Home Opinion "Removing charitable status is not a magic wand"

“Removing charitable status is not a magic wand”

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Tilly Clough

By law, independent schools are able to have charitable status and therefore receive the tax advantages from which all charities benefit.

But given there are significant question marks over whether independent schools actually offer any benefit to the public, can this be justified?

About 50 per cent of independent schools hold this status, which equates to approximately 1,300 schools.

The charitable status of independent schools is a contentious issue. On the one hand, their inability to mitigate inherent social inequality threatens to undermine their status as charities, as the concept of charity is associated with social equality.

Despite this, revoking charitable status would largely fail to address the issue of social inequality.

It may also exacerbate problems due to a reduced regulatory framework provided by the Charity Commission. Instead, more comprehensive research and reform is necessary.

Should independent schools have charitable status?

It is easy to argue that institutions that perpetuate inequality should not be charities, nor receive tax benefits: independent schools arguably deny equal opportunity and dampen social mobility by almost exclusively providing education for families who can afford the high fees (which average £17,000 per year).

Partly as a result of the income generated by fees, the lifelong opportunities afforded to independent school students are extensive. A remarkable example of this is that in 2018, figures showed that 94 per cent of those educated in independent schools go on to study at university.

This is comparable to the total 27.9 per cent of the 18-year old population being accepted to go to university in 2018.

The general ethos of a charity is one of assisting those in need. There are expectations of equality, care and the support of the disadvantaged. This cannot be squared with with the fact that the effect of independent schools within the education sector is broadly to block social mobility.

It is a striking fact that while state schools receive no tax relief and decreasing statutory support, independent schools gain tax benefits by virtue of their charitable status despite being able to charge high annual fees per pupil.

The defining characteristic of a charitable body is its demonstration of ‘public benefit’ – purposes and aims that benefit the public. Generally, independent schools meet the public benefit requirement by providing partnerships and scholarships.

They are, however, inconsistent in providing these, thereby failing to convincingly meet the legal public benefit requirement. This is a powerful argument against charitable status for independent schools.

Indeed, if partnerships and scholarships were provided effectively, it could go a long way towards balancing those social mobility issues that contribute to the inequality of outcomes between independent and state schools.

Although the Independent Schools Council claims that ‘a third of … pupils are on some sort of fee reduction’, in reality such fee reductions may simply be means of perpetuating privilege.

Robert Verkaik points out, for instance, that in 2017 nearly 62,000 public school teachers’ children, the children of alumni and siblings of existing or past students received £205 million in (primarily) non-means-tested scholarships.

Worse, in 2019 fewer than 6,500 pupils of any provenance paid no fees at all.

Should charitable status be removed from independent schools?

Plainly, the current system is failing. But does this mean charitable status should actually be denied to independent schools? Not necessarily. There is a lack of foresight regarding what will come next.

Removal of charitable status would not be a magic wand to reduce inequality in educational outcomes, and as commentators we should be wary of treating it as such.

Although the evidence of school’s perpetuation of inequality is persuasive, we should ask ourselves what the alternatives are. Removal of charitable status would see an independent school landscape in which, rather than 50 per cent being charities, 100 per cent would have commercial status, and would therefore operate without the extra checks and balances required by the Charity Commission.

This would also include the removal of additional safeguarding and inspection policies offered by these institutions being charitable.

This means 100 per cent of independent schools would not be required to provide any ‘public benefit’ at all. Is this really preferable? 

An argument often made for the removal of charitable status from independent schools is that the money saved in tax advantages can be dedicated to the state education sector. This Robin Hood-esque arguments lack realism.

As Melissa Benn and David Kynaston have discussed, firstly, this money would likely not be diverted straight to the state sector, and secondly, this reform would be fiscally insignificant.

Do I wholeheartedly believe that independent schools should remain charitable? No. 

However, I’d argue that removal of charitable status would only make a symbolic difference. It would not make any significant fiscal difference to the state sector, and would remove valuable governance and oversight currently attached to charitable status.

If we want to institute lasting change at a sector level, we need comprehensive reform.

This could include governmental sponsorship of fees, sector-wide initiatives to balance pupil demographics and legislation to provide the governance and oversight currently provided by the Charity Commission.

Successful reform should be both viable and effective, with a view to creating a fairer society. If charitable status is removed, requirements should be made to provide additional oversight in the sector and to rework the system of independent schools. Without this, social mobility will not improve.

Only after adequate reform can we begin to counter the social inequality perpetuated by the ability to pay for education.

Tilly Clough is a PhD student at the University of Liverpool researching and evaluating independent schools’ charitable status. Alongside her PhD, she is a graduate teaching assistant with a focus on equity and trusts. Find her on Twitter at @tilly_clough.

Discussion

  1. I enjoyed reading this, thank you! You might be interested into reading ‘Engines of Privilege’, a book recently published a year ago that actually explains that efforts to remove charitable status were unsuccessful (by 1977, lawyers had been unable to redefine charitable activities in such a way as to ensure organisations like Oxfam and Save The Children did not also lose out) yet I am not sure whether this comes into conversation when charitable status is discussed today.

    As someone who was educated independently at Sixth Form with partial financial support, I have found that adding VAT to fees would damage social inequality further than is being discussed. Private school pupils are bundled into one group – those that can afford, as you say, the average £17k a year fees, yet with my experience there is a demographic that is only comfortable with the £5k a term fees, and VAT would push that and other similar fees per term to near £6.5/7k which will force this demographic out of the picture, favouring those more advantaged families that have no difficulty with up to £14k per term. This is also appropriate when discussing families which opt for independent schools for SEN reasons, non-selective and special independent schools which aren’t necessarily as expensive compared with the ‘big names’ (with families not that affluent either) yet a VAT addition would endanger their chances of being able to school their children at these specific schools.

    Just in case this would also help, but schools are required to evidence how they are supposedly ‘benefitting the public’ in their accounts published openly on Companies House. This might be useful to see how schools are working within the system. Wishing you luck with your thesis!

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