Top public schools in fee-fixing scandal" makes a good headline, but were the schools guilty of acting as a cartel or just of being ignorant of the law? Last week, the Office of Fair Trading (OFT) found 50 independent schools guilty of a breach in competition law. The OFT's case is that schools' exchange of information about proposed fee increases resulted in parents having to pay more "than would otherwise have been the case".
The schools' answer is that the law was changed without their knowledge. Until March 2000, schools were exempted from competition law. The law was changed with no consultation and no publicity.
Ignorance of the law is no defence, though it is odd that this particular change should have been shrouded in secrecy. A suspicious mind might wonder whether the OFT set out to trap fee-charging schools. It is even more odd that the schools' expensive legal advisers did not warn that exchanging information might be construed as a conspiracy against the customer.
The 50 schools now have until March 2006 to say why they should not be fined for breaking the law. If they insist on making ignorance of the law the main plank of their defence, they will end up paying fines that most of them can ill afford. The OFT's case is that, whether the schools were aware of the law or not, sharing of information resulted in parents paying higher fees. The schools have to demonstrate that this assertion is ill-founded.
To my knowledge, independent schools have been sharing information about proposed fee increases for at least 30 years. The original motivation was acute anxiety that, at a time of high inflation, the schools - particularly the boarding schools - would price themselves out of the market. Discussions at governing body meetings were always about how to keep fee increases to a minimum. Even the most prestigious schools feared going out of business. Michael McCrum, the headmaster of Eton, argued in 1976 that if boarding fees reached £3,000 a year, "it seems unlikely that English parents would be able to keep their sons at Eton or, indeed, at any other independent school."
Thirty years on, boarding fees are well over £20,000 a year and independent schools are flourishing. What the OFT seems to be suggesting is that in this more favourable climate, the motive for sharing information is no longer to keep fee increases to a minimum but to calculate what increases the schools can get away with.
It must be said in the schools' defence that when it comes to setting fees they have little room to manoeuvre. Between two-thirds and three-quarters of their budget goes on teachers' salaries, pensions and national insurance contributions. To that extent, the fees are set for them and the scope for charging higher fees than are required to run the school is limited. There are two ways, however, in which this might have occurred.
First, schools that had not budgeted for a surplus might have been encouraged to do so by the example of others. It is not illegal for a charity to make a surplus to fund future building projects, but if current parents knew what was happening, they might object to paying over the odds for facilities their own children would never enjoy.
Second, exchanging information might have tempted the less prestigious schools to set their fees higher than necessary because they knew they would still be less expensive than the famous names. I have no evidence that either of these things occurred, but the independent schools will have to convince the OFT that exchanging information did not encourage some schools to be greedy.
Whatever the OFT decides, the independent schools have been taught a lesson. They make a virtue of competition so it is time they really did compete with one another on the question of fees. With cheaper independent schools coming on stream, the established schools will have to ask themselves difficult questions about items in their budget, especially the provision for making a surplus. And if they don't ask, the parents will because the OFT's investigation will encourage parents to find out exactly what they are paying for. Isn't that what the OFT is for?
The writer was headmaster of Westminster School (1970 to 1986) and is a former chairman of the Headmasters' ConferenceReuse content