency, if not the compulsion, for privately educated parents to send their children to independent schools. This is the biggest determinant of school choice and is unaffected by whatever improvements take place in the maintained sector. It explains why the population of the independent schools has remained at similar levels since the 1960s at around 7% of the eligible child population.

That parental choice or, more starkly, the capacity of some parents to choose creates segregation across generations and a social divide. It is self evidently fuelled by the parental recognition and expectation of the social and academic advantages provided by the schools – whether in relation to the local business community or preferential pathways to prestigious universities. It is also clear that these advantages are obtained largely by being exclusive and elitist rather than some other difference in terms of character or approach. The current Cabinet is both an indication of the success of the independent sector and an indictment of what it does in excluding others.

Arguably, there is no public advancement of education in a system which operates on this basis and which, it could also be suggested, actually works against the public good. Diane Abbott’s recent defence of her decision to send her son to public school was self-interested rather than socially motivated. It is worth reflecting that she would not have had to make it if the independent sector had been torpedoed in the 1960s by a refusal to continue to subsidise it. Islington, Hackney and many other London boroughs would now have had high achieving secondary schools for almost a generation and, arguably, schools, society and government would be the better for it.