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John Edward

Put to the test

The charitable status test has helped independent schools in Scotland reassess their role in the community, says John Edward

Posted by Stephanie Broad | October 29, 2015 | Law, finance, HR

The clue is there. It is the formal reason independent schools are registered charities. The “advancement of education” is their primary purpose and when they fulfil that purpose so their charitable status is confirmed. Despite political grandstanding, that status should not be considered a problem, anomaly or tax avoidance scheme. Schools that exist as registered charities cannot operate at or dispose of profit – meaning that any surplus generated can only be used by the school for their charitable purpose.

Since 2005 the Office of the Scottish Charity Regulator (OSCR) has been responsible for deciding what is or is not a Scottish charity through a test designed by, legislated for and voted on in the Scottish parliament. That test makes the specific requirement that restrictions to accessing the charity’s services, such as fees and charges, are not “undue”. All independent schools have had their status tested on the basis of their public benefit over the past 10 years and constitute almost half of all the charities reviewed in Scotland. That charity test is tougher than any equivalent in the world.

The reports on each school’s activities produced by OSCR merit much wider reading. The outcome has been a widening access programme of means-tested fee-assistance that amounts to £29 million each year and a wider programme of community engagement and shared facilities and staff. The figure reaches £45 million when non means-tested assistance is included. At the same time, every cost for the running of independent schools (except those which receive funding for additional support needs or Forces pupils) is met from parental fee income and fundraising – not from the state, local government or any other public purse.

As of 2014-15, more than 600 pupils in Scotland receive 100 percent means-tested financial assistance. Families of those pupils are amongst those most financially disadvantaged in the country. Further means-tested assistance below that percentage, from 95-20 percent, is currently given to more than 2,300 pupils. In addition, a further 4,000 pupils receive non-tested assistance such as scholarships, sibling and staff discounts – all in a sector that is a modest 31,000 pupils in size.

Charitable status also requires schools to provide facilities and services at free or reduced rates. One medium-sized independent school calculated that the value of supervised facilities and coaching or teaching staff provided free was £38,610 per year; another small school provided facilities for free for 426 hours last year. In addition, there is widespread staff participation in curriculum design and examination development, marking and assessment, staff secondments and the hosting of hundreds of student teachers.

Political commentary often focuses on the issue of relief from full non-domestic rates (NDR). In terms of rates relief, independent schools constitute 0.3 percent of registered charities in Scotland awarded rates relief, alongside universities, royal colleges and many new bodies such as local authority arm’s-length services. Paying rates at the level of mandatory relief still demonstrates that 20p/£ is being provided as new to the exchequer from external sources – again from parental fee income – unlike local authorities funded through taxation.

An independent report by BiGGAR Economics revealed that independent schools in Scotland deliver a positive economic impact to the Scottish economy of £445.8 million gross value added (GVA) per year and around 11,200 jobs in operational benefits. This is comparable to the impact of some of Scotland’s top universities. The report also showed that the schools contribute exchequer benefits to the state worth £263 million annually.

Every independent school’s founding philosophy or ethos is based on their charitable purpose – the education of the child – not on regulatory compliance or legal definition. The charity test has been a worthwhile opportunity for schools to audit, reassess, and reorder their role in their communities. Those who hanker after changing that status would only narrow access again, to the detriment of assisted pupils and contributing nothing to the other 95 percent of Scottish schools or to the “advancement of education”.

John Edward is director of the Scottish Council of Independent Schools:    

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