Take note, Starmer – these countries subsidise their private schools

“Oh wow, that means parents are going to be taxed twice over,” says Paige MacPherson, the associate director of education policy at the Fraser Institute in Canada, when she hears about the Labour Party’s plan to add VAT to private school fees in the UK. “That would be a pretty unique set up based on my understanding of the different education systems around the world.”

Not totally unique. In the middle of Greece’s sovereign debt crisis in 2015, Alexis Tsipras’ radical-leftist government slapped a 23 per cent VAT charge on independent school fees. It didn’t work out so well. Already rocked by turmoil in the Greek economy, schools closed, teachers were laid off and the state sector was overwhelmed.

Interestingly, Tsipras’s ideology had limits. Despite giving one of his two sons the middle name Ernesto in honour of the Marxist revolutionary Ernesto “Che” Guevara, he enrolled his children in a well-known Athenian private school. The tax, like Tsipras’s principles, failed to survive contact with reality and has long since been rescinded.

But there remains another parallel between Greek and British private schools: they operate in the tiny – and shrinking – handful of developed economies around the world where private schools receive no government subsidies.

Different countries have different education and tax systems so direct comparisons are difficult. Debates about private education are also freighted with different kinds of cultural baggage.

In the UK, private schools are widely seen as a bastions and perpetuators of privilege. In many other countries, by contrast, they are considered a viable means of reducing the gap in educational attainment between those children from either end of the socioeconomic scale.

This is why, in the vast majority of countries in the rich world, private schools are at least partly financed by the state. There are, broadly speaking, five strands to the philosophy behind this approach, according to education experts.

One, an educated population is a common good and the state should encourage a variety of approaches to achieve it. Two, parents should have a choice as to where and how their children are educated. Three, parents pay taxes and are therefore entitled to some government funding towards the education of their children irrespective of what kind of school they pick.

Four, subsidising private education enables families on a broader range of incomes to make that choice thereby taking pressure off the state sector and saving the government money. And, five, enabling a broader range of families to access private education makes the option less elitist.

OECD (the Organisation for Economic Co-operation and Development) research shows that those countries that don’t subsidise private education exhibit the widest gap between the socio-economic profiles of privately and publicly managed schools. There’s a risk Labour’s plan to add VAT to school fees will, according to education experts, make private schools more expensive and therefore even more elitist.

The US

Until recently, the US belonged to the small group of countries, which also included the UK and Greece, where private schools received no state funding. That is beginning to change – and fast.

One of the main obstacles to government subsidies for private schools was the US Constitution. The Establishment Clause of the First Amendment is designed to draw a very clear line between church and state and makes it illegal for the government to promote a specific religion with taxes.

As some independent schools in the US were religious in nature they were constitutionally barred from receiving government money. A work-around was created in 2011 when Arizona established “education savings accounts”.

These are public funded savings accounts that can be used for a wide range of educational purposes, including school tuition. This allowed the government to give money to parents who then chose how to spend it. If that is on fees for a school with a religious curriculum, so be it.

In 2022, Arizona became the first state to make every student, regardless of their parents’ wealth, eligible for a school voucher – on average worth about $7,200 per student a year. This can be spent on a wide variety of options including private schools or home-schooling. The move was controversial but very popular.

The system pretty closely matches an idea put forward by the economist Milton Friedman in the 1950s. The Nobel prize-winning economist argued that a voucher system would encourage competition between schools and thus incentivise them to improve their offering. He also believed it would give parents more power to hold schools to account.

In his essay “The Role of Government in Education”, Friedman concluded that a “widening in the educational opportunities open to our children…government would serve its proper function of improving the operation of the invisible hand without substituting the dead hand of bureaucracy”.

Many other states have since followed Arizona’s suit, giving rise to a broader movement called “School Choice”. Critics say the new system may result in state-run schools missing out on funding, although there is little evidence for this yet. Fans say parents are best placed to decide what kind of education suits the needs of their child.

“Over the past 50 years, the US has failed to close the attainment gap between children from either end of the socioeconomic scale despite a variety of efforts,” says Jonathan Butcher, an education policy researcher at the Washington-based Heritage Foundation. “That’s partly because our education system means kids are assigned to schools by where they live and not by what they need. Something had to change.”

It’s early days, but the signs are positive. There have been 17 studies into “School Choice” measuring student achievement using “random assignment” – a particularly robust statistical method. Eleven found positive effects, four found no effect, and three found negative effects (and, according to Butcher, these were related to one poorly designed programme in Louisiana).

Texas is one state that has tried to establish this system for years but failed. According to Butcher this is mostly the result of teachers in rural areas arguing that greater choice will undermine a sense of community in sparsely populated areas.

The greatest opposition to the new system comes from teachers’ unions. “Whenever a state introduces school choice, the teacher unions file lawsuits almost automatically,” says Butcher. “They say greater choice will bankrupt public schools. But this money belongs to taxpayers and children, not the schools.”

Canada

As with its southern neighbour, Canadian education policy is decided far from the capital. Five of Canada’s ten provinces – British Columbia, Alberta, Saskatchewan, Manitoba and Quebec - offer government funding for private schools.

Ontario, easily Canada’s most populous province, debated a proposal to introduce public funding for private schools in the lead up to the 2007 election but it ultimately floundered on arguments about funding for religious schools.

In those five provinces a portion of parents’ tax dollars follow their child to their chosen independent or homeschool, outside of their local government public school. The government provides a percentage of the operation cost of what it would cost to educate that student at a state school.

The level of student funding independent schools receive is on a sliding scale that is contingent on the level of provincial regulations they follow. “The government wants to ensure there is accountability with regards to how taxpayer dollars are spent so, it’s a trade off,” says the Fraser Institute’s MacPherson.

“Schools can choose: tick all the boxes and get more government money or be more innovative and get less,” says MacPherson. “For example, if a school comes up with a more creative curriculum or seeks to hire teachers who don’t have the traditional training then they will receive a lower proportion of state funding.”

As in the US, the main opponents to this system are the teachers unions who argue that it results in resources being diverted from the state-sector. “Actually there’s clear evidence that it saves the government money,” says MacPherson.

Her research into the education sector of British Columbia shows that between 2012/13 and 2022/23, the share of students enrolled in independent schools increased by 13.1 per cent, while the share of students attending government public schools decreased by 1.7 per cent.

In 2020/21, the average per-student cost of a student attending government public school was $14,601 while the average cost to the provincial government of a student attending independent school was $8,685. The province therefore saves an average of $5,916 on every student who attends independent school rather than government public school.

MacPherson has calculated that if independent school funding was eliminated and 10 per cent of independent school students moved to government public schools, it would cost the provincial government $51.6m a year. If half of students made the switch, it would cost $258.2m a year.

How might Canadians react if the government – national or provincial – introduced a sales tax on private school fees? “If the government imposed additional onerous costs on families currently sending their children to independent schools it could pose a considerable challenge for those families,” says MacPherson.

“Many middle-income families are sending their children to independent schools and making considerable sacrifices to be able to do so. With an already-high tax burden across Canada, imposing additional costs on those families would likely be perceived as discriminatory and unfair.”

Australia

The funding that each non-government school in Australia receives is dependent on a wide variety of factors, including: how wealthy the parents of students at the school are; where it is located; how big it is; and how many Aboriginal and Torres Strait Islander students it educates.

On average, independent schools in Australia receive $12,160 in government funding per student, according to Independent Schools Australia. This compares to $22,510 for students in government schools.

Under an agreement struck in 2019, the central government contributes 80 per cent of the “schooling resource standard” (an estimate of how much total public funding a school needs to meet its students’ educational needs) for private schools, while state and territory governments are responsible for the remaining 20 per cent. The split is reversed for public schools.

Approximately one third of students attend non-government schools in Australia. “There is a commitment by both major political parties in Australia to support parental choice in education,” says a spokesperson for Independent Schools Australia.

There is, however, also lively debate in Australia about whether the schooling resource standard system has resulted in some independent schools being “over-funded”.

Victoria, which is run by the Australian Labour party, recently revoked a payroll tax exemption for private schools. It has since been calculated that private schools will end up paying more in tax to the state than they receive in funding because of the changes (although this is only a fifth of their overall government funding).

“Dozens of schools are now having to pay the [Jacinta] Allan government millions of dollars just to continue their much-needed work providing education to Victorian children,” says Jess Wilson, the opposition Liberal party’s education spokesperson.

“Non-government schools are an essential part of our education system – they take significant pressure off the government system – and shouldn’t be made to pay for the privilege of providing educational choice to parents and students across the state.”

Denmark

Denmark’s history of private education is not quite as venerable as the UK’s but it’s getting there – the first was established in 1852 to cater for children in rural areas. The Danes also match the Brits for confusing terminology. In the UK, the public schools are private; in Denmark, the “free schools” charge fees.

However, the fees are supplemented with government funding through a voucher system. All schools are eligible regardless of their ideological, religious, political or ethnic approach. Roughly 14 per cent of all children in Denmark attend private schools.

According to the Danish Ministry of Children and Education, all parties in the Danish Parliament back financial support for private schools in the belief that “the municipal [state] schools also will benefit from the experience and competition offered by the private schools”.

The grants awarded depend on the size of the school, its location and the age profile of the pupils. But, on average, the government funds private schools at about 75 per cent of the rate of fully-funded government schools.

“Perhaps the most notable feature of Denmark’s independent school landscape is that it is incredibly diverse, affording students a wide range of pedagogical and organisational options,” says MacPherson who has studied the different educational funding models around the world.

“Danish independent schools attract students from all socioeconomic backgrounds and academic abilities. Government funding for independent schools has historically carried the explicit aim of increasing diversity among schools.”