How come Scottish private schools will have to pay business rates?

The Barclay Report on Business Rates, published in 2017, called for private schools to cease to benefit from the “reduced or zero-rates bills” they receive as charities, estimating the move could save £5 million.

The review was set up by the Scottish government in 2016 to make recommendations to improve the current rates system, and was led by former RBS boss Ken Barclay.

Business rates - which are standardised across Scotland - are the charges paid by non-domestic properties, including shops and offices, for public services such as education, waste management and roads. They are collected by councils and handed back to the government, which redistributes them, but charities do not pay them in full.

Background: Private schools should pay business rates, says Scottish government review

State school rates: ‘Schools should be exempt from £163m business rates bill’

Related: Cutting private school tax relief ‘puts exams at risk’

Opinion against: Independent schools at ‘competitive disadvantage’

Opinion for: ‘It’s only right to stop private school tax breaks’

What exactly did the report say?

The Barclay report argued that because state schools paid rates in full it was “unfair” that independent schools did not. The report called for this “inequality” to be ended “by removing eligibility for charity relief from all independent schools”. The schools would, however, continue to be classed as charities and other benefits would “continue to flow to them from that status”, it said.

Sounds fair - if state schools pay, why shouldn’t independent schools?

State schools do pay - a Tes Scotland investigation found that the rates bill for states schools was £163 million. However, independent schools argue that while they put new money into the system, the rates paid by state schools are simply “a circular paper process between them and authorities” that has no impact on school budgets.

It has been suggested, therefore, that another way to address the apparent disparity between the two sectors would be to waive the charges for state schools.

The Scottish Charity Regulator also disagrees with the move...

In response to the Scottish government consultation that ran from June to September last year, the Scottish Charity Regulator (OSCR) said it had concerns about treating any group of charities “in a differentiated way for tax or other purposes”. It added that independent schools had been “subject to much more scrutiny than many other charities... and ultimately they all passed the charity test”.

Who supports the move?

In a climate where some would happily see private schools abolished, you don’t have to look far. One commentator writing for Tes Scotland said that private schools were “not really selling education, they’re selling segregation, status and, above all, access”. He added: “Private schools are not charities - they are fee-paying institutions attended overwhelmingly by the children of the social elite. Dishing out a few bursaries a year, or letting the poor kids use the playing fields once a week, doesn’t change that. I don’t say this all too often, but the Scottish government is absolutely right to press ahead with this change.”

So, as of next year, independent schools will be £5m worse off?

Well, that’s what the Barclay review estimated but more recent calculations have put the figure at closer to £7 million.

And what impact will this have on the sector?

The Scottish Council of Independent Schools (SCIS)  says private schools will have to pass on the increase in costs to parents in the form of the fees they charge - and potentially reduce the amount of money they allocate to means-tested fee assistance. Writing in Tes Scotland, SCIS director John Edward said: “Every child removed from independent school if fees rise will be an additional cost and space for local authorities to deal with.”