A Very Unusual Charity: Eton College

Eton College is the principal fee paying school in Britain. Surprisingly, it’s also a charity. As a result, those who attend Eton are subsidised by the taxpayer.  Charities in Britain have a number of finanacial advantages reflecting their charitable work: their contribution to the well- being of society. At first sight it appears odd that Eton qualifies but successive governments have let this anomaly stand. Fees are reduced by these special privileges to the benefit of those who will, to coin a phrase, ‘inherit the earth’.

Eton College is a very successful business. It has 1,300 pupils who pay fees amounting to circa £38.69 million p.a. ( 20% of their pupils pay less than the £33,270 annual fees.) VAT (UK transaction tax) exemption is worth circa £7.74 million to Eton. Additionally, Eton has property valued at £62 million and an investment portfolio of £213 million, both of which produce an income*. Each one of the the 1,010 pupils paying full fees are subsidised by £6,554 from VAT exemption. Full fees would be £39,924 if VAT exemption didn’t apply. An interesting comparison is with Harvard University (USA), which charges $67,844 (£39, 908) for its students. This is virtually identical to Eton- £33,270 + £6,654 (VAT exemption) = £39,924. The key difference is that Harvard is a private university. Harvard is also a world- renowned research university and Eton came 37th in the GCSE** league tables (2013) beneath many state schools.

Charities in Britain have many other benefits. Business rates are one fifth of the full rate and Eton pays no corporation tax. (I can’t calculate the impact of this for Eton.) Charitable  Gift Aid legislation adds a further 28% to parental donations and fund raising activities creating a further income stream. Eton claims that a fifth of their pupils receive a discount. Pupils receiving this discount are an elite, selected to add lustre to Eton: they are cherry picked for Eton’s ‘charity’***. This appears to be ‘window dressing’ for the Charity Commissioners’ perusal. Eton provides subsidies for poor pupils. The state then provides (invisible) subsidies for the vast majority of its (very rich) pupils. The deal for parents is quiet clear. Those paying full fees are subsidised by the state to total of £6,654 p.a.

Put that £6,654 benefit in other contexts. The state allocates £5,086 per pupil for schools in the outer London Borough of Havering, which is £1,568 less than the VAT subsidy to pupils at Eton. The basic state pension in Britain is £5,881 p.a. or £773 p.a. less than VAT subsidy provided for the children of the wealthiest people in Britain. Unemployed people, under 24 years old, can claim Job Seekers’ Allowance (JSA) for six months amounting to £1,491, which is well below 50% of the VAT exemption given to pupils at Eton. JSA can only be claimed for six months, unlike five subsidised years for Eton pupils. Charitable status for Eton is a profitable anomaly to say the very least.

Invisible state aid to the independent education sector is unjust and inefficent. Parliament is dominated by a gigantic oligopoly of privately educated MPs lobbying for their old schools. In all 35% of MPs (229) were privately educated as opposed to just 7% of the general population. Astonishingly, 20 MPs were educated at Eton, a massive 3% of all MPs****. This is legislation by the rich for the rich. So the benefit culture is alive an well and living at Eton College.

*Eton College Financial Statement, 31 Aug 2013 (fees are for 2014)
**GCSE is Britain’s national 16+ examination sat by all pupils.
***Top six mathematician (aged 16) Warren Li moved from a York Comprehensive to Eton Sixth Form and will represent Britain at the 2015 Mathletics. Presumably he will forever more be known as an old-Etonian. Guardian 4th June 2015
****All figures are for MPs elected in 2010

Addendum

The May 2015 British general election has seen 52% of the Conservative MPs, who were privately educated, elected to Parliament. The Conservative Party is the majority party and has formed a new government which will be in power until 2020. Doubtless they will continue looking after the charitable status of the private schools.

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15 Responses to A Very Unusual Charity: Eton College

  1. delsmith444 says:

    Well done Chris, concise and illuminating, like a laser beam.

  2. Chris R says:

    It certainly seems to be in a ‘Mess’. The whole ‘Charity’ system is in a mess. I expect there are much worse cases of ‘Charity Status’ abuse. ( another topic for you Chris ?). What you did not compare was the cost of the ‘Uniforms’ for Eton and Havering !!
    I see that assets for the Cambridge colleges are worth £4 billion and Oxford £3.3 billion.
    It is good that we have an elite school somewhere. Even the Nazi hierarchy wanted to send their kids to Eton after they had won.
    I expect that most of the USA government top bods have had a privileged upbringing. It is not that they are the best for the posts but a case of jobs for the boys, which I am afraid happens in all walks of life; its just that it affects us most when rife in Parliament.
    The following link expresses similar views to Chris’s.
    http://www.independent.co.uk/voices/comment/private-schools-are-doing-laughably-little-to-justify-their-charitable-status-8835283.html

  3. Peter Baxendale says:

    Staggering,Chris- I cannot take in at one sitting so will ask my butler to download this in its entirety.

  4. Diane says:

    Seems unbelievable. You need to bring this to a wider audience to challenge the ‘benefit-scoungers’ discourse. The Guardian or New Statesman could be interested…

    • odeboyz says:

      I’m quite sure they all know because they too belong to same elite of ‘Old Boys’. The consequence of a state supported elite is that it is self perpetuating. After 1997 I gave up all hope that the tax system would be fair: the demonisation of the poor since 2010 is just a continuation of the Blair policy but in trumps.

  5. Diane says:

    It’s true. We need to start an alternative paper – not run by the Eton/Oxbridge elite! I wonder what the private/’public’ school sector as a whole gain out of this system. It won’t be just Eton..

  6. Pingback: Hornchurch and Upminster Labour | A Very Unusual Charity: Eton College

  7. Pete Neras says:

    “As a result, those who attend Eton are subsidised by the taxpayer. ”

    Oh really? If Eton and all the other fee-paying schools didn’t exist, where do all these kids go for their education? And what about their teachers? They would ALL go to state schools and please tell us the figures that would cost the government seeing that you’re so hot on statistics and figures.

    • odeboyz says:

      Assuming the buildings still exist along with investment and property portfolios deleting the charity status does not imply deletion of the private school sector. However it does imply that the charity status is a state subsidy. So! Some parents will not be able to pay the real cost of their children’s education and will, as you rightly say, revert to state education. And that will be an additional cost which will have to be met. The Parliamentary Committee estimates the direct cost of state subsidy to independent schools at £100 million p.a. And that is a clear under- estimate as it doesn’t cost in subsequent savings. Do the two figures add up? I.e. Would the additional pupils decanted out of private schools cost more/less than circa £100M? I don’t know but it does feel like unnecessary subsidy to me. So I am making both an economic and a political point. Thank you for your comment.

  8. Pete Neras says:

    Well, I’m looking at a much, much wider picture. Independent schools especially most of the UK’s top pubic schools are often criticised for their charitable status. This is only a very narrow tunnel vision on the part of the critics. But what is often not reported either through ignorance or prejudice or selective reporting or a combination of all three, is the billions of pounds (yes, billions!) generated by the private school sector to the UK economy:

    http://news.tes.co.uk/b/news/2014/04/01/private-schools-make-multi-billion-pound-contribution-to-uk-economy-report-finds.aspx

    Eton, for example, is on record to say they spend more each year on charity than what they receive in tax breaks. Thank you for your response.

    • odeboyz says:

      Eton College is an elite school and a destination in the international education market unlike the majority of independent schools who are neighbourhood day schools. There are circa 512,000 children in independent schools and most are in the ‘undistinguished’ bracket they generate nothing beyond their own income. I’ve looked at the Eton College financial statement and it doesn’t appear to me that they have ‘recognised’ the true impact of state subsidy on their accounts. I thought that the site you attached was full of artistic licence and double counting. The independent sector also has some companies that are For Profit, Cognita being a prime example, and they operate comfortably without state subsidy. Need I say any more? Thank you for your comments.

  9. Pete Neras says:

    Perhaps Eton College’s financial statement doesn’t appear to recognise the ‘true impact of state subsidy’ is because there’s none received by them whatsoever. And I would entirely agree with them.

    Politicians in particular, would like to have us believed that tax breaks and subsidies are one and the same thing whilst in reality they are two different animals. The definition of a subsidy is, “a direct pecuniary aid furnished by a government…”; “a grant or contribution of money”; “a sum paid…”; etc. Eton College received none of those – not a bean!

    Subsidies are monies taken (by force) from taxpayers by governmental powers and given to someone else. Tax breaks are the government saying you can pay less or even keep all your own money:

    http://thetwilightyears.wordpress.com/2013/12/28/the-difference-between-a-subsidy-and-a-tax-break/

    Hope the above explanation of the difference between a subsidy and tax break is useful. Thanks for responding.

    • odeboyz says:

      An alteration in the tax relationship is nrmally seen as a (covert) subsidy.Additionally they do recognise it because they say that they don’t ‘profit’ from it as they spend more on their charitible works theanthey get. (This is a point you also make.) Closet subsidies like all subsidies distort the market andthey don’t cease to be subsidies merely because of tricky accounting. I sense I have no more to say on this matter but thank you for the opportunity; I try to write 600 words & it is a bit tight for a complex post.

  10. Website says:

    Unquestionably believe that that you stated. Your favourite reason seemed to be at the net the easiest thing to be aware of. I say to you, I certainly get annoyed even as other people consider issues that they plainly don’t know about. You managed to hit the nail upon the highest and defined out the whole thing without having side-effects , other people can take a signal. Will likely be again to get more. Thank you|

    • odeboyz says:

      Thank you for this. The idea that the hard-working-taxpayer is subsidising the very wealthiest people on the planet is obnoxious. But they have a grip on Parliament and os nothing will ever be done. So much for, ‘We’re all in this together.’

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