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Living in never-never-land?

Britain's top private schools heads meet for their annual conference next week amid worries that their expenditure is rising faster than income. Fran Abrams reports

Bursars of some of England's most famous independent schools were planning to meet. A calling note went out: did anyone have any issues they might raise? The agenda looked a little thin. The bursar of Winchester College sent a jokey message: "Why don't we just have a good lunch and go home, as if you are having that amount of trouble it would seem simply to find items to justify a meeting would be daft!"

With hindsight it seems strange that at that stage the bursars could find so little to talk about. In the intervening months, some of them must have come to think themselves one of the most beleaguered species in the educational world.

An investigation by the Office of Fair Trading into allegations of fee-fixing has now forced the independent schools' financial arrangements into the public spotlight. Some have been forced to admit that even an average 39 per cent fee rise over the past five years has not enabled them to balance their books. And to cap it all, parents have begun to complain of feeling ripped off.

So just how much does the fee-paying sector have to worry about? A survey by The TES of half a dozen of Britain's top boarding schools highlights the concerns many must now feel about their long-term financial security.

Many of these schools have beautiful buildings, generous grounds, stunning facilities and wealthy alumni with deep pockets. But an examination of their financial accounts for the past five years shows a worrying trend.The schools we looked at - Eton, Winchester, Harrow, Rugby, Westminster and Gordonstoun - had an average rise in fee income of 24.8 per cent between 1997 and 2001. Their total income, augmented by investments and donations, rose by 25.2 per cent. But their outgoings rose over the same period by 29.2 per cent - a situation which would clearly not be sustainable in the long term.

There are several key reasons for this increase in expenses. First, teachers' pay has risen faster than inflation in the independent sector, as it has done in the state sector. At the same time employers' contributions to the teachers' pension scheme, of which most independent school teachers are members, have also risen faster than inflation. In the six schools we looked at the cost of teachers' pay, pensions and national insurance contributions rose by 31 per cent between 1997 and 2001.

This rise in teaching costs has hit independent schools harder than state schools, according to the general secretary of the Independent Schools'

Bursars Association, Mike Sant. "The biggest difference between independent and maintained schools is the pupil teacher ratio, and that's a huge cost.

We have 7 per cent of pupils but we have 14 per cent of teachers. Of course, that's what parents are paying for," he says.

There have been other increases in costs, Mr Sant says, some of which hit boarding schools particularly hard. For example, there has recently been a 16 per cent increase in fees for boarding inspections, and a 11 per cent increase in the charges made by doctors acting as school medical officers.

Charges for checking teachers' records with the Criminal Records Bureau have more than doubled this year, and insurance premiums have risen by up to 50 per cent.

Even some of the biggest and most well-endowed schools have had to admit to some chinks in their financial armour. Harrow's most recent accounts reported that its investment funds had underperformed in an already weak market, and that it had an overdraft of pound;2.2 million. Gordonstoun, meanwhile, was running an overdraft of more than pound;3 million - partly because it had bought the land and buildings of a recently-closed school in Hampshire. However, even in these straitened times many independent schools can still find money for projects most state schools can only dream of.

Winchester, for example, has just built a new pound;4 million music school while Rugby has had improved science blocks and a new chapel organ.

Westminster has just bought and renovated a 150-seat theatre.

Schools say they feel that if they do not continue to make major capital investments they will fall behind their rivals and find it hard to compete.

But some existing parents say they would like to be given a say in such decisions. One Winchester parent, who did not want to be named, told The TES he felt he should have been asked whether he wanted a new music school.

"It seems to me like an indulgence," he said. "In any other school they would have discussed it with representatives of parents. Some parents might have said instead of spending pound;4m on a music school and putting fees up 9 per cent, why not put fees up 6 per cent and spend pound;2m on the music school?"

Despite the worrying financial signals, though, even the biggest and richest independent schools are not yet on their uppers. Rugby, for example, owns estates in London worth pound;15m, while Westminster has pound;6.6m in listed investments. Most of the schools have been around for a long time, and this occasionally leads to financial windfalls. In 1994 Canford school staff were stunned when a sculpture from their tuck shop sold at auction for pound;7.7 million. More recently, Westminster school received pound;40m after Disney bought the rights to AA Milne's Winnie the Pooh stories, whose author had bequeathed a share of them to his old school. Its listed investments are worth pound;6.6m.

State schools might also raise an eyebrow at some of the independent schools' day-to-day running costs. A series of surveys by independent school bursars, seen by The TES, shows they routinely spend large sums on items the average comprehensive would never be able to afford.

Many boarding schools, for example, offer free or subsidised housing to their staff. Of 15 who responded to a recent bursars' survey on the subject, seven had enough housing to accommodate all their teachers. All had some staff housing, and all but one provided accommodation for teachers who did not undertake boarding-house duties.

Radley College, for example, had 121 residential units available even though only 25 staff were required to "live in". For those who did live out, a pound;4,000 per year allowance was granted. St Edward's paid staff who lived out an extra pound;5,260.

And though independent schools' high salary bills were exacerbated by their impressive teacher pupil ratios - 7.7 pupils per teacher in a recent bursars' survey compared with 17 to one in state secondaries - they also paid their teachers more. Schools within the Rugby group, which includes Charterhouse, Haileybury and Harrow, paid staff an average starting salary of pound;20,710, compared with pound;17,595 at the bottom of the pay scale in state schools.

At the top of the scale independent schools pay far more than the state sector. While the main grade in secondaries goes up to pound;32,217, among the Rugby group the top salary for a classroom teacher was an average of pound;40,821. Senior staff received special responsibility allowances of up to pound;10,000.

Heads and senior staff in independent schools are also well rewarded. The highest-paid member of staff at Harrow received between pound;90,000 and pound;100,000 in 2001, while at Eton two members of staff earned between pound;80,000 and pound;90,000. Most senior staff at these schools could also expect free or subsidised housing in buildings which were often both architecturally and historically impressive. Many schools offered perks such as private medical insurance, and some had generous final-salary pension schemes for non-teaching staff.

It is hardly surprising, then, that as schools start to introduce even limited austerity measures they anticipate strong reactions from staff. One bursar, contemplating his annual pay settlement, wrote to colleagues a few months ago: "I shall be suggesting a limited rise this coming year, and have ordered my tin hat and flak jacket!"

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