Rates relief removal puts schools at ‘competitive disadvantage’

The independent sector in Scotland is facing significant challenges in the current political and economic climate, despite its continued level of success. As well as the uncertainty around Brexit – which affects us all – and the increase in teacher pension contributions, perhaps the biggest comes from the impending rollout of the Non-Domestic Rates Bill.

Following a review commissioned by the Scottish Government to enhance and reform our country’s business rates system, one of the main recommendations was to remove mandatory charitable rates relief from Scotland’s independent schools. This is set to cost the sector in the region of £7m a year.

As a result of this review, independent schools will retain their charity status, but will lose out on the principal financial benefit of this status. Following on from the review, there has been a lot of discussion as to why our independent schools hold charitable status in the first place and why they have been able to claim rates relief up until now. Well, here’s why…

Charitable status

In 2005, the devolved government created the Office of Scotland Charity Regulator (OSCR). Its purpose was to assess all of the organisations that, at the time, held charitable status in Scotland because of their commitment to advancing a charitable purpose – in this case, education. The OSCR eventually determined that independent schools should remain as charities, having ensured that their public benefit outweighed the private, and that fees were not too restrictive to entry.

Independent schools are the most examined and scrutinised of all the 24,000 registered charities in Scotland, or their equivalents in England and Wales

The OSCR public benefit test was designed specifically for them and they have spent the best part of over 12 years continually meeting the requirements of that test. As a result of that unique test, independent schools are the most examined and scrutinised of all the 24,000 registered charities in Scotland, or their equivalents in England and Wales. Here’s how…

Provision of fee assistance

As part of their charitable remit, Scotland’s independent schools must allocate a proportion of their fee income to means-tested bursaries, to widen participation in their education.

As a result, since 2005, the provision of means-tested bursaries has tripled, with independent schools dedicating over £31m a year towards bursaries up to 100% for parents who could not otherwise afford to send their child to an independent school. Data collected from our 74 member schools shows that 25% of mainstream independent pupils in Scotland (that’s over 7,000) receive means-tested assistance.

Sharing of facilities

Schools continually open up their facilities to the local community and work in partnership with local authority schools to share staff expertise and facilities for the benefit of pupils in both the independent and state sectors. This includes opening up cricket, hockey, football and rugby pitches to the local area, sharing facilities such as music halls and theatres, and including other pupils in subject teaching, careers events and other opportunities.

Investing back into the community

Contrary to popular belief, these independent schools do not operate as profit-making bodies. In fact, they are legally prohibited from doing so. Money from fee income is either invested directly back into the school (to pay and recruit teachers or to improve and develop facilities, for example) or it goes towards means-tested bursaries and other forms of fee assistance.

The fact that Scotland’s independent schools are registered charities first and foremost benefits our young people and their families, as well as the local community and local authority schools.

At the end of the day, regardless of the implications for independent schools, the fact that they will retain their charitable status but will not be eligible for the same financial relief to continue their work as every other registered charity in Scotland, England or Wales restricts their work and puts them at a competitive disadvantage.