Are private schools pricing themselves out of reach?
Last month Halifax reported that private school fees had risen at three times the rate of inflation over the last twenty years. Halifax pointed out that while average earnings increased in real terms by 43% over the period, private school fees have gone up by 129%. This equates to a rise from £1806 in 1985 to £8388 in 2005 and the news is even worse for parents paying boarding fees.
These findings must worry the Independent Schools Council who supplied the figures to Halifax, because they show that not only have fee increases been disproportionate they also give ammunition to those pressuring the government to remove charitable status (and tax breaks) enjoyed by many schools. Equally galling to parents is that education activists have successfully lobbied the Office of Fair Trading to investigate private schools for price fixing, with the aim of damaging the sector rather than improving it.
In a market with weak price competition, the arrival of new entrants like GEMS and Cognita may shake up this moribund aspect of what is overall a booming market. With enrolments growing at twice the rate of the government sector, very few parents are able to fund their children’s private education from their current income. While this is not a new situation there is now a booming market for financial institutions who are moving beyond offering traditional investments and are now encouraging parents to consider alternatives such as home equity release schemes, higher-risk stock market and derivative investments and even encouraging grandparents to set up trusts and inheritance tax portfolios to help pay fees.