Additional research: Sarah Jenkins

Next week: Chronic fatigue

Around 7 per cent of British schoolchildren - more than 600,000 pupils - attend independent schools. Although fees continue to rise above the rate of inflation, figures show that pupil numbers have grown for the past nine years in the private sector. A 2004 Mori poll found that 50 per cent of parents would pay to send their children to an independent school if they could afford it. And it is often parents who were educated in the state sector who choose to fork out for a private school education for their children. So what’s the big attraction? And how do people afford the fees?

A long history

It was not until the end of the 19th century, with the 1870 Education Act, that a system of state-funded schools began to develop. Until then, all schools tended to charge some kind of fees, although many also received money from endowments that allowed them to take some children on reduced rates, or even for free. Local teachers might take on a few pupils whose parents could afford modest charges, while there is a long history of richer parents sending their sons away for a good, and expensive, education. King’s school in Canterbury, for example, was established in 597 AD, while many of today’s major “public” schools have their roots in the 15th and 16th centuries: Eton was founded in 1440 and Rugby in 1567. In the 19th century, day schools set up by mining and manufacturing companies for the children of workers deducted money straight from parents’ wages.

Still in fashion?

Today there are around 2,500 independent schools, most of which are day schools and around half of which are affiliated to the Independent Schools Council (ISC). Each school is free to set its own fees and to follow its own curriculum, although all must pass inspections by the Independent Schools Inspectorate, which are validated by Ofsted. For the first time, figures from an ISC 2005 census showed that there are more girls than boys who are day pupils at independent schools. When figures for boarding (traditionally more popular for boys) are taken into account, the numbers of girls and boys are almost equal.

According to the ISC census, overall pupil numbers at independents fell by 0.6 per cent this year, following nine years of steady growth. To some extent the dip can be put down to population change, which has seen pupil numbers drop across the country: the Department for Education and Skills estimates that state schools have seen a reduction of 1.2 per cent. But other contributing factors are almost certainly the continued rise of fees - by an average of almost 6 per cent last year - and a drop in the intake of foreign children of almost 10 per cent. The ISC blames this on a sharp increase in visa charges and higher fees from the British Council, which promotes British schools abroad.

Going global

While there may be a drop in the number of foreign students travelling to Britain for a private education, the global brand represented by some of the biggest independents has opened up a whole new international market. In many Asian countries, in particular, the tradition and status offered by an established independent school is in high demand, and parents are willing to pay substantial fees for a British-style education. Harrow, founded in 1572, opened a school in Thailand in 1998. In return for the use of its brand, Harrow receives royalties and inspects the Bangkok franchise to maintain standards. Shrewsbury school opened an outpost in Bangkok in September 2004 for more than 900 pupils aged from three to 18. Earlier, in April 2004, Bromsgrove school in Worcestershire joined forces with an existing Thai school to create a new one carrying the Bromsgrove name, based in the Panya Park golf club in Minburi (unsurprisingly, golf features strongly in the curriculum).

Dulwich college has two schools in China, with more planned for the future, but has also sounded a note of caution in the scramble to cash in on a global brand. Earlier this year it severed its ties with Dulwich college international in Phuket, Thailand, which had been running for eight years, and which has since had to change its name. “Management differences” were blamed for the split with Thai investor Arthit Ourairat, who tried to limit the influence of his British partners.

Cut-price competition

Another international model for independent education is offered by the Global Education Management Systems (Gems) brand of schools. Gems has 36 schools in the USA, Middle East and Asia, inspired by an English public school ethos. Founded by Dubai entrepreneur Sunny Varkey, the purpose-built day schools are arranged into three price brackets offering different levels of experience for different levels of fees. In the past couple of years, Gems has added 13 English schools to the portfolio, with fees starting under pound;4,000 at primary level. “We’re offering an affordable alternative to state education for double-income families, or for those who wish to compromise on other things to give their children an independent-school education,” says John Bridger, senior director of Gems.

“We’re not trying to compete with established public schools.” Gems has plans to buy, build and manage a whole range of schools in the UK over the next few years and to build on the opportunities offered by the company’s international dimension. “When you look at the future for linking schools in the Gems group, for exchanges, lesson-sharing and world citizenship, then it becomes exciting,” says Mr Bridger.

The other new big player in the sector is Cognita, which was set up by the former chief inspector of schools, Chris Woodhead. Cognita has bought 17 schools in the UK, with fees starting at around pound;6,000 a year.

Fixed-price collaboration?

The Office of Fair Trading is currently investigating more than 60 independent schools believed to have been involved in “fee-fixing”. The suggestion is that groups of schools, in direct competition with each other for pupils, shared sensitive financial information, possibly with a view to establishing a common level of fees. This kind of collaboration would be in breach of the Competition Act. The schools are arguing that, as charities, they should not be bound by the same rules as commercial companies.

Those under investigation include a group of seven independent day schools in the West Midlands, and a clutch of high-profile public schools including Winchester and Eton. Officials from the OFT are expected to announce their findings before the end of the year and those found guilty could be fined up to 10 per cent of three years’ turnover. For the big-name boarding schools that could amount to several million pounds. Ironically, if the OFT does impose hefty fines, the result is likely to be an increase in fees as schools seek to cover the cost.

Doing the sums

While cheaper alternatives may be on offer, the average cost of fees for sending a child to day school is almost pound;8,000 a year, and almost Pounds 18,000 to wave them off to boarding school. Some fees, of course, are even higher: 88 schools now charge over pound;20,000 a year. And that can be without the cost of extras such as uniforms, extra-curricular activities or exam charges. Over a school career, from five to 18 years of age, parents can expect to spend around pound;130,000 for fees on each child - and at the current rate of fee inflation, a child born this year and starting school in 2010 may well cost nearer pound;350,000.

But many parents are more than willing to make the sacrifice. “Everyone thinks I’m rich because my son goes to private school,” says the mother of a Nottingham high school pupil. “But I’m a single mum. My parents have to chip in for the fees, and we go without holidays. It’s worth it because I know he’s getting opportunities he might not otherwise have.” Nor is it only those who want to relive their own school days who are willing to put their hands in their pockets. It is estimated that 40 per cent of parents who choose to send their children to independent schools were themselves a product of the state system. “The numbers of what we call first-time-buyer families have been consistently high since the early 1990s,” says Dick Davison, director of information at the ISC. “Independent schools are part of the machinery of social mobility - people see them as a chance for bettering their own and their children’s lives.”

Value for money?

The ISC argues that a good independent school offers value for money to thrifty parents: an average ratio of one member of staff to every 9.98 pupils; more than half of all pupils at GCSE gaining A or A* grades in 2004 (compared with a state average of 13.4 per cent), and 92 per cent of school-leavers going on to university. “But it’s not just high academic achievement,” says Mr Davison. “Of course, parents expect that. But what clinches it are the more intangible things. Like good manners; respect for teachers; perhaps a spiritual education. That’s what parents are prepared to pay for.”

There is also an argument that independent schools can help a cash-strapped state. Foreign pupils are estimated to be worth pound;280 million to Britain in foreign currency, while the ISC points out that independent schools save the Government aroundpound;2 billion that would otherwise be spent on educating their pupils in state schools.

Balancing the books

In the past 20 years, three of the most popular methods for raising money for school fees have been abolished: tax-free covenants disappeared in 1988; education trusts finished in 1996 and the Government’s assisted places scheme effectively stopped in 1997, although those who had places on the scheme before that continued to get money until the end of their school careers.

But there is still help around. In 2004, independent schools awarded approximately pound;300 million worth of bursaries and scholarships and the ISC says that a third of pupils in independent schools now receive some form of financial assistance. With the end of Government schemes, however, this money has to be found direct from a school budget. “The proportion of total turnover from independent schools which has gone on assistance has risen steadily over the past 15 years from 4 per cent to 7 per cent,” says Mr Davison. “But even so there’s a limit. There are almost as many pupils receiving assistance now as during the heyday of the assisted places scheme - but the financial value of each award is generally lower.”

High cost or high flier?

Traditionally, assistance with fees has been through a scholarship system in which pupils compete for a fixed number of awards attached to academic, musical, artistic or sporting achievement. The value of scholarships varies but is usually between a quarter and two-thirds of school fees.

Means-tested bursaries are similar to scholarships, but the sum awarded is linked to financial need as well as aptitude. The ISC recently aired plans for its member schools to stop offering scholarships, and award only bursaries, but the Office of Fair Trading has warned that it would view any introduction of a standard bursary system in the same dim light that it views the fixing of fees.

Bursaries are often funded from long-established trusts and foundations. In some cases they are bound by conditions set by the original benefactor: some schools award grants to the offspring of clergy or members of the armed forces, while George Heriot’s school in Edinburgh offers full remission of fees to the children of widows. In other cases it is simply a case of financial need: many schools offer full-fee awards on a diminishing scale to low-income families.

Independents currently give back more than 7 per cent of their turnover in awards to pupils, but a return to government subsidy of bursaries seems unlikely. Labour abolished the assisted places scheme in 1997, and earlier this month they rejected calls from the HMC chair Priscilla Chadwick for a voucher system to increase access to independent schools for less well-off families.

Shopping for bargains

Independent schools are fully aware that meeting school fees can be a struggle. Hence many schools have developed their own payment schemes to try to ease the burden. Sometimes parents can pay the whole year’s - or even a whole school career’s - fees in a lump sum in advance, which entitles them to a discount. “But it only appeals to a few,” says John Bridger of Gems. “Those lucky enough to have cashed in an inheritance or downgraded their house in a big way.” Other schools offer a deferred payments scheme whereby a finance company pays the fees up-front and parents pay off a monthly balance, plus interest.

There is also a whole range of investments aimed at meeting future school bills. “In many cases, children have just been born and grandparents want to help by putting some money aside for fees,” says Mike Saunders, school fees specialist at Clarke and Partners financial adviser in Dorset. But like shopping around for endowments to pay off the mortgage, buyers need to be sure they are getting what they want: schemes can guarantee a fixed amount of money, but they cannot guarantee it will be enough to pay off school fees which might have rocketed in the meantime. Nor does paying beforehand allow children to jump the queue when it comes to passing the entrance exam. “Paying into a school scheme is low-risk, but it’s also low-return for what could be 10 years or more of investment,” says Mr Saunders. “And there’s no guarantee. School fees often increase ahead of savings and the widening gap can be quite a concern. It can leave a substantial shortfall.”

Hard-nosed or soft-centred?

Some independent schools are run for profit. But most - around 85 per cent of ISC members - operate as charities, with any surplus money from investments or fees being fed back into the school. This charitable status is highly prized: it gives schools 80 per cent relief from business rates, as well as tax relief on investment income or money from gifts and appeals.

In 2001, it was estimated that this added up to a total of pound;88m a year of extra cash for independent schools - although, on a total fee turnover of almost pound;3.5 billion, it makes up a relatively small proportion.

Not everyone agrees that independents should be allowed charitable status: critics claim that it is in effect a subsidy which reduces the money available to the state education system. New requirements under the Charities Act currently working its way through parliament (and expected to be law by the end of this year) are likely to go some way towards meeting these concerns by making independents earn their charitable status by proving they offer “public benefit”.

This might involve making facilities such as sports fields or libraries available to other schools or community groups, or by extending scholarship schemes to poorer families. While many of the larger schools do this already, the new requirements might prove more testing for smaller independents. They often do not have extensive facilities to share with the state sector, nor the financial capacity to offer means-tested scholarships.

“Only a handful of schools have big endowments. For most others it’s a case of recycling other parents’ money. But that has to come out of the annual budget,” says Mr Davison. “And there’s only so much slack you can make to fund assistance. It’s a delicate balance to strike.”

Resources

* Independent Schools Council (ISC): www.isc.co.uk; tel 020 7766 7070.

* Clarke and Partners: www.schoolfeesadvice.co.uk; tel 01202 889 707.