Is it justifiable that public schools have charitable status leading to massive tax savings, but state schools don't?

[motherogod]

Many posters here have defended private education in terms of parental choice - fine - but I'd like to know how it can be justified that public schools have charitable status, particularly as half of them then have an 80% deduction on the rates they pay, whereas schools run by councils have to pay business rates. Academies, foundation schools and voluntary aided schools also receive an 80% reduction.

@Penguin007

To be fair to *@Andante57*, there have been a fair number of chippy comments about the perceived unfairness of fee-paying schools.

Some people choose to spend their money on their child's education. It may not seem fair. Who said it had to be?

To be fair to me, I didn't say fee-paying schools are unfair, I questioned their charitable status!

You were talking about charitable status in terms of fairness, really.

Our society isn't equal, we don't strive for that. If you want equality, look to a socialist country like Denmark.

Pamdemic

many many many private schools barely if at all manage to satisfy the legal definition of a charity

For the past 50 years the Labour Party have had quite a number of years in power. I wonder why they didn’t act on this ‘immoral’ charitable status.

there are tax loopholes that can be used to offset some of the costs of fees

I followed your link because I was fairly sure it would not back up your statement. What the link in effect says is that grandparents can give money to a child, and that the investment income will be taxed in the child's name, and therefore at a lower rate than grandparents would have paid on the investments. This is true, but there is no connection with schooling.

To afford a London day-school costing 19K a year, out of dividends, even if the investment return was a very generous 6%, the grandparents would have to give away 19K/6% = 317K per child. At a more realistic 4%, it would 475K. (I'm ignoring that actually there would be some tax to pay on the dividends, albeit a tiny amount.)

I don't think reducing income tax on investment income would make sense as the main reason for such large gifts.

@RandomLondoner

there are tax loopholes that can be used to offset some of the costs of fees

I followed your link because I was fairly sure it would not back up your statement. What the link in effect says is that grandparents can give money to a child, and that the investment income will be taxed in the child's name, and therefore at a lower rate than grandparents would have paid on the investments. This is true, but there is no connection with schooling.

To afford a London day-school costing 19K a year, out of dividends, even if the investment return was a very generous 6%, the grandparents would have to give away 19K/6% = 317K per child. At a more realistic 4%, it would 475K. (I'm ignoring that actually there would be some tax to pay on the dividends, albeit a tiny amount.)

I don't think reducing income tax on investment income would make sense as the main reason for such large gifts.

The article makes a specific connection with schooling, so take it up with the author!

@PamDemic

I'm' not quite sure what that proves Andante about the morality or otherwise of the tax breaks that schools get by virtue of their so-called charitable status, but in any case the charity law definition changed in 2006 to expressly include the need for public benefit. Before that it was not explicit. Charitable tax breaks are also much more beneficial now then they were.

That's interesting. I didn't set out thinking of fairness necessarily, but I do now wonder at the ethics of public schools benefitting to the tune of 220 million in the next two years because of their charitable status. Parental choice is one thing but I now (after looking into it and hearing the reasoning on this thread) think it isn't justified as the public benefit is so negligible, and that money could certainly be used to improve education for more people.

if their charitable status is predicated on their contribution to education the use of a swimming pool isn't within the remit of that.

Recreation is also a charitable function:

www.gov.uk/government/publications/example-charitable-objects

[quote Ellmau] if their charitable status is predicated on their contribution to education the use of a swimming pool isn't within the remit of that.

Recreation is also a charitable function:

www.gov.uk/government/publications/example-charitable-objects[/quote]
Yes but their charitable status is not specifically predicated on that, so it's not a reason.

The article makes a specific connection with schooling, so take it up with the author!

I'm taking it up with you because you are using it on this thread, and you've drawn an inference from it that isn't actually true. The article does not say anything untrue, but it also does not back up the statement you intended it to back up. The article is not wrong, but you are.

I agree they mention schools, in a way that might have fooled you into genuinely believing what you wrote up-thread, but the bottom line is that the idea that there are tax-breaks available on school-fees is wrong.

The article you linked to about making the fees more affordable is just ridiculous for most people. The “loopholes” you can use consist of things like having very wealthy parents who are happy to basically pay the fees for you, or having loads of cash to put into offshore investments, or having so much money that you can just pay the whole of your children’s school fees in one go at the start and avoid inflation.

The vast majority of parents sending their children to private school do not have any of these options available to them. They are mostly both working and paying the fees in a monthly basis out of their income. It is a stretch for a lot of people.

If sweeping changes were made to the system leading to fees increasing, a lot of these “normal” people would no longer be able to afford to send their children there. Only the very very wealthy people would be there. These children would all then need state school places.

Your use of Eton etc as your frame of reference is ridiculous. It is not at a all representative of private schools in general. You said that “some schools” have fewer assets than Eton. I would argue that as practically no school has greater financial assets than Eton, it is not a useful example to use. And as you only have Eton and Dulwich to use as a frame of reference, maybe you are not in a good position to make a judgement.

As a PP pointed out, people who send their children to private schools are in general already paying far more than the average tax bill, yet not using any of the school places their tax is paying towards. Maybe it would be fairer if these people’s children were given a grant to the value of a state school place to put towards paying for their private school place. Then maybe you could take away the charitable status of private schools.

@RandomLondoner

The article makes a specific connection with schooling, so take it up with the author!

I'm taking it up with you because you are using it on this thread, and you've drawn an inference from it that isn't actually true. The article does not say anything untrue, but it also does not back up the statement you intended it to back up. The article is not wrong, but you are.

I agree they mention schools, in a way that might have fooled you into genuinely believing what you wrote up-thread, but the bottom line is that the idea that there are tax-breaks available on school-fees is wrong.

There may not be designated tax breaks but there are certainly tax efficiencies which means less money for the exchequer: grandparents setting up a family company and children utilising their £10,000 p.a. tax free allowance. The charitable status also helps parents save money in certain circumstances - if they pay a lump sum, the school can invest it without paying capital gains tax on any income because they are a charity - the parents get a 'discount' for paying upfront.

FGS, the number of people doing that (family company) will be tiny. And it is perfectly legal anyway.

The amount of money people are saving the government by not putting their children into the state system at all will be many times greater.

There is a risk in paying upfront, in that the school may go out of business, or you may want to move your child.

It seems like you are just coming up with reasons to not like the fact that fee-paying schools exist.

I can only speak for my own subject of Economics, but Eton provide considerable help to state school teachers. I've attended CPD there several times - top quality, no charge, lunch provided, and their Econ teachers set up a resource provider website that has now expanded to a wide range of subjects with free and (reasonably priced) resources. They've filled a real gap in the market.

@SpanishRio

FGS, the number of people doing that (family company) will be tiny. And it is perfectly legal anyway.

The amount of money people are saving the government by not putting their children into the state system at all will be many times greater.

There is a risk in paying upfront, in that the school may go out of business, or you may want to move your child.

It seems like you are just coming up with reasons to not like the fact that fee-paying schools exist.

I'm not coming up with reasons - I couldn't care less whether or not public/private schools exist but I don't think they should benefit from charitable status if that means serving the public good - I haven't seen a single reasonable argument on here that has explained how these schools serve the public good. Educating people who will earn a lot of money and therefore pay a lot of tax is hardly a justification! And the result of that status being revoked is hardly a justification to maintain it.

I actually went down that family company rabbit hole in response to someone's 'gotcha' when I said it looked like it could be a tax loophole according to a specific article - I was correcting it to tax efficiency, partly enabled by the charitable status.

Private schools should absolutely NOT be charities. It's disgusting!

If you want to change their charitable status, become a politician.

Do you have any skin in the game, or is this ok for your entertainment?

I haven't seen a reason in your commentary for them not to retain it, even if it is only to stop state schools becoming swamped when the indies close.

Ignore the random ok!

My DDs Volunteer aided primary has 2 charities connected to it, the PTA which is literally called "School Name" so basically the school is a charity and then the CofE Church connected to the school is a charity and donates a lot of money to the school.

When I looked into it they make the same from these 2 charities as the tax reduction at the local private school, said private school has the same amount of children but a larger range of ages (they go up to year 8) as our primary.

@SpanishRio

If you want to change their charitable status, become a politician.

Do you have any skin in the game, or is this ok for your entertainment?

I haven't seen a reason in your commentary for them not to retain it, even if it is only to stop state schools becoming swamped when the indies close.

I pay some of my tax in the UK and am a trustee of a UK based charity so am not just interested For entertainment. I’m also deeply affected by the UK government’s policies in certain areas, and many of my English friends’ kids and my wider family are affected by the A level scenario.

I've cut from reply 10 to the end.

No, it's not fair. But while we have a Tory government, it will never change.

It had endlessly been demonstrated that a private education confers benefits to its recipients that they would otherwise not enjoy.

The private school student gets:

Selection (by wealth, ability, maybe other. But selection).

Usually small class sizes, but before Xenia chimes in with her 25 per class example (North London hyper selective girls schools, classes where everyone is at the same very high level).

Much more sport, art, drama.

Higher grades. Oh, and a history of higher grades that take away the horrors of Ofqual algorithms....

Intolerance of disruption.

No unmanaged SEN.

But, it will always be dressed up as 'charidee', not 'advantage'. Especially if we keep on voting Tory.

No, it's not fair. But while we have a Tory government, it will never change

Miljea we’ve had Labour governments over the past 50 years and they didn’t change it either.