Let’s put a little context around this. I was a boarder at Bryanston School in Dorset. This school publishes its school fees on its website
These fees may seem affordable until you clock that they are not for a year but a term. Multiply by three and you can work out that per child , parents are paying just under £50,000 pa. This is no longer something that can be paid for out of income, unless your income is measured in hundreds of thousand pounds. Eton’s fees are very similar, this is the going rate.
Edi’s argument no doubt holds good for some schools, but not for Bryanston, as Bryanston switched its pension arrangements from DB to DC some years ago. It has a generous DC scheme relative to AE minima but it is no longer exposed to the vagaries of the SCAPE rate and the demands of the Teachers Pension Scheme , as intimated by Edi and reported on on this blog. True there are legacy pension costs but they are not the primary driver of school fees inflation.
I occasionally revisit my old school which understandably likes to keep in touch. When I do, I am amazed at the opulence of accommodation, the quality of teaching and cultural facilities and the extraordinary spending on sport. When my son was going through private education, I remember seeing the transformation of the schools around London which he visited for matches. Nothing seems too good for the top private schools.
When I left Bryanston, I was told that I had peaked in terms of sporting prowess by my rugby coach. My Dad spluttered into the cornflakes when he read in my report that I would go on to make a good club rugby player. Actually, my expectation was to be an international player – an expectation dashed by my not being very strong, very fast or very talented, but that was what being in the first XV at that school at that time led to.
This wasn’t just “entitlement” it was “super-entitlement” and it was good I was told this at 17 as I was soon swamped as a player by genuinely talented peers and became a decent club flanker – no more.
Edi and I work together and share a lot of views, but I don’t think we share the same views on private education. In my view, private education is affordable either though bursaries, scholarships or through capital. If you can afford to pay school fees through savings plans you can afford to pay through income, it is not saved capital, it is inherited capital that gets most children through.
Many of these private schools are now educational franchises operating in the Far and Middle East like Virgin or Macdonalds (well not very much like Macdonalds) but the financial model is the same. They are investable and as soon as they start paying VAT I suppose many will shed their charitable status and seek funds from the private markets – a long term infrastructure play for pensions?
As for the pensions they pay their staff, that is a matter of priority. Private Schools only stay in the Teacher’s Pension or run their own DB plan because they are attracting top staff. In the “money is no object” world I have witnessed, it could be argued that DB pensions are just one weapon in the arms race.
Edi’s comment is accompanied by others from Toby Nangle giving additional context about the Teacher’s pension scheme and why it is so particularly expensive for private schools and most higher education establishments. The SCAPE rate is the discount rate used by Government to value future liabilities and it is currently very low, reflecting low expectations of growth in the UK economy. Public sector pensions are currently seen as very expensive for future generations which is why the contribution rates shoot up and up.
De-linking your school from this pension hyper-inflation , is probably a smart commercial move – so long as you don’t lose your best staff. Most teachers I know – in the teacher’s pension scheme don’t know how lucky they are and the extent to which their pensions are subsidised by you and me.
But putting your staff in a the Teachers’ or any kind of DB pension scheme is not an obligation , it is a choice. So long as schools continue to take expensive choices, they will be expensive to send your children to. The proximity of the major schools fees, suggests to me that schools are not competing on price but on value and that some parents (or more likely family trusts) are ready to put up with any amount of pain to offer the best for their children.
Which suggests that any remaining subsidy from the Exchequer from “charitable status” is likely to be short-lived.