The current controversy surrounding independent schools and their charitable status is becoming increasingly absurd. First, the public benefit test is a pointless exercise because it should be clear to any right minded person that a school will benefit the public simply by being a school and educating children. After all, the public benefit associated with schooling was one of the key reasons used to justify government subsidies in education in the first place. Furthermore, if all independent schools are not automatically assumed to provide a public benefit then this must also apply to all state schools serving middle and high income families. One could even claim that some independent schools provide a much greater public benefit than many failing inner-city state comprehensives, where a high percentage of students graduate with few qualifications and subsequently become dependent on government handouts.
Second, the suggestion that the charitable and tax free status enjoyed by independent schools is the same or equivalent to receiving a public subsidy is simply incorrect. A public subsidy involves the government taking money from some people and giving it to others – a transfer of resources from A to B. Some people therefore benefit at the expense of others. However, in the case of independent schools there is no transfer of income and so nobody is worse off. A public subsidy can’t just appear out of thin air, as if by magic. Instead, in this case the government is simply respecting the right and freedom of people to set up their own schools outside of government control and without arbitrary government interference. The tax-free status is also based on an understanding that to introduce a tax on any kind of school will be counterproductive as it will discourage private investment in the sector and also result in the transfer of resources out of education into less important sectors of the economy. While those receiving the new public subsidy may now be better off, it is also important to recognise that the school being taxed will now be much worse off. In short, a tax on schooling is likely to cause much more harm than good. This begs the following questions: why would any government would want to introduce any kind of tax on any kind of school? If a tax acts as a disincentive why would any government want to discourage private investment in education? Also, why is the government intent on transferring resources out of education and what does the government intend to use these tax revenues for? What could possibly be more important than children’s education and is there not a less damaging way of raising such revenue?
The solution to this embarrassing charade is simple. First, scrap the public benefit test which represents an insult to all independent schools, which incidentally were providing a public benefit for hundreds of years prior to the existence of state schools. We should also never forget that thousands of these schools would still be providing a public benefit if they hadn’t been unfairly forced out of business by the introduction of free government schools. Second, abolish the link between organisational form and tax status (for further details see ‘For Profit Charities in Education’). The debate about independent schools and their charitable status will then become irrelevant. All schools should be tax free, whatever their legal structure.
This blog by James B Stanfield originally appeared on the IEA website on May 26 2011.