In need of history lessons as well as economics
Banging the drum again about "tax breaks", this Guardian columnist gets the economics and the history wrong in her call to nationalise charitable foundations
In the Guardian, Rebecca Boden takes her turn to ignore economics and twist the truth. She says independent school “tax breaks” are worth more than £3bn a year. She concludes “reform of these schools’ charitable status could ensure that their sizeable charitable assets are used to benefit all children”.
That’s weasel for “the state should nationalise/take control of charities I don’t like”. We’d better explore what this “expert” has to tell us.
Bad History
The author starts by complaining about tax rebates on donations to independent schools, plus VAT and business rates exemptions, which she says are worth £3bn, citing herself as a source for this figure. I can’t get to her original journal article, but the preamble says that independent schools’ tax treatment “since the 19th century….involved the purposive intervention of ruling elites in defence of class privilege”. If you expected any nuance, tough - that’s almost Karl Marx bingo in one sentence.
It’s certainly interesting to ignore the rather more significant societal changes that took place in the same period, such that both upward mobility and living standards rocketed while more children received full-time education:
rapid increases in technology and trade in the 19th century, which increased the private and social value of education (there were many more opportunities not to be a farmhand just as in the 20th century there arose many more opportunities not to be a coalminer)
consequently, rapid growth in output such that families could “afford” more resources invested in education rather than having children do manual labour
the entry of the state to provide universal
freetaxpayer-funded compulsory education, largely reducing the economic role of charities and family funding, which wasstrongly supported by industrialists who wanted a more educated workforce
voted through in a “pre-suffrage” political system of 1870 dominated by the “privileged”
If there was a “defence of class privilege” over the period Boden refers to, it was a staggeringly ineffective one. So much for the history, now to the economics.
Bad Economics
As I argued here, the whole “tax break” attack line, which is polling so nicely, is a total deceit.
However, today let’s take Boden’s claimed £3bn at face value, since I can’t see how she calculates it. Spread across ~565k independent school pupils (her numbers), that amounts to £5.3k per child. The cost of a state school place is around £6.5k for operating costs according to Oxford Economics, plus £2k for capital expenditure, so £8.5k taxpayer funding for each state school child. But that’s just part of the £99bn cost of running the Department for Education which implies overhead of around £3k per child (inspectorates, LEAs, civil servants etc.) - it’s reasonable to suppose the “benefits” of that overhead are mainly for state school children.
So the overall cost to the taxpayer of state education per pupil is between £11-12k, more than double the £5.3k independent school alleged “tax break/subsidy”. Why does Boden exclude any mention of the former? Remind me who is favoured by the taxman? And we haven’t even mentioned the disproportionate tax contributions made by higher-earning independent school parents for the services they don’t use (the top 1% of earners pay 29% of income tax).
The flip-side of the existence of independent schools, which Boden conveniently omits, is further outlined in the Oxford Economics research which also shows they support £16.5bn in economic output and £5.1bn in taxation plus $4.4bn public funds saved on free taxpayer-funded state school places. The £3bn “tax break” seems astonishingly good value.
But that’s not all. Education delivers public as well as private benefit. That’s why the state became involved in the first place (not, as some might argue, because “education is a right” or anything of the kind). Excellent education is good for society, as well as the recipient. Boden questions the value of the “tax break” but ignores all social benefit from independent schools, most obviously in the development of high-potential workers, leaders, doctors, entrepreneurs, actors, musicians etc; but also in form of bursaries and partnerships, the provision for SEN, and in the expensive maintenance and accessibility of historic buildings. Quite an omission, for an “economist”.
What will be the impact of VAT?
Boden refers to IFS “research” that indicates “school rolls might eventually fall by between 3% and 7%” if the cost of VAT and business rates were passed on. She states that “The IFS concludes that withdrawal of the VAT exemption and the relief for business rates would raise an estimated £1.7bn (sic) net a year, which Labour says it would put towards state school funding” which is simply wrong - the IFS actually concluded £1.3-1.5bn, but perhaps Boden regularly loses a cheeky £200-400m a year down the sofa.
That’s before going into the IFS research itself, which is ghastly and deserves a post on its own. In very brief, their 3-7% is based on the author’s “best judgment” having observed that fee increases in 2000-2020 or so tended not to drive families away. It’s not great economics, as explained here:
In general, we can’t predict the future based on the past
More specifically, economists can make a good stab on “fast-moving goods” like groceries and forecourt petrol, where price changes are frequent and easily observed, transactions are frequent, switching is easy, and price-based competition is strong and immediately responsive; it’s entirely different (e.g., in education) where decisions play over many years, relationships are crucial, switching costs are huge and choices are limited
We certainly can’t assume the parent cohort of 2025 will behave like the cohort of 2010 being y’know, different people
We can’t assume away house prices, interest rates, core inflation, student debt, fiscal drag and tax hikes, as though none of those tectonic shifts have any bearing on affordability
Finally, when price increases are cumulative, it’s absurd to assume away the “last straw” effect; by Mr Sibieta’s logic, if he would accept a £1 price increase from £5 to £6 for an ale, he’d do so repeatedly and remain equally willing to pay £7, £8, or £29. Prices may be “inelastic” but, for every customer, only up to some hard-to-discern point, which Labour, Boden, and Mr Sibieta are determined to discover.
I dare say Boden would call me an ideologue. I’m OK with that - I have my ideas about choice, quality, family and independence, and they are better than her ideas of state-imposed uniformity.
But as I often point out, it’s hardly “not ideology” when the Left supports a taxpayer-funded, state-run, union-dominated, 93pc monopolist with centralised pedagogy and prohibitions on any form of pricing.
Nationalisation call
After all the bad history and the bad economics, comes the bit where Boden calls for charitable status to benefit all children. Don’t be fooled by the cosy language - this is (1) a nationalisation call for the assets, with (typically) no mention of whether the state will buy or grab them and (2) a demand that all children are state-educated, with a socialist government dictating what should be the socially-acceptable level of education provided to your family.
I suspect the irony of believing in £billions of VAT revenue on independent schools, while calling for their abolition, is lost on Rebecca Boden.