Privilege, private schools & educational apartheid: The case against charitable status

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Four Scottish private schools were recently told that they faced losing their charitable status. Scott Lavery argues that because of their exclusivity all fee-paying schools should have their charity tax-breaks revoked.

There is an institution that cultivates the growing inequality across our society. Its existence is almost entirely devoted to serving the affluent and privileged, and its product is a hugely advantaged upper class with its grip firmly on the mechanisms of political and economic power. The institution in question is the private school, one of the most socially divisive establishments in our society. Anthony Seldon, himself a headmaster of an English fee-paying school, has gone as far as saying that the independent educational establishment fuels ‘a social apartheid.’

At the end of last month, four Scottish private schools were told that they faced losing a lucrative package of tax-breaks because they were failing to fulfil their ‘charitable’ obligations. This challenge could potentially represent the beginning of an objection to the system of private education, which until now has gone largely uncontested. In a society where the top 1% own 23% of the wealth, it could even represent a significant move against those who occupy the top-end of the social hierarchy.

Prominent figures from across the voluntary sector have denied that independent schools have any legitimate claim to charity tax-breaks. Stephen Maxwell, Associate Director of the Scottish Council of Voluntary Organizations, said that private schools give “their own students – in Scotland only about 4% of the total – a competitive advantage in competing for top universities and jobs to the disadvantage of the majority. By so doing they create inequality and social division.”

For a portrait of the upper-echelons of this social division, one need look no further than a photograph recently released of Conservative shadow-chancellor George Osborne and multi-millionaire banker Nat Rothschild. It was circulated following the latest Conservative party-funding debacle aboard a luxury yacht in the Mediterranean. The photograph features the two erstwhile companions in their student days at the Oxford University “Bullingdon Club”. This old-boys network – of which David Cameron was also a member – is renowned as much for its exclusivity as it is for its drink-fuelled rampages. Membership remains strictly invite-only and entirely limited to the aristocracy and the ineffably wealthy.

Those affected gentleman in the Bullingdon Club picture were – just years before their inauguration into the Oxford elite – enjoying the privilege of a private education. Their parents’ wealth and background had bought them a place in the beating heart of the British ruling establishment, in which they would later serve with their equally privileged and privately-educated peers. Their riches acted as a means to social advantage.

Private schools across the country – whether they admit to it or not – continue to trade on this philosophy. By paying for what is perceived as a better education, parents benefit their children over others in their search for a university place and career. With an average termly fee for sixth formers standing at £4871, the favourable financial situation of private schools enables them to build and maintain superior facilities, take their pick from a pool of willing prospective staff, and continually cut class sizes.

These propitious elements of private education exist only because there are people rich enough to afford them: the continuation of the private school is conditional upon the existence of a wealthy class willing to pay-up. And pay-up they do. Seventeen major private schools in Scotland generate more than £160 million in fees between them. This sum of money goes towards the continued entrenchment of social and economic inequality and the consolidation of privilege that has become the preserve of our ‘progressive’ society.

Private schools are currently deemed to have “charitable status”. This exempts them from paying corporation tax, business rates, VAT on their utility bills, and from paying a tariff on financial donations. Independent educational establishments enjoy over £100 million in savings each year across the UK and £4.5 million in Scotland because of these tax-breaks. For this reason private schools have zealously defended their claim to charitable status.

Their claim is without justification. That the institutions which educated the inordinately wealthy Rothschild, Cameron and Osborne – Eton and St. Pauls – are considered suitable candidates for charity tax-breaks is utterly absurd. However, the funding farce extends beyond the confines of these traditionalist establishments. The ‘charitable status’ anomaly permeates beyond the institutions that were set up to satisfy the didactic requirements of the nobility and super-rich, into all levels of private education.

Some progress is being made in addressing this situation. In 2005, the Scottish government introduced legislation to ensure that charitable organizations were properly regulated. The “Charities and Trustee Investment Act” established The Office of the Scottish Charity Regulator (OSCR), a body which oversees the operation and conduct of charities and which has the power to grant charitable status. Under the act, institutions which apply for charitable status must demonstrate that they provide a service which is of public benefit. Crucially, they must show that access to this public benefit is not unduly restrictive. Essentially, this means charitable organizations must not be exclusively open to a small portion of society, namely those wealthy enough to afford high fees.

On Tuesday 28th October four Scottish private schools had their charitable status challenged by the OSCR on these grounds. Hutcheson’s Grammar in Glasgow was one of the institutions which was told that access to its services were unduly restrictive, and therefore in violation of the Charity Act’s requirements. The £9000-a-year school offered only 49 bursaries out of a school roll of 1750. St Leonard’s in Fife fared even worse – only 3 pupils benefited from means-tested financial assistance, amounting to a grand total of 0.5% of the schools income.

The OSCR was right to challenge the charitable credentials of these institutions. It is utterly ludicrous that a school which offers less than 1% of its income towards assisting the needy could be subject to charity-tax breaks covering 100% of its expenditure. In practice, schools such as St. Leonards and Hutcheson’s operate highly restrictive admission procedures, whereby the poor are effectively barred from partaking in any of the benefits a private education can offer.

Stephen Maxwell has claimed that these exclusionary practices can provide grounds for rejecting the private schools’ case. He said, “historically, charitable endowments were entirely devoted to a recognised charitable purpose – relief of sickness, education of poor scholars and so on… the public rightly gets irritated by news of charity staff earning high salaries, or charities spending too much of their income on administration or even fund-raising campaigns. [This is] why most people are puzzled if not outraged to learn that Eton and Fettes and other fee-paying schools have charitable status.”

Charlie McKinnon, an activist for EIS (Scotland’s teaching union), has expressed his distaste at the tax-breaks private schools currently enjoy. Speaking in a personal capacity, he said, “At a time when state schools in Glasgow are facing deep cuts in budgets, it is morally repugnant that private schools have charitable status. It is a grotesque irony that Hutcheson’s Grammar School was originally founded to help orphaned children.”

The independent educational establishment has responded to such sentiments with an aggressive assertion of its own philanthropic mission. However, at best the arguments it presents are indicative of the private sectors’ misunderstanding of itself and of the law. At worse the claims of the fee-paying schools’ are no more than a cynical attempt to create an illusion; a chimera behind which the private sector can pick the pocket of the tax-payer.

One argument commonly advanced by private schools is that they save the taxpayer large sums of cash by taking children out of the state system. Judith Sischy, director of the Scottish Council of Independent Schools, said, “The independent sector educates almost 32,000 pupils, which saves the public purse an estimated £165 million a year.”

They argue that because of this private schools create public benefit and therefore should retain their charitable status. This argument is a red herring: the savings the state makes because of private schooling are not grounds upon which charitable status can be granted. Stephen Maxwell explains, “Charities can only spend money on purposes recognised in law as charitable. Saving the Treasury money is not a recognised charitable purpose.”

The various groups that do defend the interests of private schools on these grounds should be well aware of this fact. That they continue to peddle this as a defence demonstrates their willingness to acquiesce in half-truths and rhetorical gambits in order to secure the valuable tax-breaks that charitable status entails.

Dr Michael Carslaw, the headmaster of St. Leonards School, has claimed, “It is disappointing that providing a high quality of education is, in itself, not judged to have sufficient public benefit.” One of the provisions of the Charity Act does indeed define the pursuit of education as a charitable enterprise but, as mentioned above, access to this service must not be unduly restrictive.

If charging fees of £23,346 for senior boarding places and £9,807 for day places does not constitute unduly restrictive practice (when the average national household income stands at below £30,000) then it is not clear what does.

It would seem that St. Leonards in fact esteems the virtues of militarism and martial authority over expanding its admissions base to the socially disadvantaged. The school handed-out £54,471 last year to eleven sets of parents who were employed by the Armed Forces. The allocations of these bursaries were not means-tested and were therefore allotted irrespective of financial need.

The headmaster claims that his school has “taken great strides in increasing access to a top quality education. We have a successful assisted places scheme for boys and girls who would benefit from a St Leonards education and whose parents are unable to afford the fees. It is disappointing that this was not recognised as adequate by OSCR.” As established by the OSCR report, however, this means-tested scheme benefited a sum total of three pupils. To claim that this level of means-tested help represents a ‘great stride’ in St Leonard’s commitment to social mobility is as ridiculous as it is disingenuous.

The four Scottish schools that have had their charitable status challenged have fallen spectacularly short of the requirements set by OSCR. They have failed to mitigate the effects of their restrictively high fees. They have failed to demonstrate public benefit. They have failed to secure places for those at the bottom of the society. In addition to these shortcomings, there is a broader truth about the system of private education which should not be overlooked.

It is a truth that can be witnessed across society: throughout business organizations, within financial elites, inside the civil service, the government, across the epicentres of political power, throughout the judiciary and indeed within our very own university. All traditional sources of influence and power within our society are disproportionately populated by, and represent the interests of, a moneyed-class. It is no coincidence that nearly half of those holding government or shadow ministerial roles were educated privately; or that over 70% of Scotland’s judges were educated in the independent sector; or that within the leading 100 media outlets, 52% of the top jobs were occupied by ex-public school boys.

OSCR has set a precedent for passing the ‘charity test’ by recognizing certain other private schools’ charitable status. George Heriot’s in Edinburgh and Gordonstoun – the former abode of our honourable head-of-state-in-waiting Prince Charles – both passed whilst offering approximately 10% of their incomes in means-tested benefit.

This level is far too low. As Stephen Maxwell argues, it is implausible to claim that an organization that offers 90% of its services to the affluent shows due concern for those who need help the most. Rather, he urges that institutions should be dedicating approximately 90% towards the needy in order to receive charitable tax breaks.

He said, “Today the public understanding of charity remains that a charity should be dedicated to a general public benefit – i.e. a benefit to which everyone has access – or to meeting the needs of people who are disadvantaged – by illness, poverty, poor housing, etc.”  Mr. Maxwell continued, “If The Charities Act were properly applied, this would result in most fee-paying schools losing their charitable status.”

The current system of private education segregates society along the lines of ‘ability-to-pay’. Consequently, it perpetuates inequality and consolidates political power in the hands of a moneyed-elite. In Scotland, the first step we can take towards addressing this injustice is to revoke the charitable status of all fee-paying schools.