Tax breaks for private schools are a bad use of the U.K.’s public money

Sep 30, 2021

Education is a public good, but so is medicine and Pfizer doesn’t claim to be a charity.

At the U.K.’s Labour Party conference earlier this month, party leader Keir Starmer called for elimination of the tax-beneficial charitable status of private schools. The below article on the subject originally appeared in CapX on September 27, 2021, and is republished with permission. Another CapX article, by Henry Hill defending the charitable status of the U.K.’s private schools, is here and also republished with permission.

Private schools aren’t charities and we shouldn’t treat them as if they are. The services they provide aren’t primarily for public benefit, they’re for the benefit of those who can afford them. Yes, they offer bursaries and a few other nods to the public good. That’s no different to thousands of businesses with corporate social responsibility strategies. Sainsbury’s donates to baby banks. Tesco fundraises for health charities. TOMs donates a pair of shoes for every pair they sell. Education is a public good, yes. So are medicine and food, but neither Pfizer nor The Ivy claim to be charities.

Who mainly benefits from the education provided by private schools? Primarily those rich enough to afford the fees. According to the Independent Schools Council Annual Census, average fees for day schools are about £15,000 a year. For boarding schools it’s £36,000. Unsurprisingly, analysis by UCL finds that the proportion of children attending private school is close to zero across most of the income distribution. It starts rising slightly when you get to the richest third of the population but only rises to above 10% of children among the richest 5%.

To be in the top 5% you need an income of around £80,000. So, it’s not just uber-wealthy millionaires sending their kids to private school, but it is people who are vastly richer than the majority of the population. For many of those people, fees of £15000—£30,000 a year will take a sizeable chunk out of their income. I’m sure many give up things that others with a similar income could do. The point, however, is that parents on lower incomes sacrifice too, but for them it means skipping meals to buy your child new shoes. Or wearing a worn-out coat so your children can get the bus to football. Keeping the heat off so that you can keep up with the rent. Those somewhat higher up may not face that level of hardship, but they will sacrifice and save for a holiday or to buy a new cooker, or a car. Having the option to “sacrifice” £15,000 every year for your child’s education is a privilege very few people can dream of.

What about all those bursaries private schools offer? Around half a million pupils attend independent schools in the U.K. and about three in ten (157,162) receive some help with fees from their school. Most aren’t getting help on a means-tested basis though, they win scholarships or benefit from staff or other discounts. Among all those who get help, only a tiny minority pay no fees (8116). The rest pay reduced fees but are still stumping up thousands of pounds a year. The average amount of financial support received is £5969, so it’s only helpful for those who can find nearly £10,000 a year to cover the rest. Even among those who don’t pay fees, most have to find the money to pay for uniforms and other costs. Only 1.5% of all means-tested bursaries and scholarships include help with costs like uniform. If this was a business’s corporate social responsibility strategy it would be deeply unimpressive.

Private school education is only available to a tiny minority, but they are vastly over-represented in highly paid and influential jobs. Sutton Trust research shows that only 7% of the population went to private school, but they account for nearly two thirds of senior judges and nearly six in ten civil service permanent secretaries and members of the House of Lords. Another study finds that privately educated people earn about 17% more than their state school counterparts by the time they’re 25. The same study examined whether those educated privately were any more likely to be “community minded,” to volunteer or give to charity, sometimes cited as wider public benefits generated by private schools. However, they found that there was no difference between private and state educated people on these measures.

So, private schools overwhelmingly benefit the wealthy, giving access to powerful jobs and higher wages. Research shows that private schools deliver academic advantages for their pupils, who do significantly better at A-level than those in similar state schools. In addition, they confer non-academic benefits such as social networks with others who will go on to be rich and successful, guidance to help get into the best universities, links to high value internships, access to extra-curricular activities and so on. Private schools don’t create inequality on their own, but they are one mechanism by which those who are already advantaged increase and entrench that privilege.

Most private schools have charitable status, giving them at least 80% relief on business rates. This saves a school like Eton more than £500,000 a year. Labour has said it aims to save £1.7 billion by removing tax breaks for private schools.

The change is long overdue and has been bubbling up for some time. Back in March 2020, the Times reported that the Independent Schools Association had warned its members they would probably lose some of their tax breaks.

At any time, we should look hard at how public money is spent. Right now, it’s especially important. We’re heading into a Spending Review likely to be even more contested and fractious than usual. Earlier this year we had a foretaste of the fights to come when Kevan Collins, then the government’s Catch Up Tzar, delivered his plan to enable the nation’s children to catch up educationally and then resigned when it was vetoed by the Treasury. Can you imagine the reaction if he had gone in and asked for £1.7 billion to give to private schools?

Even if their impact on society was neutral or benign, there is simply no way you can argue that this is the best use of £1.7 billion. Removing tax breaks from private schools shouldn’t be viewed as a matter of ideology or class warfare—it’s just good management of the public finances.