Councils have to subsidise private schools to the tune of £144 million per year because of their charitable status, new research finds

Private schools in England and Wales receive public subsidy through local taxation relief, having to pay only 20 percent of their tax assessments as a result of relief on business rates. State schools, meanwhile, must pay the full rate.

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Local councils have to subsidise private schools to the tune of £144 million per year because of their charitable status, new research by the Private Education Policy Forum (PEP Forum) has found.

The findings are based on data analysed from 267 councils during the financial year 2019-20 to form both a national and regional picture of just how much local councils are losing out on as a result of the tax reliefs given to private schools.

The shocking figures come as Labour leader, Sir Keir Starmer, earlier this week repeated his pledge to scrap private schools’ charitable status if the party comes to power. 72 percent of schools affiliated with the Independent Schools Council have the status of a charity. In England and Wales they are obliged to pay only 20 percent of their tax assessments.

Private schools in England and Wales receive public subsidy through local taxation relief, having to pay only 20 percent of their tax assessments as a result of relief on business rates. State schools, meanwhile, must pay the full rate.

The research also found regional variations in the amount councils lost out on. In London, where there is a high concentration of private schools, a total of £28.1 million worth of tax was not paid in the year before the COVID-19 pandemic, amounting to an average of £879,000 per council. Some councils lost out on much higher sums, such as Kensington and Chelsea, which could have received £3.15 million if the private schools in the area paid 100% of their tax assessment.

Elsewhere, private schools in Wales saved a total of £2.3 million of tax, which equates to an average of £99,000 per council. That figures rises to £666,000 per council in South East, which has the highest deficit per council outside London.

PEP Forum’s figures, on the benefit accrued to private schools through charitable relief, are higher than had been estimated by consultants CVS in 2016, who put the figure at £522 million over five years. Without factoring in inflation, PEP Forum estimates a saving to private schools – and a loss to local councils – of £720 million over a five-year period.

Lead report author, Professor Francis Green, board member of Private Education Policy Reform and Professor of Work and Education Economics, UCL Institute of Education, said: “The large amount of money saved by private schools as a result of tax relief on their business rates deprives local councils of much-needed resources for the delivery of local services, including state education.”

Professor Green added: “The removal of private schools’ business rates relief would contribute to narrowing the private-state gap in education resources. Though such a reform would only go a little way to resolving the unfairness that stems from the private/state school divide, it would be a step in the right direction and broadly welcomed by the large majority of the public who do not participate in the private education sector.”

Basit Mahmood is editor of Left Foot Forward

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