Why Labour’s proposals to end charitable status for independent schools could face legal challenges

Labour’s proposal to end the charitable status of independent schools is an old chestnut that crops up from time to time and yet it has never been achieved. The last change to independent schools with charitable status came under the Charities Act 2006 (now 2011) which abolished the presumption of public benefit for charities generally and led to the Charity Commission putting pressure on such schools to increase bursaries for those pupils who would not otherwise have the means to attend. Even then the Independent Schools Council won a case in a Charity Tribunal proving that the common law justified only a more than token benefit when admitting pupils from underprivileged backgrounds.

In this article, charity lawyer and author of “The Law of Charitable Status: Maintenance and Removal”  Robert Meakin considers some of the practical and legal issues with Labour’s proposal to end the charitable status of independent schools.

Legal challenges

If Labour attempts to legislate on this issue, it could well face legal challenge under Article 2, of the Protocol to the European Convention on Human Rights: Right to Education. This protects the right of parents to educate their children: “in conformity with their own religious and philosophical convictions”. Beyond independent faith schools, it could also be argued that the desire to educate one’s children at an independent school was a philosophical conviction which would be denied if the removal of charitable status led to a school’s closure and there were no other options available in the area.

It could also be argued that many independent schools with charitable status provide for special educational needs children who would not otherwise be provided for by the state, at least to the same extent. This was estimated to be about 12% of children in independent schools, including specialist schools for blind and deaf children. Their parents might select independent schools for their small class sizes and access to learning support unit. These facilities are not available, to the same extent, in the state school sector. This could also trigger an Article 2, Protocol 1: human rights challenge.

Withdrawal of tax relief

The suggestion that the removal of the tax reliefs that come with charitable status would contribute an estimated £1.6 billion to the Exchequer needs to be interrogated further as it is unlikely to lead to the predicted tax revenue boost. Any tax saving gained would be counteracted by the need to increase public expenditure on providing extra state education for children from closed independent schools moving to state schools. Furthermore, the loss of charitable status would give independent schools the freedom to withdraw bursaries to children from poorer backgrounds – a saving of about 6% of income for schools on average. Withdrawal of the VAT exemption for the supply of educational services via a charity would lead to VAT being added to independent school fees which would hit struggling parents. However, this would be a bonus for schools because they would be able to recover their VAT input tax.

If independent schools lose their charitable status and therefore, tax relief, they could opt to become academy schools. Introduced by the Blair Labour government, academy schools are fully funded by the state and would allow those schools to retain their selection criteria, such as faith and/or academic selection.

It remains to be seen if this proposal is taken forward to the next general election or amounts to nothing more than gesture politics.