Monday, 23 May 2011

Small number x large number = large number - shock!

From the BBC:

Independent schools are using a "tax payer subsidy" to provide luxuries like golf courses, beagling and shooting for their pupils, a court will hear. Private schools in England and Wales have to show they provide a "public benefit" in exchange for their tax-free charitable status.

... on Monday the court will receive evidence from a group of educationalists and lawyers, the Education Review Group, which argues that independent schools are being allowed unfair tax advantages through their charitable status. The group claims that private schools enjoy tax breaks worth £88m per year - with some of these schools providing a luxury "gold-plated" service at a cost that is prohibitive to most families.


OK, there are about 700,000 children at private school, so that £88 million (about 0.1% of the education budget) works out at £125 per pupil per annum, i.e. nothing, in the grander scheme of things, and a tiny fraction of the PAYE that private schools pay.

If you think about it, the 'charity tax break' is a stupid tax break, because what it means in practice is that most private schools are exempt from paying corporation tax on their profits, i.e. while the money they spend on actual education (teachers' salaries) is liable to tax in full, i.e. PAYE, the income they don't spend (the profits) is tax exempt. For this reason alone it would be better to scrap the tax break and hand out education vouchers of £125 per pupil.

And what these Righteous also forget to mention is the subsidy which private schools don't get, i.e. the £8,000-odd per pupil which state schools are given*. If parents were given this subsidy in cash, then we'd find that the net cost of private education is 'prohibitive' to very few families indeed.

* OK, I'm cheating a bit here, the schools themselves are only given about £5,000 per pupil, and £3,000 per pupil disappears in admin and overheads.

23 comments:

Bayard said...

I wouldn't waste your time; it's just toff bashing, like banning fox hunting. They may dress it up as a question of tax, or cruelty to animals in the case of fox hunting, but at the bottom, they are simply lefty class warriors.

Macheath said...

Too right! When you're working your fingers to the bone to pay school fees, this just adds insult to injury.

You've mentioned this issue before in the context of vouchers. In 1996, a whole cohort was entered on the database, with nothing to stop the vouchers continuing until they left school, had the PTB had the vision to continue.

If teh ERG have taken this before the courts, is there no group who would go to court to claim that the 'unfair' practice here is the removal of an otherwise automatic state subsidy from certain children based on the choices made by their parents (NOT their household income)?

Mark Wadsworth said...

B, but the ERG will look pretty stupid when the respondents point out that £88m divided by 700,000 = £125, which is less than half the cost of school dinners.

McH, "is there no group who would go to court to claim that the 'unfair' practice here is the removal of an otherwise automatic state subsidy from certain children based on the choices made by their parents..?"

That's a very good idea. I'll have to think about that.

AntiCitizenOne said...

I'd prefer the subsidy to all parents be stopped...

Mark Wadsworth said...

AC1, you call it a 'subsidy to parents', I call it a 'universal benefit earmarked for spending on merit goods'.

Bayard said...

What particularly irritates me about the anti-public school brigade is how thinly their envy is disguised and how little they have thought their arguments through. They talk about "public schools" and mean places like Eton, Winchester and Harrow, with astronomical fees and pupils from titled families and appear to be completely oblivious of the fact that the vast majority of "public schools" are small schools with moderate fees whose pupils are mainly the children of the likes of Macheath. They don't seem to realise that you cannot simply "abolish public schools", you have to make private education illegal, or other private schools will simply spring up to meet the demand.
On a separate note, do these idiots realise that many state schools are now simply public schools where the fees are paid by the state, privately owned and run, with teachers employed by the school?

Mark Wadsworth said...

B, the article referred to 'independent schools' and 'private schools' rather than 'public schools' but hey.

What is also galling about the charity tax break is that it benefits the very expensive private schools (i.e. 'public schools') far more than the small, local ones, yet another reason to replace it with vouchers.

That said, I do think Gove is heading ever so tentatively in the right direction on this, and let's not forget that 'nursery vouchers' were introduced by the Tories, a model which could easily be applied to children of all ages up to 18.

James Higham said...

Extreme example, of course and the words "private school" give away the mindset. We always called them "independent schools" and most were barely making ends meet, in an effort to provide choice in education.

Blue Eyes said...

Presumably a lot of the smaller private schools will jump at the chance to become free schools when the government gives them the chance. I think it was Broon who said he wanted to raise the spend-per-pupil up to the private school average. When this can be spent as a "voucher" rather than by pouring money in at the top of LEAs then the maths might work out.

I went to an extremely expensive school but their fund-raising efforts were always with the long-term aim to have enough capital to be able to offer places to pupils on merit not cost.

Mark Wadsworth said...

BE, I don't know if existing privates can reverse engineer their way to becoming 'free schools'. Can they?

As to free places for clever pupils, that is self-financing: let's say on-tenth of pupils at privates are clever-but-poor kids who pay nothing*, and they double the number of pupils getting straight A's at GSCE or A level. This shift up the league rankings is likely to boost the fees the school can charge the other ninety per cent of fee paying pupils by more than 11.1%, so overall, the school's income goes UP.

* I was one such pupil :-)

dearieme said...

"* OK, I'm cheating a bit here,...": no you're not; it's anyone who omits the £3k pa that's cheating. (By the by, does the £3k include the money that goes on capital expenditure as well as on running costs?)

Mark Wadsworth said...

D, the much vaunted 'capital expenditure' is f- all divided by six, that comes out of petty cash. The £3k probably includes the cost of Teachers' Pensions (which I think private school teachers can pay into as well).

Macheath said...

MW just to confirm, private school teachers can be members of the teachers' superannuation scheme, and almost all are; the school pays the employer's contribution.

Bayard said...

"What is also galling about the charity tax break is that it benefits the very expensive private schools (i.e. 'public schools') far more than the small, local ones, yet another reason to replace it with vouchers."

The ERG would be far better employed making sure that public schools, like other charities and especially fakecharities, were not spending large amounts on directors' or governors' fees, instead of whingeing on about "luxuries like golf courses, beagling and shooting", all of which are reflected in additional fees from the parents and which the parents are, presumably, happy to pay.

Deniro said...

I read the article. The educational reform can only argue whether the Bursaries are in the public good or not. By bringing in politics and Including what goes on at the schools is arguing against themselves. All the public schools have to do to counter that is say "we save the state £8000 a year"
That said, as David Hockney says it is a political issue when the politicians and their children go to different schools than everyone else.
- And politicians children don't go to the schools which the state is in charge of.

Mark Wadsworth said...

McH, I thought so, but can an existing private school become a 'free' school, which is vouchers by the back door?

B, indeed. It wouldn't surprise me if the ERG were one of these fakecharities.

Den, if it boils down to the free places being sufficient to clinch the tax exemption, then that works as well. Let's guess than five per cent of private school kids (35,000 kids) are on free places, average fees £10,000 a year = value of those free places £350 million, which is still four times as much as the very modest (albeit stupid) tax break.

Deniro said...

actually I think he wasn't commenting on the make up westminster inparticular but saying it was a political issue in the uk in general.

dearieme said...

"the much vaunted 'capital expenditure' is f- all": that may be fair enough in the round. But when a local headmaster who has just had a whole new wing built on his school start whinging about not getting £8k per annum, you sre still duty bound to remind him that a private school that wants a new wing has to raise the money itself.
P.S. there are some localities that are going to need a hell of a lot of capital expenditure imminently - those furriners who were brought in to supply Labour votes have been having children who'll need schooling.

Mark Wadsworth said...

D, I wouldn't panic about that. The furriners tend to live in urban areas where there are plenty of schools within twenty, thirty minutes walk or bus trip, everybody shuffles around a bit, sorted.

What does it cost to build a classroom? £50,000 or something? Interest/amortisation on that £2,500 a year, 25 kids in the class room = £100 each, a fraction of what school dinners cost.

adamcollyer said...

And what these Righteous also forget to mention is the subsidy which private schools don't get, i.e. the £8,000-odd per pupil which state schools are given

That is a VERY good point, beautifully made.

Mark Wadsworth said...

AC, thanks. It's actually slightly worse than that, but hey.

Scott Wright said...

MW: "* OK, I'm cheating a bit here, the schools themselves are only given about £5,000 per pupil, and £3,000 per pupil disappears in admin and overheads."

I was under the impression it's closer to a 50/50 split, the school gets £4,000 & the admin costs are £4,000 (of which £3,500 is government waste)

Scott Wright said...

"And what these Righteous also forget to mention is the subsidy which private schools don't get, i.e. the £8,000-odd per pupil which state schools are given*. If parents were given this subsidy in cash, then we'd find that the net cost of private education is 'prohibitive' to very few families indeed."

Well based on my first comment above, if the administrative burden of external exam boards etc... actually cost what it SHOULD cost (I know you hate the word but when we're talking about government waste I like it) then it is perfectly achievable to hand out a voucher of £7,500 per pupil per year to parents. The private schools in my area charge around £9,000 per year. I'm sure I could find £125 a month especially under a more sensible tax/welfare system where lower incomes are not suffering marginal rates of 76%