Independent schools

Have private schools been given six of the best by the recession? EN examines the real bottom line.

Just over 2,600 private schools exist in the UK which are independent of local or central government funding and control. Together they teach 628,000 children – around 6.5 per cent of the total number of school children in the UK – each of whom pays, on average, £3,500 per term, although fees in many boarding schools are significantly higher.

While most independent schools are constituted as charities and receive charitable status and the tax breaks that come with it, all are run as businesses and operate relatively straightforward business models.

Broadly speaking there are three different revenue streams for public schools. The most obvious, fee income, makes up the biggest chunk of revenue for all schools. Trading income – brought in from commercial operations such as shops selling uniforms, equipment and memorabilia or the renting out of facilities for summer lets, weddings or conferences – usually accounts for quite a small percentage of total revenue. Some schools also earn modest amounts from historic endowments or foundations. A “lucky” school like Harrow – a boarding school with 815 pupils – would benefit from all three streams while, by and large, day schools are basic money-in, money-out operations running off fees alone.

Jonathan Cook, general secretary of the Independent Schools Bursars’ Association, says the notion that the independent sector is rolling in money is laughable: “Even if you have historic endowments and the rest of it, the chances are you are in a historic, listed building that takes two arms and a leg to maintain. The day schools, which tend to be more modern, have none of that baggage but also none of that wealthy legacy either.”

The Merchant Taylors’ Schools (there are separate establishments catering to mixed infants and junior girls, junior boys and single-sex seniors) in Crosby are typical of a dayschool set up, running purely on school fees.

Tuition fees for the junior pupils are £2,067 per term. Senior pupils pay £2,808. School dinners, at £145 per term, are an additional charge and the school offers a discount of five per cent on school fees for the third sibling to join the school.

Cost drivers for the independent sector are the same as in the maintained sector only in different ratios. Staff costs at Merchant Taylors are typical of public schools, accounting for around 70 per cent of fee income.

Salaries for teachers in public schools tend to match those of teachers in state schools or are “slightly higher” but public schools employ more staff per pupil – working on a ratio of around 9.5:1 compared to around 26.2:1 in state maintained primary schools and 20.9:1 in maintained secondary schools.

Staff are also eligible to join the state-run Teachers Pension Scheme. EN is told the similarity in pay scales and pensions in the independent and state-funded sectors exists to make it easier for staff to migrate between the systems – and they do, although most go from state schools to private education.

After staff costs, a large chunk of what’s left, Louise Robinson, headmistress at Merchant Taylors’ girls’ school, says, goes on heating and electricity which, for many public schools run in old and listed buildings, can be “astronomical”. The maintenance of IT equipment is another significant cost as are exams which account for £120,000 of Merchant Taylors’ annual budget.

A surplus of around nine per cent is generated annually at Merchant Taylors’ (the Independent Schools Commission, of which around half of the UK’s public schools are members, recommends ten per cent). That surplus, together with relatively small amounts raised through fundraising, is used to fund the school’s bursaries.

Around five per cent of pupils at Merchant Taylors receive some help with fees. Applicants are means-tested and take the same exams as paying pupils.

The surplus also provides a contingency fund for any maintenance necessary on the school buildings. Robinson says, “We run a very tight ship because we have to. Old buildings like ours aren’t the most energy saving and cost efficient.”

Boarding schools, costing on average £7,750 per term, operate slightly differently. After staff costs, catering is a big bill.

Harrow, for example, produces 3,000 meals per day (three square meals a day for every boy, plus lunches for staff).

The breakfast menu consists of croissants, kippers, porridge and fruit. For lunch, pupils are offered roast leg of lamb, cous cous bakes or coq au vin and a dessert. And for “supper”, tuna, beef casserole and sautéed Chinese chicken are on offer.

On top of fees from its pupils in the UK – 815 pupils pay an average of £28,545 per year for board, tuition, textbooks, a stationery allowance and laundry – Harrow generates income from two overseas schools, in Beijing and Bangkok, that are operated under franchise agreements.

Another is due to open in Hong Kong in 2012. Operated by a local team but with standards and methods dictated by Harrow headquarters, the Harrow exports generate an “important amount of income” that goes towards funding scholarships and bursaries.

At Harrow, there is an extra charge for any subject requiring additional tuition. A late payment charge of £250 is added to all accounts not settled on time by direct debit and overdue accounts are subject to an additional interest charge of 1.5 per cent per month.

A full term’s notice must be given if a pupil wants to leave the school and in the absence of such notice the full fee for the following term is payable.

There are around four times as many boarders in the South East as in the North. Younger boarders are likely to share large bedrooms that accommodate between four and six children. Older pupils have smaller bedrooms for two students or single study bedrooms, some with ensuites. Schools can spend £1,500 per boarder each year or more on refurbishing and building boarding accommodation.

School buildings will, in most cases, be owned by the charity as will most of a school’s assets and it’s this charitable status that causes the sector the biggest headache.

David Lyscom, chief executive of the Independent Schools Council, says, “One of the problems we have in the sector is that our charity law does not allow charities to stop being charities unless they wind themselves up.

“There has been this debate about the tax breaks afforded to schools and the Charity Commission insisting that because they get tax breaks they have to jump through certain hoops on things like public benefit [in practice, this equates to the more scholarships the better].

“About 1,000 of our schools have charitable status and the total amount of tax they save is £100 million a year. It’s not a huge amount if you compare that to what they spend on bursaries each year –around £200 million.”

Lyscom says some schools would be quite happy to lose their charitable status and the tax breaks that go with it if a half-way house existed. “If schools could drop the charity label to become not-for-profit organisations and get the Charity Commission off their backs, many would but that’s not possible unless they just dissolve the school and sell off all the assets and start again.”

Even then they would probably have a hard job. Cook explains, “Actually all of your assets are charitable. The buildings and land are probably charitable so you just can’t get rid of them.”

The ISC is hoping a new government will create a bill that will allow an “off ramp” for public schools from charitable status to not-for-profit trust.

Lyscom says, “If the Tories get into power they are talking about setting up all of these new free independent schools. They will need to have some sort of legal status and we would hope that that legal status will be available for our independent schools too.”

Public schools are, Cook tells EN, classed as “lagging indicators” in economic terms – they go into a recession slowly and come out of it later – but those with good business models, he says, are doing “jolly well”.

Lyscom agrees and says public schools have fared relatively well this time round. During the recession of the early 90s, numbers of pupils in public schools fell over a four or five year period but in total only by about 2.5 per cent.

He says, “Everyone was predicting that this would be the end for lots of schools and that hasn’t happened.

“The point is, you stop buying your new car and flat screen TV because keeping your kids in school is a long-term commitment and is probably the most important commitment parents are making. You won’t see a huge fall off but what you may see is lower numbers at starting age.

“Our sector had grown by about ten per cent over the last few years. It is a very buoyant picture when you think of what the rest of the economy is doing.”

Pictured:

The Merchant Taylors’ Schools

David Lyscom, chief executive of the Independent Schools Council

Louise Robinson, headmistress at Merchant Taylors’ girls’ school

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