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Independents make ready to fight their corner

Labour's U-turn over VAT on fees removed one problem for independent schools but left them with their recurrent nightmare - abolition of their charitable status.

That has been on Labour's agenda for 20 years now and was dropped only briefly from the 1992 party manifesto when legal advice ruled it was too complex.

For some private schools, already badly squeezed by three years of recession, the loss of the charity tax break could be the last straw.

While few would close, most would have to raise fees making the remaining schools even more socially exclusive, according to the Independent Schools Information Service (ISIS).

"It would drive fees up and cut off the routes by which lower income families have access to independent schools," said Dick Davison, deputy director of ISIS. "It would make independent schools more exclusive, which is an odd objective for the Labour party to be seeking."

Alongside abolition of charitable status runs Labour's unshakeable opposition to the assisted places scheme, currently available to more than 30,000 pupils and costing Pounds 94 million.

But - assuming that the issue of VAT on fees has gone - public schools are fighting on familiar territory and they have access to some of the most powerful networks in the land.

ISIS will press its case at a forthcoming meeting with David Blunkett, the shadow education secretary. Out of the 1,355 schools it represents, more than 1,100 have charitable status worth an estimated Pounds 42 million. Charitable status gives them 80 per cent relief from the uniform business rate, relief on bank deposits and income from investments and they are also able to claim back tax paid by benefactors. Mr Davison said that in comparison with the Pounds 42 million gained by charitable status, independent schools gave out around Pounds 55 million in scholarships and bursaries.

Until recently the difficulties of ending charitable status for public schools have appeared insurmountable, but a paper produced by Labour backbench MP Frank Field a year ago may have overcome obstacles.

In his paper, Mr Field suggested establishing education commissioners who would examine all education charities - including public schools and Oxbridge colleges - to determine whether they were using funds for the charitable purposes originally intended. The commissioners would have powers to redistribute money where they felt it was justified.

Bryan Davies, one of Labour's education spokesman, said: "Many of the old private schools were founded as educational charities for the education of the poor. They are now educating the children of the well-off, yet they still have charitable status.

"It is a somewhat bizarre view of charitable status to take money from ordinary taxpayers to subsidise the extremely wealthy."

While Roy Hattersley, former deputy Labour leader, said: "It is quite intolerable that the generality of people, some of them on very low incomes should subsidise through their taxes ... young gentlemen at Eton and Harrow. "

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