Pension rise may be too much for many private schools

Independent Schools Council chief Julie Robinson outlines why many private schools face a financial storm that they may not be able to weather
2nd November 2023, 12:14pm

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Pension rise may be too much for many private schools

https://www.tes.com/magazine/analysis/general/teacher-pension-rise-funding-costs-private-schools
Wringing out clothes

Oscar Wilde famously said: “A fool is someone who knows the price of everything and the value of nothing.”

Well, people leading schools are no fools. The senior leaders I speak to are acutely aware of their budgets, of course, but they also have a keen sense of what is valuable to their institutions.

And if you ask any head what their most valuable resource is, you’re likely to get a single answer: teachers.

It’s because schools value teachers so much that such a large proportion of their budgets is invested in staff, and independent schools are no exception.

Staff costs account for around two-thirds of schools’ outgoings in boarding schools - and that rises to nearly three-quarters in day schools.

Biting costs

So, when costs bite, it is inevitable that every line of a budget - including what is considered valuable - is scrutinised.

Like many others across education and beyond, independent schools are seeing costs soar as multiple financial issues come to bear: the cost-of-living crisis, Brexit, energy prices and the ongoing economic pain caused by Covid, to name but a few.

On top of this, independent schools are staring down the barrel of two further financial hits: the rise in employer contributions to the Teachers’ Pension Scheme (TPS) to 28.6 per cent and the Labour Party’s policy on our schools, which would see business rate relief scrapped for those run by charities and VAT added to parents’ fees across all independent schools.

These are not small things to add to the pile. Martin Willis, of consultancy firm Barnett Waddingham, told The Telegraph this week the two combined could result in more than half of independent schools operating at a loss.

Few good options

This is because the TPS rise is funded for state schools, but independent schools will have to fund the rise themselves. And while VAT is a tax on the consumer, rather than the provider, many will be looking for ways to make sure that fees remain affordable for parents by absorbing some of the pain.

Independent schools will not want parents to have to pay 20 per cent extra on their fees. But nor can they afford to slash their budgets by a fifth - no organisation could do that. And they will, of course, want to make sure teachers have fair pay and conditions.

But if the money is not in the budget (and many independent schools run to a very small operating surplus as it is), then increasing TPS contributions simply may not be an option.

Over the past few years, independent schools have been doing what they can to keep fees lower during difficult times and fee rises over the past few years have been below wage inflation.

Not a painless process

There are a handful of household names in the sector, but the fact is that those large, wealthy schools are the exception rather than the norm.

Most of our schools are very small, community schools that are already operating on tight margins, keeping fees low while also balancing the books.

Every head, every bursar, every governing body will be looking for costs they can cut.

But the fact remains that many - if not most - of our schools will have to start looking at what they value and making difficult decisions about what they can afford to keep, including TPS contributions.

That won’t be a painless process and staff may not be happy about the outcomes. But we know schools will do all they can to make sure the people they value are part of the process and understand why certain steps have been taken.

It would be foolish indeed for schools to cut back without taking into consideration the immense and central value of the people who make the world of education what it is. But it would be equally foolish to ignore cost completely.

After all, the hard fact is a school that does not exist can contribute precisely zero to anyone’s pension.

Julie Robinson is chief executive of the Independent Schools Council (ISC)

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