![\"\"](\"https:\/\/world.edu\/wp-content\/uploads\/2022\/06\/Private-School.png\")
\nSome UK private schools appear to be taking advantage of their charitable status and the lax legal definition of \u201cpublic benefit\u201d by charging fees that are increasingly out of kilter with their ongoing costs.<\/p>\n
\nSome UK private schools appear to be taking advantage of their charitable status and the lax legal definition of \u201cpublic benefit\u201d by charging fees that are increasingly out of kilter with their ongoing costs.<\/p>\n
Around 1,300 UK private schools, including the vast majority of the most prestigious private institutions, enjoy long-standing charitable status. This gives them substantial tax advantages but obliges them to use their charitable resources for public benefit.<\/p>\n
Our\u00a0research<\/a>, conducted over the last four years, focuses on how these schools acquire, sustain and use their wealth, and on the associated thin transparency and accountability regimes that have endured for more than a century. (Responses received are collated at the end of this article.)<\/p>\n We found that some of these schools have more than doubled their fees over the past two decades, which appears to indicate that they are pricing by what parents can pay, rather than their actual costs.<\/p>\n Charging very high fees while offering discounts (known as fee remissions) that mostly benefit the already-wealthy can be justified as lawfully charitable and delivering public benefit under the loose regulatory environment created by English charity law. Furthermore, the limited nature of the level and reach of fee remissions is often obscure, given their \u2013 quite legitimate \u2013 treatment in private schools\u2019 financial accounts.<\/p>\n While less than 7% of pupils attend private schools in the UK, in\u00a02020 more than 31%<\/a>\u00a0of students at Oxford University were privately educated. This educational disparity is effectively subsidised by all UK taxpayers through a broad range of tax exemptions available to private schools with charitable status. The UK also subsidises universities by a roundabout route, meaning that privately educated students pay to get access to a state-subsidised system.<\/p>\n It is not possible to state with certainty how much the UK\u2019s charitable private schools save through tax exemptions. However, a good estimate according to our research is around\u00a0\u00a33 billion a year<\/a>. This equates to more than 6% of England\u2019s total state school budget (\u00a347.6 billion) in 2020-2021.<\/p>\n Meanwhile, the UK parliament\u2019s\u00a0Public Accounts Committee<\/a>\u00a0reported in March that severely straitened finances have seen many state schools in England narrowing their curriculum offerings, dropping subjects, cutting staff and reducing support for pupils with special educational needs and disabilities.<\/p>\n Brighton College commissioned a world-leading architectural firm to design its new Sports and Science Centre. Photograph: Laurian Ghinitoiu\/OMA.<\/p><\/div>\n At Millfield, a full range of academic and instrumental tuition is offered in a purpose-built Music School \u2026 Millfield is fortunate to have the Johnson Hall, our 350-seat Concert Hall with superb acoustics and a stage large enough to host a full orchestra and choir. The Johnson Hall Steinway D Piano was recently described by international artist Pascal Rog\u00e9 as \u2018among the ten best pianos I have ever performed on\u2019. (Extracted from the\u00a0Millfield School website<\/a>)<\/em><\/p>\n Music education is culturally and socially enriching for children, and deemed a vital part of a well-rounded education. Millfield, a high-fee private school in south-west England, is a member of the\u00a0Headmasters\u2019 and Headmistresses\u2019 Conference<\/a>\u00a0(HMC) \u2013 a powerful lobby group of private schools. Most HMC schools have similarly abundant music offerings.<\/p>\n These provisions stand in\u00a0stark contrast<\/a>\u00a0to the parlous music offering in state schools. A survey conducted by\u00a0UK Music<\/a>\u00a0found that 50% of children at independent schools receive sustained music tuition, while the figure for state schools is 15%. Furthermore, 17% of \u201cmusic creators\u201d were educated at fee-paying schools, compared with 7% across the population as a whole.<\/p>\n The intellectual, cultural and social advantages accruing to private school students through music education are echoed in all other curriculum fields, from the performing arts to sport to STEM subjects.<\/p>\n UK private schools generally possess lavish facilities and infrastructure.\u00a0Brighton College<\/a>\u00a0commissioned a world-leading architect,\u00a0OMA<\/a>\u00a0\u2013 whose\u00a0other buildings<\/a>\u00a0include the London Design Museum and Moscow\u2019s Museum of Contemporary Art \u2013 to design its new \u00a355m Sports and Science Centre. Opened in 2020, it features: A view of the interior of one of Roedean School\u2019s four boarding houses after its renovation. Alamy.<\/p><\/div>\n A couple of miles down the road,\u00a0Roedean School<\/a>\u00a0noted of its refurbished boarding facilities in 2015 that \u201ceach house is adorned with artwork and a palette of House colours, and complemented with a mix of new and period furniture\u201d.<\/p>\n Roedean has utilised its superlative facilities to create an air of exclusive luxury and privilege. In one annual report, the school quoted high-society magazine\u00a0Tatler\u2019s<\/a>\u00a0exclamation that \u201cRoedean now has the swankiest boarding facilities in the country, perhaps in the universe\u201d. Such abundance is a common feature of private schools\u2019 marketing strategies.<\/p>\n The increasing asymmetries between state and private provision in the UK severely skew educational, cultural and\u00a0social outcomes<\/a>. Such disparities led Finland to outlaw charging for education nearly 50 years ago. In contrast, some UK private schools have used their charitable status and formidable networks to achieve a \u201cvirtuous money circle\u201d that is effectively being subsidised by all UK taxpayers, while benefiting a small minority of predominantly wealthy families. And while they offer some fee remissions for those unable to pay their full fees, our research suggests these usually do little to make the schools less exclusive.<\/p>\n Charities in England must have charitable purposes, and for more than 400 years, English law has recognised education as such a purpose. Charities must also deliver public benefit with their resources \u2013 but this term is only loosely defined in law. This effectively permits private schools to allocate most of the benefits of their land, buildings, facilities and scholarships to a small group of significantly better-off families who can afford the school fees.<\/p>\n For a century or more, charities have been exempted from a broad range of taxes \u2013 a form of public expenditure known as \u201ctax expenditures\u201d. Rather than collecting taxes and then spending the money on public services, the government simply excuses certain classes of taxpayers (in this case, charitable private schools) from paying tax in the first place.<\/p>\n Such tax expenditures are largely invisible because they are not measured, and no specific budget allocations are made and subjected to parliamentary scrutiny. Private schools are, in practice, subject to little or no accountability with regards to the effectiveness or equity with which they use this cash.<\/p>\n Students from private schools such as Eton are disproportionately represented at the UK\u2019s top universities. Shutterstock<\/p><\/div>\n Charitable resources intended for public benefit and the considerable tax savings enjoyed by many private schools help provide luxurious facilities. In turn, young people from families wealthy enough to pay the high fees generally gain disproportionate access to top universities and\u00a0subsequent life chances<\/a>, in part through the \u201cold school tie<\/a>\u201d networks.<\/p>\n Indeed, a representative of the Old Marlburian Association (the alumni association for Marlborough College) told\u00a0The Times in 2019<\/a>\u00a0that: The schools\u2019 wealth also gives their students significant advantages in terms of an abundant supply of quality curriculum materials, small class sizes and intensive teaching, plus a potential benefit from the schools\u2019 ability to \u201cgame the system<\/a>\u201d.<\/p>\n The fact that UK higher education is still significantly state-subsidised means, in effect, UK taxpayers continue to fund privately educated students during their university studies. Such students\u2019 disproportionate representation is a serious opportunity-loss for state students, many of whose schools are suffering real financial hardship that negatively impacts their students\u2019 educational and career outcomes.<\/p>\n Private schools have three primary sources of income.<\/p>\n 1. Fees<\/em><\/p>\n Fees charged to families are the major source of private schools\u2019 income. Fees may not seem a legitimate public concern \u2013 people can spend their money as they please. But the links between fees and the schools\u2019 charitable obligations need to be unpacked.<\/p>\n Private school fees are high relative to average UK incomes. In 2018, average annual fees in day and boarding schools were nearly\u00a0\u00a315,000 and \u00a333,000<\/a>\u00a0respectively. In real terms, fees have\u00a0more than doubled<\/a>\u00a0over the last 25 years. These price points\u00a0serve to exclude<\/a>\u00a0lower-income families. The fee increases also match marked rises in the disposable income of wealthier families in the UK, and the increased recruitment of students from wealthy overseas families \u2013 in particular from Russia and China.<\/p>\n Our\u00a0research<\/a>\u00a0demonstrates, empirically, that many private schools charge much more than is strictly necessary for them to fulfil their charitable purposes of providing education. For example, comparing average day and boarding school fees by region, the differences between day fees in the cheapest and most expensive English regions could not be explained by costs alone. Specifically, while boarding school fee differentials (17%) were roughly equivalent to the difference in associated costs such as staffing, average day fees in the cheapest region were 35-40% lower than those in the most expensive.<\/p>\n Similarly, we found a stronger correlation between local\u00a0gross disposable household income<\/a>\u00a0and day fees than with boarding fees. This suggests that day schools are particularly responsive to the disposable income levels in their catchment area.<\/p>\n But boarding school fees are also rising rapidly, as was highlighted in a recent\u00a0Sunday Times report<\/a>\u00a0which suggested the average annual cost of sending a child to an English boarding school is now \u201capproaching \u00a350,000\u201d due to planned fee increases for the next academic year.<\/p>\n The increasingly upmarket facilities of charitable private schools, such as those described earlier, may, in turn, be used to justify these rising fees. The vast majority of children from families with more modest incomes are excluded by this fee spiral from enjoying such facilities \u2013 which should, by law, be available for public benefit.<\/p>\n 2. Tax reliefs<\/em><\/p>\n Private schools benefit financially from the tax exemptions that arise because of their charitable status. Their operating surpluses (profits) and capital gains (profits on the sales of investments including shares, land and facilities) are exempt from income tax, capital gains tax or corporation tax.<\/p>\n In England and Wales, private schools also receive an 80% discount on business rates (local taxes). Furthermore, they can claim 25% of all donations received (such as chancellor Rishi Sunak\u2019s donations to his old school, Winchester College, which\u00a0reportedly exceed \u00a3100,000<\/a>) from the tax authorities in\u00a0gift aid<\/a>.<\/p>\n This suite of tax exemptions arose principally from a legal and public\u00a0campaign<\/a>\u00a0conducted by the Headmasters\u2019 Conference in the early 20th century, and have remained largely unquestioned ever since. Charities that provide education are also, under a 1977 EU Directive, exempt from charging VAT, while bequests to schools are exempt from inheritance tax.<\/p>\n The total scale of these tax expenditures is mostly unknown. The\u00a0Labour Party<\/a>\u00a0estimated the annual value of VAT forgone by the state from charitable private schools was \u00a31.6 billion in 2019. In 2021, it estimated the annual value of these schools\u2019 business rates discount and income tax relief to be around\u00a0\u00a3100m<\/a>\u00a0and \u00a3700m respectively. In all, we estimate the total value of private school tax exemptions could be in the region of\u00a0\u00a33 billion<\/a>\u00a0a year.<\/p>\n 3. Investments and donations<\/em><\/p>\n Many private schools derive substantial income from invested funds and donations. Some of this income is derived from related charities whose purpose is to fund specific private schools, but which are separate for legal and accounting purposes. Whatever the source, this income is charitable in nature and must legally be used for public benefit.<\/p>\n In some cases, private schools hold significant investment portfolios accumulated over long periods of time. For example, the published financial accounts of Eton College and Winchester College show they have\u00a0total reserves<\/a>\u00a0of \u00a3323,000 and \u00a3526,000 per pupil respectively.<\/p>\n In law, such investments must have a charitable purpose. Yet Eton, despite fees of \u00a342,500 per student, still has to use investment income to help fund its spend on education. In reply to a request for comment on this article, the school confirmed: \u201cThe amount Eton spends on education is not met fully by fee income; a significant proportion of that expenditure comes from income from our endowment.\u201d This means the school uses income from charitable assets to subsidise educational provision that it already generously funds through fees.<\/p>\n Sources of donations and fees<\/em><\/p>\n Across the private school sector as a whole, it is worth considering whether the sources of donations and fees are always legitimate, and if the potential exists for\u00a0money laundering<\/a>. In 2018, the UK\u2019s National Crime Agency (NCA) asserted that money is\u00a0being filtered through British private schools<\/a>, and criticised schools for failing to flag suspicious payments to the government.<\/p>\n The recent\u00a0sanctions<\/a>\u00a0placed on Russian citizens following the invasion of Ukraine again put a spotlight on the sources of school fees and donations \u2013 there are some 2,300 Russian children currently studying in UK private schools. However, these schools are not legally obliged to report suspected money laundering, and may also have limited capacity to carry out checks.<\/p>\n UK private schools are, on the whole, replete with financial resources. Because they are charities, they cannot pay out dividends (they have no shareholders) and their freely available (\u201cfree\u201d) reserves must,\u00a0in law<\/a>, only be sufficient to enable them to carry out their charitable objectives.<\/p>\n Their remaining \u201crestricted\u201d reserves are funds that are held for charitable purposes \u2013 such as saving for a new building or funding bursaries. But charity law and\u00a0accompanying guidance<\/a>\u00a0are not prescriptive, and simply require trustees to formulate reserves policies that justify a target level of reserves, and explain how they intend to achieve that target.<\/p>\n The accounting firm\u00a0BDO<\/a>\u00a0has suggested that, across all charities, reserves policies are far from satisfactory. In the case of private schools\u2019 accumulated reserves, there appears to be little action (or appetite) from the\u00a0Charity Commission<\/a>\u00a0to address this issue. In short, these charitable schools are free to accumulate cash and have significant discretion as to how it is used.<\/p>\n One way to absorb cash that cannot be reasonably kept as free reserves is to incorporate it into more facilities of the type described earlier. Investment in\u00a0luxurious infrastructure projects<\/a>\u00a0appeals to the schools\u2019 target markets, potentially enabling them to charge even higher fees.<\/p>\n While a detailed analysis of schools\u2019 expenditure on infrastructure is problematic, due to the unpredictable nature of such expenditure and the difficulty in distinguishing it from normal infrastructure renewal, the rise in private schools\u2019 total\u00a0annual capital expenditure<\/a>\u00a0from \u00a3247m in 1997 to \u00a3771m in 2013 (the latest reliable figure) supports this analysis.<\/p>\n English law requires that charities provide benefits to at least a significant section of the public. However, the\u00a0Charity Commission<\/a>\u00a0advises that what constitutes \u201csignificant\u201d is a matter of judgment.<\/p>\n In a landmark case in 2011, the UK\u2019s Upper Tribunal\u00a0ruled<\/a>\u00a0that the law \u201crequires that those who benefit from the charity\u2019s purpose must be sufficiently numerous to constitute \u2018a section of the public\u2019\u201d. While school-age children obviously constitute a significant part of the public, fee levels exclude a very large proportion of them. How, then, are private schools not in breach of their public benefit obligations?<\/p>\n The Upper Tribunal ruled that, in making adequate provision for \u201cthe poor\u201d, consideration should be given as to whether the charity in question provides a \u201cluxury\u201d service. Its judgment stated that, while the provision of luxury facilities is no bar to charitable status, there is a greater onus on private schools to demonstrate how they provide a public benefit.<\/p>\n However, Charity Commission advice does not prescribe any limits either to the degree of luxury which may be provided, or the maximum level of charges. And the Upper Tribunal ruled that \u201cthe poor\u201d does not just include those who meet official definitions of poverty. Its definition extended to those of \u201cmodest means\u201d \u2013 defined as those who could not afford the\u00a0school\u2019s full fees<\/a>. Given the current high levels of school fees, such families may be far from poor by official measures.<\/p>\n Crucially, decisions as to what constitutes adequate provision for \u201cthe poor\u201d are at the discretion of individual school trustees. Charitable private schools stay on just the right side of a fuzzy legal line in deciding who benefits from the resources they generate from fees and other income sources, such as tax reliefs and investment income.<\/p>\n But, these schools were given\u00a0short shrift<\/a>\u00a0by the Upper Tribunal in 2011 for arguing that, simply by relieving the state of the cost of educating their students, they were delivering public benefit. And while many private schools allow local communities to use their facilities, such as swimming pools, the Upper Tribunal stressed this does not provide public benefit as it has no direct educational purpose. With its more recent plans to\u00a0sponsor selective academy schools<\/a>, Eton College might fare better on perceived public benefit provision.<\/p>\n Mostly, charitable private schools seek to demonstrate their public benefit through fee remissions and complete exemptions. These may be means-tested, awarded based on academic, musical or sporting talent, or given as discounts for families with more than one child at the school, or to the children of staff. Again, these decisions are at the trustees\u2019 discretion, within the law.<\/p>\n In 2011, the Upper Tribunal set no minimum level of total fee remissions, stipulating only that it must be more than \u201cmerely token\u201d.\u00a0Our analysis<\/a>\u00a0reveals that in 2018-19, UK private schools awarded fee remissions totalling just over \u00a31 billion to 176,234 out of their 537,315 students. Analysis of all fee remissions awarded by the 192 HMC schools in 2019 shows a median value of 10.4% of total fees.<\/p>\n Of this \u00a31 billion, some \u00a3440m \u2013 44% of the total fee remissions \u2013 was means-tested. The proportion of fees discounted on this basis ranged from 1.7% to 15%, with the median at just 5.1% (for the 142 HMC schools where the means-tested split could be identified). In all, our research shows the means-tested \u00a3440m was shared between 44,395 students \u2013 an average of around \u00a31,000 a head.<\/p>\n Just 6,118 \u2013 1.1% of all private school students \u2013 received a full scholarship, and a further 2.1% received fee remissions in excess of 75% of fees. Of the schools contacted during the writing of this article,\u00a0St Paul\u2019s School<\/a>\u00a0highlighted that 80% of its 147 bursaries are for between 75%-100% of the fees, and Eton highlighted that in the 2020-21 academic year, 90 of the 261 boys receiving fee remissions paid no fees at all. According to our research, these are uncharacteristically high percentages compared with the national average.<\/p>\n Importantly, while private schools may be proud of their scholarship provision, most provide no data on the demographic profiles of recipient students, making it impossible to evaluate the extent to which these benefit less well-off families. And given the high levels of fees, most students in receipt of means-tested fee remissions will still require very substantial family contributions.<\/p>\n For instance, St Paul\u2019s offers fee assistance to families with an annual household income of less than \u00a3120,000, which can arguably be justified when the definition of \u201cmodest means\u201d is being unable to afford fees of around \u00a327,000 a year out of post-tax income.<\/p>\n Charging very high fees and giving fee remissions which mostly benefit those who could be considered to be already wealthy can certainly be justified as lawfully charitable and as delivering public benefit. But this is because of the loose regulatory environment created by charity law and associated accounting rules, and because of a simple lack of public transparency and accountability in the system.<\/p>\n Furthermore, the limited nature of the level and reach of fee remissions may be obscured by their \u2013 quite legitimate \u2013 treatment in private schools\u2019 financial accounts. For example, if full fees are \u00a315,000 per year and a 50% deduction is awarded, the schools show (either on the face of the Income & Expenditure account or in a note) gross fees of \u00a315,000 and the remission of \u00a37,500 as a deduction from that figure. However, the additional cost to the school of teaching that pupil is likely to be lower than the valuation placed on the fee remission, because schools\u2019 costs are largely fixed or stepped (for example, when an extra teacher is required). But there is, of course, an opportunity cost to the school of replacing a full-fee place with a student paying a reduced fee.<\/p>\n There is a relative dearth of accountability around the finances of charitable private schools, despite the public funding they receive through tax reliefs and their public benefit obligations. The UK government collects no data on the value of tax expenditures received by the schools, and\u00a0our analysis<\/a>\u00a0of the (limited) scale and distribution of private school scholarships was\u00a0highlighted in the House of Lords<\/a>\u00a0in May 2021 as a cause for concern.<\/p>\n Discussing the private school sector, Andrew (Baron) Adonis said in his\u00a0speech<\/a>\u00a0that \u201cwhat starts off as a hugely privileged sector, even in the work that it does that is supposed to be charitable \u2013 in relieving fees and giving access to these charitable assets \u2013 is not meeting those objectives\u201d.<\/p>\n The financing of the UK\u2019s charitable private schools is a matter of public interest and concern. These schools have public benefit obligations regarding their use of charitable assets, yet some fees indicate that private schools are indulging in market pricing, excluding nearly all but the wealthiest from any charitable benefit. In addition, the schools receive substantial benefits by being exempt from a wide range of taxes.<\/p>\n Given the current state school funding crisis, it can be argued that educational resources are being misapplied as a result of private schools\u2019 charitable status, exacerbating educational inefficiencies and social injustice. For anyone seeking to address these issues, our research leads us to the following conclusions:<\/p>\n (1) The UK government should introduce robust systems of transparency and accountability for charitable private schools, regarding how their charitable assets are used and by whom, and the extent and distribution of the tax reliefs the schools enjoy. For example, private schools could be required to report demographic data on the recipients of their public benefits along with the results of independent stakeholders\u2019 evaluations. Collated nationally, such data would provide an important input into debates on education funding.<\/p>\n (2) The UK government should also consider withdrawing the tax exemptions enjoyed by these schools (Scotland has already withdrawn their business rates discounts). In 2020-21, total spending on state schools in England and Wales was \u00a347.6 billion. If tax exemptions for private schools, were removed, the resulting increased taxes could be redistributed to state schools, increasing their\u00a0budget<\/a>\u00a0by around 6%, thereby making a significant contribution to the government\u2019s levelling up agenda.<\/p>\n (3) The charity status of these private schools should be reviewed. They are, for the most part, elite organisations delivering a paid-for and exclusive product. The extent to which this meets public perceptions of \u201ccharity\u201d is questionable. Of course, removal of charitable status would mean making new arrangements for the assets the schools hold, as they could not legally retain control of charitable assets such as investments and buildings. Control of these assets might be transferred to, say, a national education trust for the benefit of all UK school students. In part, this could be achieved by renting back the buildings and facilities to the private schools where they are located, with the rental income raised then being distributed throughout the state school system.<\/p>\n (4) Finally, higher education policies on university access need to specifically address issues associated with the disproportionate representation of private school students. The UK government has, for some time, devoted considerable resources to widening higher education participation, with its main policies encouraging disadvantaged students to gain access and achieve success. Such policies effectively ignore the opportunity costs borne by state educated students because of charitable private schools\u2019 tax exemptions and other benefits.<\/p>\n Any attempts to effect change will, however, inevitably be met with significant pushback. Over at least two centuries, the UK\u2019s private schools have successfully mobilised charity and tax law to their advantage. Yet this exercise of power is effectively invisible to wider public view, due to the complexity of legal linguistics and processes, the pseudo-objectivity of the law, and the failure of parliament to make public expenditure on private education a matter of regular debate and accountability.<\/p>\n![\"\"](\"https:\/\/world.edu\/wp-content\/uploads\/2022\/06\/BrightonCollege.png\")
An air of exclusive luxury and privilege<\/strong><\/h4>\n
\na cinema-style auditorium linked up to science departments across the globe, 18 university-standard laboratories, six breakout spaces for personal research and tutorials, a 25-metre pool, a strength and conditioning suite, a rooftop running track with panoramic views, and a double-height sports hall. (Extracted from the\u00a0Brighton College website<\/a>)<\/em><\/p>\n![\"\"](\"https:\/\/world.edu\/wp-content\/uploads\/2022\/06\/RoedeanSchool.png\")
Charitable status, public benefit and tax<\/strong><\/h4>\n
![\"\"](\"https:\/\/world.edu\/wp-content\/uploads\/2022\/06\/Eton.png\")
\nParents now expect that what they pay for is not just five years of teaching but lifetime membership to a special club. It\u2019s the reason people decide to send their kids to public schools and not to the local academy, where they may very well perform better academically.<\/em>
\nThe fact that privately schooled students are remarkably over-represented at top universities is, in part, because these schools\u2019 essential selection criterion is family income, which usually ensures that students already have considerable\u00a0cultural capital<\/a>. Other selection criteria may include tests and interviews.<\/p>\nPrivate schools\u2019 sources of income<\/strong><\/h4>\n
How private schools use their income<\/strong><\/h4>\n
What constitutes adequate provision for \u2018the poor\u2019?<\/strong><\/h4>\n
Who qualifies for private schools\u2019 reduced fees?<\/strong><\/h4>\n
So what could be done?<\/strong><\/h4>\n