Revealed: the £10m private schools save on rates ... because they are 'charities'

The private-sector perk has been branded "repugnant" by a leading education expert.

Some of the country's most privileged fee-paying institutions charge more than £30,000 a year.

Despite their elite position in Scottish society, private schools are deemed to be charities, not businesses, a fact that has provoked controversy for years.

Their legal status brings a rich broth of benefits, as the organisations which run the schools do not have to pay income or corporation tax.

This newspaper can now reveal one of the sector's most lucrative taxpayer-aided subsidies: non-domestic rates.

Fettes College in Edinburgh, regarded as one of the country's most exclusive independent schools, is one example.

The institution, whose alumni include Tony Blair, tycoon Sir David Murray and actress Tilda Swinton, charges £27,150 a year for senior school boarders.

Its bill for non-domestic rates (NDR) last year was £209,139, but an 80% discount meant the school had £167,311 lopped off that total. In the past three years, Fettes was liable for £550,236 in rates, but £440,188 was sliced off.

By contrast, Wester Hailes Education Centre, which has 40.5% of its pupils registered for free school meals, attracted an NDR bill last year of £261,873. The charge was paid in full by the local authority.

The total rates bill for Edinburgh's state schools was £9.8 million. Of that, around £9m was paid into the central pot by the council. The handful of discounts received related to empty property and disability relief.

A similar division emerges in Glasgow. Hutchesons' Grammar, a private school in the city's southside, charges £9459 for an education.

Its rates bill for the last three years came in at around £924,923. As a result of its charitable status, the Trust running the school benefited from £739,934 of relief.

Figures released by Glasgow City Council show that the NDR charge for state schools was £13.8m in 2011. Over 95% of this bill was paid.

Although independent schools account for only 4% of Scotland's pupils, the sector has for years educated the country's elite. A disproportionate number of judges, lawyers and other professionals attended schools whose fees are out of reach for the majority of the population.

While householders are liable for council tax, non-residential properties like offices and shops have to pay NDR.

The level of the tax is set by the Scottish Government, collected by local councils, and put into a central pot.

However, private schools attract a "mandatory" 80% discount on account of their charitable status.

Information obtained from six key local authorities reveals how lucrative this advantage is to private schools.

George Watson's College, an independent day school in Edinburgh that educated rugby legend Gavin Hastings, Olympic gold medallist Sir Chris Hoy and Tory grandee Sir Malcolm Rifkind, is another school to benefit from a rates discount.

Its NDR bill last year came to £412,649, but the school was given relief worth £330,119.

Over the last three years, the total bill for Edinburgh's 16 private schools was £6.32m. In the end, around £5.1m was knocked off.

The same discount is in place all over the country. Glenalmond College, the Perthshire boarding school that educated former rugby star David Sole and comedian Phil Kay, had £126,747 chopped off its rates bill last year.

Gordonstoun, the institution that schooled Princes Charles and the Duke Of Edinburgh, was liable for £148,086 last year, but given a reduction of £118, 468. This charity charges up to £31,839 a year for its services.

The High School of Dundee, whose alumni include singer KT Tunstall and journalist Andrew Marr, is in the same category. Liable for £121,240 last year in rates, an 80% discount cut the school's bill by £96,992.

By contrast, state schools in Dundee had to pay nearly £10m in NDR over the last three years. According to official figures, no exemptions were applied.

In Aberdeen, the total value of the 80% subsidy for nine independent schools was £1.53m between 2009 and this year.

All told, the discounts for the private schools in the six local authority areas totalled around £10m in three years.

Brian Boyd, emeritus professor of education at the University of Strathclyde, said: "The idea that Fettes can pay proportionately less in rates than a comprehensive school in Drumchapel is repugnant."

The £10m figure is significant in the context of pressure on education budgets. The subsidy is the equivalent of the salaries of more than 450 probationer teachers in the state sector, or the wages of 625 classroom assistants, excluding national insurance contributions.

The independent sector is adamant that private schools do enough to justify their tax perks. It points to means-tested support for fees and co-operation with state schools.

Hutchesons' Grammar, for instance, provides means-tested support to 9.9% of its school roll, although only 2.2% of pupils receive 100% financial support.

At Fettes, around 20% of pupils enjoy some form of fee support, although it is not clear how generous these reductions are for individual pupils.

According to the Scottish Council of Independent Schools, around £35m a year is made available by the sector for financial assistance. However, a spokesman for the organisation confirmed that a proportion of that sum was taken up by sibling and staff discounts.

While private schools are determined to hold on to their charitable status, public opinion appears to be on the side of abolition.

In 2009, a YouGov poll for the University and College Union found that 56% of the British public wanted private schools to lose their charitable status.

TOP PRIVATE SCHOOLS:

Fettes College, Edinburgh

Fees: £9,050 per term, three terms a year (senior boarders)

Alumni: Tony Blair; James Bond novelist Ian Fleming; Tilda Swinton

Rates bill 2011/12: £209,139

Discount: £167,311

George Watson's College,

Edinburgh

Fees: £9606 a year (S1 to S6 senior school)

Alumni: Gavin Hastings; Chris Hoy; David Steel

Rates bill 2011-12: £412,649

Discount: £330,119

Glenalmond College, Perth

Fees: £9370 per term (three terms a year)

Alumni: Robbie Coltrane;

comedian Phil Kay; David Sole

Rates bill 2011-12: n/a

Discount: £126,747 (80%)

Gordonstoun, Elgin

Fees: Up to £31,839 a year

Alumni: Duke of Edinburgh and Prince Charles

Rates bill 2011-12: £148,086

Discount: £118,468

High School of Dundee

Fees: £10,302 a year for seniors

Alumni: Lord Mike Watson; KT Tunstall

Rates bill 2011-12: £121,240

Discount: £96,992

REACTION:

UCU general secretary, Sally Hunt: "Questions are bound to be asked about why private schools are being allowed to benefit from large tax breaks while state schools receive no discount. In a time of recession every pound of taxpayers' money we spend on our children's education should be to the benefit of the many, not the few."

John Wilson, SNP MSP for Central Scotland: "The continued use of charitable status given to private schools should be brought to an end as soon as possible. The fact that they continue to get 80% non-domestic rates relief on school buildings, while education facilities operated by local authorities have to pay NDR, highlights the continued inequalities."

Neil Bibby, Scottish Labour's children and early years spokesman: "If private schools are going to continue to benefit from charitable status, then we must ensure they are meeting their obligations to the community and this is reviewed by Office of Scottish Charity Regulator."

Alison Johnstone, Green MSP:

"Charitable status must be reserved for those organisations that really do benefit all of society. The system is clearly inequitable if the likes of Fettes are receiving huge discounts on their rates while cash-strapped local authority schools, who receive no discount, are paying hundreds of thousands of pounds in tax to the Scottish Government. If education is a recognised charitable aim then why on earth is the system set up in this inconsistent way?"

John Edward, director of the Scottish Council of Independent Schools: "The simple reason for independent schools receiving relief is that they are charities – state schools are not. In terms of financial gain, this is outweighed by the financial gain the schools give out. The fact that independent schools receive mandatory relief is a matter for government."

'This subsidy is repugnant'

Comment by Professor Brian Boyd

That charitable status has brought private schools huge financial benefits is shocking enough, but the real impact on the education system, and on society as a whole, is much more insidious and more profound.

Put simply, private schools are inimical to the creation of a more equal Scotland; as bastions of privilege, they have a deleterious effect on state schools, creaming off the high-attaining children of middle class families from local comprehensive schools and creating self-perpetuating networks within the professions, thereby restricting social mobility. While, nationally, only some 4% of Scottish pupils are educated in private schools, in Glasgow and Edinburgh the figures are much higher for the secondary sector. Yet our comprehensive system is highly regarded internationally. Comprehensive schools take in all pupils in their catchment area, including those who are not motivated to learn and who may not have support from home. They take in pupils who are vulnerable, who may have been damaged by the ravages of deprivation, addiction, abuse- In short, they strive to educate everyone. And the teachers who work in both systems are trained in exactly the same way by the same universities and there is no evidence that private schools attract the best teachers.

The difference is that private schools are richer, allowing them to have more teachers, and, therefore, smaller classes. They are better equipped, generally, have access to extensive sporting and cultural facilities and can rely on parents to fund even the most expensive extra-curricular activities.

So the issue is not the quality of teaching; it is funding. In addition to fees and generous bequests, they pay only 20% of their non-domestic rates, subsidised, in effect, by their less privileged counterparts in the most disadvantaged areas of Glasgow and Edinburgh.

The idea that Fettes can pay proportionately less in rates than a comprehensive school in Drumchapel is repugnant. If every state school had the same per capita spend as the average private school and had a fully comprehensive intake, then we could make progress towards ensuring that every child had the chance to fulfil his or her potential - and we would improve levels of equality and social cohesion.

The challenge for Scotland as a mature democracy is to make equality its goal and to resolve to remove barriers to the educational achievement of all children, especially those in areas of disadvantage. Countries which have more equal education systems tend to be among the most successful.

Charitable status has been shown to be little more than a smokescreen for subsidies and needs to be reviewed.

The money could be better used to provide targeted support for children in early years who are already falling behind their peers, as they do in Finland. Closing the achievement gap, with all of the benefits it would bring to society, must surely be a higher priority than tax relief by stealth?

Education is not a privilege; it is a right. As such it should not be for sale.

Brian Boyd is emeritus professor of education at the University of Strathclyde

Supplementary documents

Subsidies from the councils in Glasgow

Subsidies from the councils in Edinburgh