News & Insights 12 January 2018

Independent Schools: Do They Deserve Their Charity Status?

(Photograph: Peter Titmuss/Alamy)

Depending on your opinion of them, the mention of independent schools can provoke a wide range of reactions. Privileged? Prestigious? Unfair? Unnecessary? But…. Charity?

While this might be somewhat perplexing at first, the most recent Charities Act 2011 defines a charity as an institution which is established for a charitable purpose and provides benefit to the public. The ‘advancement of education’ is a charitable purpose, meaning independent schools are eligible to become charities.

So what benefit does an independent school receive by registering as a charity? Tax relief. According to a study of local council records earlier this year, independent schools are set to receive tax rebates totalling £522 million over the next five years. Charitable organisations in England and Wales are entitled to relief of 80% on the business rates payable on the buildings they use. As a result of this, a large number of independent schools qualify for this relief. Analysis of government data suggested there would be a business rates bill of £1.16 billion over the next five years on the 2,707 properties classified as private schools. However, it is forecasted that only £634m will be paid, with the remaining £522m saved due to the schools’ charitable status. Eton College, for example, would have faced a bill of £4.1m for business rates over the next five years without its charitable status, but instead, it will pay just £821,040.

With this in mind, it is worth revisiting the definition of a charity? Even if institutions can prove their charitable purpose due to the ‘advancement of education’, can they prove their provision of benefit to the public? In days gone by, there was a presumption that any type of charity is for the public benefit. This is no longer the case. In 2008 the chair of the Charity Commission, Suzi Leather, provoked the ire of the Independent Schools Council (ISC) when she warned that independent schools may be stripped of their charity status if they operate as “exclusive clubs” for the rich. She was clear in her assertion that fee-paying schools must prove that children who cannot afford their services will also benefit. While a legal case brought by the ISC in 2011 removed the possibility of independent schools’ charity status being stripped by the Charity Commission, Leather’s comments on public benefit certainly kick-started a shift in thinking on the topic.

Initially, guidance from the Charity Commission viewed bursaries for free or subsidised access as an obvious and, in many cases, the simplest way in which independent schools could provide opportunities to benefit people who could not afford the fees. This guidance has since evolved to include the need for creating formal partnerships between independent schools and state schools. Earlier this year, the Department for Education set up a System Partnership Unit which was designed to support the independent school sector with the brokering of aforementioned partnerships. Once a partnership is created, there are seemingly endless ways in which independent schools can provide time, money and resources to support state schools. Sharing use of sports facilities; performance centres for art, drama and music lessons; laboratories for science lessons to name but a few. The need for an explanation of how the school has carried out its purpose for the public benefit in its annual report is another positive recommendation made by the Charity Commission in its guidance.

While these steps are encouraging, the lack of statutory definition for the term ‘public benefit’ will always allow for a grey area. Without it, actions by independent schools can vary considerably depending on their interpretation of the term. Furthermore, the tribunal in 2011 ruled that trustees of a charitable independent school should decide what was appropriate in their particular circumstances, not the Charity Commission.

With this being said, there have certainly been signs of encouragement in recent years. A number of independent schools have noticeably increased their efforts to be active participants of the local community. We, as a society, must continue to encourage and welcome efforts made by independent schools to forge meaningful partnerships in their local area to benefit all children in the community, irrespective of socio-economic background. While there is still some way to go, we are certainly moving in the right direction.