Liz Smith: The case for charitable status in education

The publication of the Barclay Review of Business Rates last month has reignited the debate about charitable status in education. This is because the report recommended that the eligibility for charity relief should be removed from all independent schools in order to ensure there is equity between the independent sector and the state sector.

Fettes College in Edinburgh. Photograph: Scott Louden

The ambition for equity may be laudable but instead of stripping the independent sector of its eligibility for charitable relief it would be far better if the state sector was accorded equivalent financial benefit. The Barclay Review should be recommending a levelling up not a levelling down.

Let’s be very clear; education is rightly defined as a merit good. Public benefit exists whether or not those consuming the good (or, in this case, their parents) pay fees. It is exactly why colleges and universities – some of which also charge fees – are thought worthy of charitable status and it is also why some other educational institutions and independent schools have charitable status. The contribution of these institutions to society and the economy vastly outweighs the tax breaks they receive.

If that contribution is the defining criterion then state schools should not be left out of the equation. There is no reason at all why they should not have an equivalent encouragement to seek charitable giving and regulations could be put in place to allow this to happen. State schools are given taxpayers’ money and it is state money they hand back when they nominally pay the state paper-based tax. There is no loss of revenue.

Likewise, those who seek to strip independent schools of their relief are missing some key points. Removing charitable status would make independent schools fully private. Fees would rise, making these schools unaffordable for a very large number of parents. In Scotland, it would mean that a significant proportion of the 30,000 pupils who attend independent schools would have to move to the state sector at the taxpayers’ expense, at a time when local authorities are already under financial pressure.

Secondly, these schools would become wholly elitist. They would no longer strive for social balance, they would no longer feel able to hand out such generous bursaries, or want to offer the use of their facilities to their local communities. This would also, of course, put Scotland’s independent sector at a competitive disadvantage with the rest of the UK.

But there is something else that would happen, and that is the devastating effect it would have on some smaller independent schools who offer very specialist help to children with additional support needs. These are some of the most successful schools in the country which do a thoroughly good job with some of our most challenged young people, including those referred to them by local authorities. No-one seems to have thought about these consequences particularly at a time when John Swinney has rightly decided to look again at whether the presumption to mainstream children is always the right one.

The charity test in Scotland as set out in the 2005 Charities and Trustee Investment (Scotland) Act is as rigorous as you would find anywhere in the world. Far from doing the minimum, independent schools have come a very long way in the past ten years to widen access and increase social diversity. The sum spent on means-tested assistance has more than doubled in that time to more than £30m and the scrutiny of the public benefit which they provide is first class. The most recent report from the Scottish Charities Regulator (OSCR) confirms exactly that. Indeed, it proved that the threat of failing the charity test means that schools will do far more than the minimum necessary.

Therefore it is somewhat bizarre that the Barclay Review has made its recommendation to strip independent schools of charitable status. In doing so, it is singling out 50 or so charities from the other 24,000 – very few of which have undergone the same detailed scrutiny.

The independent sector is one of the most successful parts of Scottish education. Attacking it, when the real focus should be on the pressing issues of improving literacy and numeracy and narrowing the attainment gap, sends out completely the wrong message, and should not be the role of a business rates review. Surely, the alternative is to be ambitious and accord state schools an equivalent financial benefit.

Liz Smith is Conservative MSP for Mid Scotland and Fife and a former teacher