Whitehall “braced for private schools collapse” 5

[ICouldBeVioletSky]

Starting a continuation thread in anticipation of the fourth one filling up…

www.mumsnet.com/talk/education/5301690-whitehall-braced-for-private-schools-collapse-4?page=39

In June 2024, an insurance provider’s survey of 250 independent school leaders found that one in five independent schools were going through a merger or acquisition, and two in five had done so during the past 12 months. One in ten had been through a merger or acquisition more than 12 months ago.

The Conservatives were still in power in June last year.

It’s been going on for years. Senior schools merging or acquiring prep schools to ensure a throughput of pupils, or the creation of schools groups to achieve economies of scale. And commercial groups acquiring charitable schools, separating the charitable aspect from the operational side.

A contraction in a sector means job losses.

Can you see why people wouldn’t want that?

eg Do you think 2008 is a time people want to return to?

Why do you think schools are consolidating? Because it’s not new, it’s been happening for years.

This consolidation is an inevitable and healthy adaptation of the market. All markets will adapt to survive.

Is your sector commercial?

The independent school sector, commercially funded and the publicly funded state education sector serve different consumers.

Your sector requires consumers I presume.

Where is the morality in contracting the former to benefit, not for any commercial gain, the latter, for anything other than the philosophical beliefs of the latter?

Schools are consolidating surely because if the private secondary does not save the private prep, then they might have less pupils in years to come. And there is some sort of moral obligation on the part of eg Winchester College towards eg Pilgrim’s because they probably want to protect the cathedral tradition of Winchester Cathedral and they know this is all complete political bullshit that will pass because it is so insane, so why let hundreds of years of tradition and cathedral practice lapse, when Winchester College has an endowment etc to get them through the craziness.
It is the charitable schools exercising their charity towards the preps, where they can.
It has zero to do with “efficiency”. VAT is not efficient. It is the brain child of deluded Marxist who are having a few years of hoorah who only got in by default and are already as despised as the previous lot.

Pilgrims, despite a blip during Covid, is in a healthy financial position according to its filings. Secondaries merging with preps to maintain the throughput of pupils and achieve economies of scale isn’t new.

Streamlining and efficiency are absolutely significant factors, governance can be more easily managed, better purchasing power, shared administrative services, shared facilities and teaching, as well as greater financial security by being part of a larger group.

A 20% tax will contract a sector. You’ve been arguing this as a positive, including job losses.

I think that’s upside down pretty much, no one argues for this, unless it’s due to a poor policy from Labour and someone is loyal to them.

It’s a response to more difficult economic circumstances in any sector - businesses become leaner and more agile.

I didn’t vote for Labour either.

A ‘lean and agile’ business doesn’t necessarily benefit the customer- especially of customer also being asked to pay more via tax.

Agile businesses should be all about responding to change and delivering benefit to the customer.

Governments can of course pass vindictive laws which have no moral basis.

They can vindictively decide that everyone with blue eyes must pay extra tax, if they choose.

Or they can - as Labour have shown - decide to vindictively attack charities they don't like: requiring them to both fulfil specific public obligations that other charities aren't obliged to fulfil and pay tax that other charities aren't obliged to give.

But private schools have absolutely no justifiable moral obligation now, regardless of whether they are charities or not. I now see they never did have a moral obligation - although we had all been told they did.

I hope private schools find every way they can to reduce and minimise that immoral imposition, using every legal boundary, every leeway, and every grey area they can. Rather than genuinely and generously giving, as they previously did.

Total fee income from private schools is estimated at about £10 billion.

They educate 7% of the UK's children - 550 thousand of them.

That is directly saving the taxpayer £4.4 billion in state school funding at £8k per child.

Ie more than 40% of private school fees are actually a direct subsidy to the UK government, which is a pretty huge public benefit.

But actually, unlike pretty much all other charities - which benefit from gift aid on their income, and claim back all income tax - that is coming out of parents taxed income, taxed at least 40%. So actually it's £11 billion being handed straight over to the government, out of the £16.6billion any other charity would get to spend on their own charitable aims. Ie educating the children enrolled at that private school. The state is stealing two thirds of the money we pay to educate our own kids.

I don't think any other UK charity gives so much of it's income directly to the state - hence to every single UK citizen - instead of to its own charitable aim. Even without any additional outreach and support.

And that was before the 20% VAT travesty.

I have no idea why we haven't ever pushed back on how completely unbalanced the requirements on private schools have always been. Every other UK government has realised that they shouldn't fuck with something the UK benefits from so much. And somehow we parents all just accepted that this was the price we paid for getting to educate our own children. It's totally unjustifiable.

*£6.6 billion being handed straight over to the government in hard cash. £4.4billion in kind: doing the job of educating those UK children for them. Out of a total of £16.6billion paid by private school parents to educate their children. Despite education supposedly being considered a charitable endeavor and a public good.

You’re still selling in a tax that contracts a sector. Can you see a contraction and job losses are not welcomed by everyone. Or anyone really.

Do you recognise there are more downsides which is why politicians, economists and the electorate don’t say great things will contract?

I agree with @KendricksGin's points yesterday.

Also, I must say it is a novel argument that the government is carrying out this VAT policy for the good of the independent education sector! I suppose it is a "logical" way to keep justifying the policy, as a contraction could not only wipe out the promised £££ VAT bonanza but end up costing the taxpayer £££ in pupil funding.

Private schools that have charitable status are not “businesses”.
The VAT affects the cathedral choirs and choristers in many cathedrals.
Jon Snow was a chorister at Pilgrim’s.
It is an example of a rich public school being able to help out and ensure the long term survival of a school like Pilgrim’s. Presumably they can now share their bursary funds with pilgrims. I do not know the details but maybe they need to be able to do that to attract more choristers, for example.

However, if public schools need to step in to save preps, that means less money for outreach in local state schools and less bursaries in their own schools, potentially. So why anyone would think that is a good thing as it deprives some children of opportunity is beyond me. The State won’t do anything good with the extra 20 per cent VAT. It won’t be a direct tangling benefit to local communities.

Schools mostly arent a business though - even most private ones, though many of those against anti private school would love to assert otherwise. A ‘lean and efficient’ charity just does less and hopefully prioritises for maximum (if reduced) reach.

Interesting that some posters are saying that private schools should stop any “public good” activities because of VAT. It sounds like they are conflating charitable status and the VAT situation. Those private schools which are charities-60% or so-will still, as they should, fulfil the requirements set out by the Charity Commission in order to continue to get the tax and other benefits granted to charities. Nothing to do with VAT.

Like business rates relief. That’s been removed too. That leaves corporation tax but that’s only payable on profits and many private schools make little or no profit.

But there is a huge amount of difference in what charitable activities schools do and how much effort they put into it. A lot is also driven by invested and contributing parents.

The introduction of VAT which is pushing many parents to the brink in combination with the rhetoric from a lot of state school parents are not really increasing the will and the charitable achievements.

as an example, our previous school used to ask parents to donate the initial deposit to the bursary fund. This was money already paid years ago, used to fund school spaces for local children. I don’t think many parents will continue to donate this.

There are many, many other examples of partnerships with local school, outreach activities, use of playing fields etc. There is meeting the bar and there is smashing it when it comes to charitable work.

I am still uncertain about what the VAT will be used for, cornflakes for schools which already are solvent enough to partially subsidise this? So not the ones in the most need?

You assume they were doing the bare minimum to maintain charitable status, or that tax benefits were the main driver of being set up as a charity - not the case for many schools, especially those with a long history. There’s a lot of flexibility in how they meet the requirements, and many will have to reduce or scrap charitable programmes as operating budgets get squeezed. There’s no prescription for number of bursaries, for example - they could eliminate them all or direct them to existing families only, for example. Have a read of the charity commission guidelines you referenced - schools aren’t really obligated to do much to maintain their status.

But actually, unlike pretty much all other charities - which benefit from gift aid on their income, and claim back all income tax

Charities don’t receive gift aid on income - they receive gift aid on donations.

Schools mostly arent a business though

They are businesses in the sense that they sell a service to a customer, some are for profit and some are not for profit. Interestingly, some charitable schools are employing commercial managers to create additional income streams.

I’m not assuming that-although some definitely are-which prompted the Charity Commission’s guidelines. There are some posts on the subject down thread which talk about what private schools are doing to fulfil the “public good” criteria. Some do excellent work.

Some do excellent work with regards to charity, that is right. I also read up thread about a school thrashing a state school in some sports. That would usually not happen. The PE department will decide which team to field. Against some schools, our school would field the C or D team in order to have a good game.

but the problem with all these policies is that the government and the supporters are expecting things to continue as it is, parents to just pay more in VAT (regardless of feasibility), schools not to pass on the full amount (regardless of pension increases, minimum wage increases and NI increases) and schools and parents continuing to do all the charitable work they are doing (regardless of monetary squeezes and being willified by the VAT supporters). In reality, behaviour changes, sometimes quickly, sometimes it is building up.

I think everyone will lose with this.