The state sector in education is undergoing a massive belt tightening that is leading to larger classes and, consequently, an impoverishment of the service it is able to deliver. The UK national debt will reach £1.5 trillion in 2015, requiring further cuts. Therefore, Scottish state schools can expect to come under greater and greater pressure to deliver the current levels of service with less resources available. Given this is the case, it would be sensible to look at ways that could free up money or utilise what is available more effectively.
On this point, we can look at how schools are taxed. As schools, they are liable for the equivalent of the council tax on their property: the Non-Domestic Rate (NDR). The NDR is a tax that the local council gathers and adds to a particular pot. It can be a sizable amount of a school’s budget – in the hundreds of thousands.
Independent (private) schools in Scotland have to pay the same tax, but because they have charitable status they are eligible for an 80% reduction in their NDR. This frees up hundreds of thousands of pounds for independent schools every year to spend on the education of their students. As Paul Hutcheon in The Herald pointed out, charitable status gives rise to a situation where George Watson’s College in Edinburgh had its NDR reduced from £412 649 to £83 530, a saving of £329 119, yet Wester Hailes, a state school in Edinburgh where over 40% of the students are eligible for free school meals because of low family incomes, still pays the full NDR of £261 873, over three times the amount paid by Watson’s. If charitable status was applied to Wester Hailes then the school would only pay £32 375 a year, loosing up £229 498 to support education in one of Edinburgh’s most disadvantaged schools! A creative headteacher could do a lot with that.
All of this raises questions of why do not state schools have charitable status and why do independent schools enjoy charitable status? Independent schools are not, needless to point out almost, obviously charities. And yet they are, or at least have that legal recognition.
It is the Office of the Scottish Charity Regulator (OSCR) that decides upon such matters. They have ‘duty to review entries in the Scottish Charity Register from time to time, as well as to remove any charity that no longer meets the charity test’. It may be interesting to know something about how these things are defined.
What is the test of a charity? Some of the test is financial. Charities must submit accounts and open themselves to review, but the crucial test in Scots law of whether a school can have charity status is three fold. A body:
• must have charitable purposes
• must not use its assets for non-charitable purposes, and
• must provide public benefit
Suitably vague, but enough possibly for common sense application. OSCR goes onto state that:
“When assessing whether a charity provides public benefit, OSCR must look at whether the charity’s activities involve any private benefit, or disbenefit to the public; and whether there is any undue restriction on gaining access to the benefit the charity provides.”
There’s always a moment when language lets you down. The language is ambiguous but having ‘disbenefit to the public’ coordinating with ‘private benefit’ would make the reader think that to have a charity run for private benefit would exclude it from charitable status as much as public disbenefit. You cannot use the money raised for your dog charity to fund your illegal drug business, for example. It would be correct to assume that a group of people who separate their children for the purpose of an elite schooling might be termed a ‘private’ party, rather than ‘public’. In the same way a ‘private’ house is only accessible by the owner and who the owner or legal warrant gives permission to. Not everyone can wander into the house, neither can just anyone who wants to attend independent school.
In this very obvious sense an independent school is a ‘private’ school, and so were they named before being re-branded ‘independent’. On the grounds that they are of ‘private benefit’, independent schools cannot possibly be recognised as charities. As for ‘public disbenefit’, an individual can take their pick. Does elite schooling and access to a network benefit or hinder the public good? More about this point later.
Nonetheless, the next clause about ‘undue restriction’ to the benefit the charity provides would seem to put the nail in the coffin of the independent school case for charitable status: independent schools are run for private benefit; independent schools restrict access based on money, surely an ‘undue’ limitation on access? A person who lacks economic clout cannot independent schooling. Generally, most people are under the impression that charities are for people whose economic status is a barrier to services and resources.
To think that would be to jump to a conclusion too soon about the definition of charity. A conclusion that OSCR avoids. OSCR is not prepared to make that particular judgement about fee-paying schools, instead they write, ‘The area of concern with fee-charging schools is whether the fees they charge unduly restrict the access of potential pupils to the educational benefit the charity provides.’ Again, note the crucial word here ‘unduly’. What does it mean? How is it applied? Fortunately, no definition is supplied to disambiguate the nebulous cloud of meaning.
Although several schools in the independent sector did not pass the charity test of public benefit and received instructions which they must comply with, most independent schools, after review, retained their charitable status. It is quite instructive to examine a private school that did pass the charity test so that we may gain a sense of how standards are applied and how judgements are arrived at. This would help furnish us with reasons and proofs for state schools to enjoy charity status. Furthermore, we can learn what a school that has failed the charitable test might have to do to preserve their charitable status. Again, this is helpful in providing a possible pathway for state schools to achieve the desired legal recognition.
By sheer chance, genuinely, I happened on UK Education Secretary Michael Gove’s old alma mater’s review. It seemed as good an example as any to examine and we may take it as indicative of how an independent school is expected to work, having passed the review at the first time of asking. Robert Gordon College is an independent school in Aberdeen. Before we examine how it passed the charity status review, we may wish to put the importance of charity status into context with regard to the financial benefits the status endows. According to the annual accounts Robert Gordon College has to submit to OSCR the school had an income of £16 060 000. This income was garnered from three sources: total donations, fund raising and agencies (£437 000); other income resources (£174 000); and charitable activity (£15 449 000). Expenditure was £15 329 000 which leaves a ‘profit’ of £731 000. It is hard to imagine Robert Gordon’s raising £15 million with carol singing, bob-a-job or supermarket packing so we’ll have to assume that ‘charitable activity’ is the term applied for the collective amount that parents or other interested parties pay for their children to attend Robert Gordon’s. And we’re going to assume that the £174 000 is money raised by hiring out the grounds and properties of Robert Gordon’s, combined with any other money-making activities the school and its staff run.
If Robert Gordon’s did not have charitable status (and this is rough working) then they would have to pay 20% VAT on the service they provide and 20% corporation tax. Let us assume that the fees increase and everybody who is paying them now continues to pay them and the income generated remains the same. This means that the College is saving itself £3.1 million in value added tax. Taxes on profit would be £146 000 and then they would have to pay two or maybe three hundred thousand in NDR. It’s a lot of money. Especially when you think that the people who pay the fees and make donations can make tax deductions against those fees and donations because the College is a charity. These tax deductions not being available would lead to a mass exodus of pupils as the cost of an education at the College would be prohibitive. Without charitable status, independent schools run as a private business would be unfeasible. When we also realise that tax deductions by parents or interested parties made for independent schooling means that the state receives less money because it is de facto paying for individuals to attend private school; and that for each individual several thousands of pounds are ‘deducted’ from the fund that provides public services, to the public, then this may cause us to recall the term ‘public disbenefit’. Thus, all in all, Robert Gordon’s College’s charitable status’ true cost to the taxpayer is millions of pounds each year.
And I’ve no reason to believe that the other independent schools do not cost the taxpayer the same amount. Losing its charitable status would have a cataclysmic effect on Robert Gordon’s. But, why don’t we return to how it gained this status?
The relevant review by OSCR announces the decision from the outset:
“Following an inquiry under section 28 of the Charities and Trustee Investment (Scotland) Act 2005 (the 2005 Act), we are pleased to confirm that Robert Gordon’s College meets the charity test and therefore continues to be eligible to be registered as a charity in Scotland.”
“We are satisfied that:
- these purposes are charitable;
- the charity’s activities provide public benefit in furtherance of those purposes;
- there is no evidence of any significant private benefit or disbenefit arising in consequence of the charity exercising its functions; and
- the conditions on accessing the benefit are not, on balance, unduly restrictive.
The review first examines ‘Benefit that is charged for’. I would have thought that this fact alone would exclude a body from charity status, but I am willing to accept that a charity may charge less than the going rate for the same service. Yet with fees of £11 185 pounds an academic session for a single secondary student and £8 180 for whole day nursery provision for a year long session, the College does not discount on a service that can be had for free to the general public or at most, in the case of state nurseries, £6000 a year.
It seems that OSCR is close to agreeing with me on the point of the high fees, even if they only compare with other independent schools (loading the dice?): “In order for public benefit to be provided, there must therefore be significant mitigation of these fees in place”. However, a rigour that raises hope of a thorough cost-benefit analysis lasts as long as a sentence. In the very next line the report goes onto assert, ‘Robert Gordon’s College provides benefit to its pupils which is charged for.’. That’s it. The school is worth the money. No comparison with the other independent or state schools. It just does provide ‘public’ benefit, at a price.
The review then lists the educational services provided by Robert Gordon’s College – Curriculum for Excellence, Highers and pupils can take part in extra-curricular activities. Robert Gordon’s College has passed the test for ‘Public benefit that is charged’. The fees are mitigated by providing the same service as nearly every state nursery, primary school and secondary school in Scotland!
Yet what about the ‘Public benefit that is uncharged’? This is the crux. This is the litmus test as to whether the school extends itself to help those less fortunate than themselves. There are some poor areas in Aberdeen that could possibly benefit from some outreach work…
This section begins with a qualification: ‘In addition, the school has provided evidence of a notable level of benefit for which it makes little or no charge.’ (Italics my own.) A definition of ‘little charge’ would be useful. Is a profit above costs made on these charges? How often are they made? The review is silent on these points.
We continue. Robert Gordon’s, according to the review, ‘Provides support to external pupils sitting Intermediate, Higher and Advanced Higher courses’. Although the pupils do not attend the school (wait a minute!) teachers will provide ‘guidance’ and administer end of unit assessment. Well, at least it is something…’Approximately, ten pupils have benefitted from this type of support from the school in the last four years’. Do I start with ‘approximately’ and wonder what the margin of error is? Do I start with ‘ten’? Or ‘four years’? Or do I let the reader draw their own conclusions with a little aside that even if it was 3 pupils a year benefiting, the work would take less than 60 minutes…a year, for each pupil, in each subject.
A little better is the five pupils a year who participate in the preparation programme for ‘high tariff universities’. This runs from two months and cannot be much more than a few sessions as these pupils will be doing a lot of homework and study. It is not clear if the pupils from the state school have to pay a small amount. It is a very small amount regardless of the circumstances.
Robert Gordon’s College does invite external pupils to careers events and Oxbridge entrance presentation – but those are drawn from other independent schools. (Here there may be a case for ‘undue restriction’?) Hardly charitable.
Staff are encouraged to develop the curriculum, and to mark for the exam board, and join education committees – all things that either pay money or benefit an individual’s career. Again, a public good that seems capable of the application of the word ‘charitable’ is lacking. A member of staff does sit on a committee that affects local schools, and the Geography Dept is involved in a Nigerian project with local schools, but it is unclear whether these are state or private.
It does take probationers and students, which is a benefit. But, as both cost nothing and the school can save money on teaching staff with a probationary teacher, who is helping who? A probationer can save a school over £30 000 a year. If you have five or six, you are saving serious money. over £150 000, and schools can be reimbursed for the costs probationers incur from…the taxpayer. Financially, it is a more direct form of subsidy. Once again, not really charity.
The area where most people might expect to see a public good is in facilities. Robert Gordon’s might be expected to put its wonderful and expensive facilities at the disposal of local state schools or the general public. Hockey and cricket clubs benefit. Yet, these sports are not widely played by the public, even the report states that the cricket club has ‘few beneficiaries’. It does allow football and other multi-sports to use the facilities during the summer, however, these are ‘commercial’ so the school will make at least running costs if not a profit, probably a profit. The rest of the events are either very small or chargeable. The final one, ‘makes a hall available to a local school on a weekly basis’ would again be for a charge, I’m guessing.
Where the school seems to be most impressive is in the allocation of bursaries. There is a certain amount of ambiguity here. 158 pupils received a bursary but this doesn’t mean they did not pay fees. This means they had a reduction in fees. By how much it is not made clear. £500 off £11 000 is not really charity.
Nonetheless, from 1 567 pupils, 5.3% had the 100% bursary. This is 83 pupils and fits with the claim on the website that ‘between 10 and 18 pupils every year for entry in to Secondary 1′ – the average is 14 a year. This means a total of £921 000 a year is spent on bursaries. Quite a generous sum. The school appears to be sacrificing a great deal of its income to benefit pupils who cannot afford their fees. Admittedly, they are academically selected and they are probably quite middle class, most of them, yet it does require a sacrifice by the school and higher fees for all the other pupils to be able to afford this. Is it?
But the case becomes curiouser as the website says, ‘This is possible with the support of the Aberdeen Endowments Trust, other trusts and funds and the College’s own endowments.’ (Italics my own). Aberdeen Endowments Trust? What is that?…Oh surprise! It is a local charity. Three Aberdeen councillors sit on its board which means that it is most likely a local council funded body. (It also funds short courses and degrees at Aberdeen University if you come from Aberdeen area.) This means that local council money, raised from the Aberdeen public, is given to a ‘charity’, set up and funded by the local council, which local councillors sit on, and from where they disburse monies. Legal shennanigans aside, it is, in essence, local government paying for things by other means.
This means that the seemingly most impressive charity work that Robert Gordon’s does do is funded by a state-supported local charity! The good people of Aberdeen are paying close to £1 million pounds a year to educate 83 pupils. And some of this will be ‘profit’ for the school. Meanwhile, their own children’s schools suffer cuts and pay the full NDR. And it will be the same, I imagine, for other areas who have independent schools offering ‘free’ bursaries.
Since the bursaries are effectively a scam of the taxpayer, this, by my calculation, reduces its undisputed public benefit charity work to a handful of hours a year given to 2 or 3 individuals, possibly for a few subjects, possibly for one. And it retains charitable status! What must the independent schools that failed charitable status have been like?
And poor Wester Hailes, with a 45% free-dinner role has to pay in excess of £200 000 a year in NDR.
Let me be clear, I have nothing against Robert Gordon’s College or the independent sector. It just seems very, very unfair that the independent sector is being very generously let off with millions, yet claims an undeserved charitable status, whereas the poorest schools are going to endure continued budgetary pressures for the next few years.
Now, let us turn to the state sector, and I’ll make it quick. Can Wester Hailes, under the rules set out by OSCR and as fulfilled by Robert Gordon’s College, be recognised as having the legal status of a charity?
Wester Hailes is a community school that provides a free education to the public of school age in that area. It provides extra-curricular activities and support for free, or for a very,very small charge: the teachers are not paid extra for this. It provides educational courses at reduced rates for anyone who wants to attend. It provides facilities, at reduced rate, to sports club, fitness clubs and superannuated groups. Its land is free to use to members of the public – to play football on, to walk, run or play on.
In a deprived area, it provides security for many students who come from very difficult backgrounds. It liaises with social work to provide support. School meals are free for 45% of its pupils, ensuring that they have at least one good meal a day. Staff regularly take part in CPD, exam board marking and sit on committees too.
In short, if Robert Gordon’s College is a charity, then so much more so it Wester Hailes and other schools like it. There’s a clear injustice here and something should be done.