When you read this, the 2017 general election will be a distant memory. Editorial deadlines, however, dictate that I write this with one week to go. So with a larger than usual caveat that typically accompanies ‘what lies in store’ opinion pieces, here is one view of what independent schools can expect in the year ahead.
It is a fair assumption that debates around the contribution of charitable independent schools will not evaporate following the election. There is, in fact, reasonable clarity as a result of the Green Paper, the ISC/DfE memorandum of understanding and the Conservative manifesto. Assuming a Conservative-led government post-election, that manifesto will provide justification for implementing the proposals which first appeared in September 2016 – albeit that the government’s thinking and, it is to be hoped, understanding of the issue has been considerably refined over time.
In Theresa May’s September 2016 speech, for example, she set out a commitment to amend Charity Commission guidance “to enact a tougher test on the amount of public benefit required to maintain charitable status”. This statement disclosed a worrying lack of understanding about charitable status, which is not something requiring ‘maintenance’. The Green Paper corrected the error, and the ISC/DfE concordat built on that greater understanding with a series of sensible proposals designed to differentiate between the multitude of independent schools and the capacity and capability of each to support the aspiration of increasing the number of good school places.
Public benefit is intrinsic both to the aims of schools, and the manner in which they are operated
The Conservative manifesto committed a future government to work with ISC: “To ensure that at least 100 leading independent schools become involved in academy sponsorship or the founding of free schools in the state system, keeping open the option of changing the tax status of independent schools if progress is not made.”
That statement, of course, begs many questions, notably whether existing partnerships count and what degree of partnership or involvement can be included within the definition of sponsorship? If cross-sector chains and groups are included, such as Woodard, GDST, United Learning and the various livery companies such as the Mercers’ Association, the Haberdashers’ Company and the Merchant Taylors’ Company, considerable progress towards the target of 100 schools is already in the bank.
The sector’s consistent response has been a sensible focus on existing partnership work, taking online via the Schools Together website the work of tracking cross-sector collaboration that has been charted for decades, first in a series of ‘good neighbours’ reports carried out by the predecessor of ISC, then in the annual ISC census and most comprehensively documented and analysed in Oxford Economics’ 2014 report on the impact of independent schools on the British economy. Chapter six of that report, focusing on the contribution of the sector to the publicly funded education system and society, still bears scrutiny.
As the debate proceeds, it is worthwhile restating some basics. First, charitable status is not an optional extra which can be discarded if the costs of compliance exceed the benefits. If a school is operated within a charitable trust, it forms part of the assets of the charity, to be managed in accordance with the charity’s objectives. Trustees act as custodians or stewards of the charity’s assets, working to promote and further the charity’s aims and objectives at all times.
Opinion is divided across the sector about whether regarding schools as charities is a good or a bad thing and whether it would be preferable for schools to be classified as ‘not for profit’. This debate is largely irrelevant and pointless. There is no mechanism for reclassifying charitable schools as something else, and no political appetite for passing the necessary legislation to allow schools to choose a different status. Even the legislation threatened in the Green Paper did not envisage a change to charitable status, and focused instead on removing the benefits of charitable status for uncooperative schools.
Charitable status, in fact, accurately reflects the nature of independent schools which share a common mission to promote education for its own worth rather than for a profit motive. Charitable schools reinvest surpluses in the schools, rather than extract and distribute profits for shareholders. Their entire resource base is dedicated to advancing education. They share an aspiration to make that education available to all who can benefit from it. Fees are an economic necessity, given the absence of public funding. Public benefit is intrinsic both to the aims of schools, and the manner in which they are operated.
Since ISC’s successful judicial review of the Charity Commission’s previous public benefit guidance, the regulatory position has been settled and clear. Engagement with the Charity Commission is positive and there is absolutely no appetite (and no need) for a reworking of public benefit rules or guidance, in the absence of any change in law. It is to be hoped that no such change in law is forthcoming after the election.
VAT on school fees
To ensure a balanced presentation of opposing views, Labour’s manifesto pledge to fund school meals for primary school children, “by removing the VAT exemption on private school fees” needs consideration.
The premise – that requiring schools to collect VAT on school fees results in a net increase in revenues for the Treasury – is open to challenge on the basis that, presumably, schools would also be able to reclaim VAT on expenditure.
The bigger economic consideration is that fewer parents would be able to afford an independent school education, thereby increasing the number of children in the state system at a time of record pressure on school budgets and numbers.
In fact, the National Audit Office estimates that state schools in England have to make £3bn in savings by 2019/20 to meet cost pressures such as pay rises, higher employer national insurance contributions and pension increases. And whilst the schools budget is slated to increase from £39.6bn in 2015/16 to £42.6bn in 2019/20, the DfE has estimated that pupil numbers will rise by 3.9% in primary schools and 10.3% in secondary schools over the same period.
The burden of regulatory compliance is unlikely to lessen for independent schools in the year ahead. It is a sign of the times that the pastoral team of school-specialist lawyers I joined in 2014 is now the regulatory compliance team. A core part of our work is helping independent schools ensure compliance with regulatory standards, and dealing with the increasingly toxic fall-out – both for individuals and institutions – of non-compliance.
Our compliance survey of independent schools (February 2016) reflected on the multifarious aspects of compliance, ranging from regulatory standards through HR and employment, data protection and privacy, SEN and disabilities, health and safety, visas and immigration, charity, commercial and trading standards. No one individual could possibly deal with all these compliance aspects of operating a school. And yet schools appear increasingly to favour appointing compliance officers, often on a part-time/term-time basis. It’s an unenviable role.
In considering what could provide the most effective improvement to regulatory compliance, schools are increasingly interested in online platforms, regular updates and outsourcing elements of regulatory compliance. Our response has included elements of all of these: Compliance toolkits, which deliver monthly plain English updates on regulatory standards and guidance; OnStream, our online compliance portal for independent schools; and My OnStream which delivers compliance management solutions across several areas including a range of compliance focused e-learning modules, the single central register, and staff appraisals.