Scholarships on need, or merit?

A revolution is under way in the award of scholarships and bursaries by private schools. Dick Davison reports

Wycliffe's scholarship is unusual, certainly, but the practice of giving scholarships is widespread among independent schools. Originally, this was normally a matter of honouring the provisions of a founder's or a benefactor's bequest. In the 19th century, partly to eliminate abuse, the custom grew of awarding scholarships on the basis of competitive tests. Until very recently, most assistance disbursed by independent schools went in this way.

Most scholarships are academic, with a smaller but substantial number being awarded for music. And a browse through the pages of "The Independent Schools Yearbook" (A&C Black), where schools list their scholarships, discloses awards for maths, drama, art, technology and sport.

Some are surprisingly specific: Loretto School in Scotland, for example, has scholarships for promising golfers. Many offer "all-rounder" awards: a good example is the award Sherborne School has named after one of its best known old boys, the actor Jeremy Irons, "for outstanding ability in one or more activity outside the classroom".

But a quiet revolution is taking place in the way schools disburse the limited funds they have available for discounted fees. Increasingly, the emphasis is shifting from the attraction of talented recruits to the widening of access on the basis of financial need.

Two factors have combined to propel this change. One is the increasing unease felt by many heads and governing bodies about the destination of their generosity. How could they justify giving generous discounts to families who could well afford the full sum, simply because they have a clever son or daughter?

Dr Tim Hands, headmaster of Portsmouth Grammar School, puts it forcefully. Noting that no one laments the passing of Oxbridge scholarships, he adds: "The idea that independent schools devote substantial funds to scholarships based on ability rather than to bursaries based on need is morally debatable and politically inept."

One striking response has come from Rugby School. It greatly reduced the maximum value of its scholarships to 10 per cent of fees (from 50 per cent maximum) to focus resources on families who genuinely need assistance. Using foundation resources, the school now offers boarding places to children who will benefit from the experience, whatever their family means. The head, Patrick Derham, says: "I am determined that we shall build on this and significantly increase the number of children who come to us in this way."

Harrow decided some years ago to reduce the maximum value of its scholarships. The maximum automatic value is now 30 per cent of fees, which can be topped up - as at Rugby - if family means, reviewed annually, justify it. Together with energetic fundraising that has increased the resources available by 50 per cent in five years, this allows the school to offer much more targeted assistance.

According to the Independent Schools Council (ISC), schools' response to this change of attitude is significant. In 1991, schools devoted on average just over 4 per cent of turnover to fee assistance; last year, this had risen to more than 7 per cent. The ISC's 2005 census showed that almost a quarter of all pupils - a record number - were receiving some form of fee assistance.

There is no denying, too, that the issue has been given urgency for those schools - the vast majority - which are also charities. Many are still trying to replace from their own resources the opportunities provided by the assisted places scheme, abolished by Labour in 1997. They now face a major change in charity law.

The Charities Bill, now before Parliament, will require all charities to demonstrate their public benefit. Consultation on implementation will follow the passage of the Bill into law, so it will be 2007 at least before schools face a regime change. But the ISC is already strongly advising its member schools to conduct public-benefit audits before then. It has told them that, though many factors - like the sharing of facilities and savings to the public purse - may be taken into account, the degree to which charitable schools try to extend their benefits to those who cannot afford to pay full fees will be a key principle.

So bursaries - means-tested fee concessions - assume critical importance. It is hard to pin down the overall balance between scholarships (non-means-tested) and bursaries (means-tested), but the best estimate is that resources are about equally divided between the two. It is clear which way the trend will be, especially when the Charity Commission starts to exercise its new powers.

But there's a snag. The two-year investigation by the Office of Fair Trading (OFT), still not concluded, into alleged fee-fixing has placed schools in a dilemma. Jonathan Cook, the general secretary of the Independent Schools Bursars' Association, puts it bluntly: "Schools desperately want to help social mobility and the disadvantaged, and many of them are thinking those issues through. But they are also competing in a cut-throat marketplace, and the offer of scholarships is part of that.

"If we could all agree that you give a handsome book, a pink tie and the honour of being called a scholar, that would be splendid. But they can't because the OFT says that such an agreement would be anticompetitive."

Schools, he says, are therefore reduced to making their own independent decisions in the knowledge that their competitors are still offering scholarships, trying to guess what changes they can make without placing themselves at a critical disadvantage. "Schools which are more confident of their place in the market are able to make significant changes, but it is very difficult for the majority of schools who have to compete for every pupil against the background of a declining birthrate."

The situation is made worse by the fact that the OFT declines to enter into dialogue with the schools, Cook says. The effects of this look likely to continue well into 2006, with the OFT's decisions being repeatedly delayed. They are not now expected before the late autumn.

With independent schools thus subject to incompatible demands from different agencies of government, it may be some time before the ideals of a donor to Rugby's Arnold Foundation are more widely realised. "It's a two-way street," Cook says. "Not just charity, but an objective that helps the school to move forward in the 21st century and helps to bring the benefits of an excellent education to a wider community."