Examination of Witnesses (Questions 520
- 539)
WEDNESDAY 30 JUNE 2004
DR MARTIN
STEPHEN, DR
ANTHONY SELDON,
SIR EWAN
HARPER, MR
JONATHAN SHEPHARD
AND MR
JACK JONES
Q520 Lord Campbell-Savours: Has there
been a real benefit to you from doing this?
Mr Jones: I believe that the composition
of our board of trustees today has benefited from our ability
to pay a modest remuneration, yes.
Q521 Lord Campbell-Savours: How?
Mr Jones: By attracting people
who have a better understanding of the commercial world in which
we are doing business.
Q522 Chairman: That is primarily
because you see yourself as a business rather than a charity,
is it?
Mr Jones: We see ourselves as
a business that is delivering a service in an increasingly competitive
market.
Q523 Chairman: In essence your argument
is that you require trustees with the professional ability to
help run what is a £400 million business.
Mr Jones: That is correct.
Q524 Bob Russell: Hospital trusts
pay members of their board, so I think there is a similarity there.
Chairman, we are the Joint Committee on the Draft Charities Bill
and while it has been a fascinating debate so far this morning
and I do recognise the financial complexities of education, the
fact that any VAT should be paid by any educational establishment,
wherever they are, is a nonsense. Sixth Form colleges, which are
publicly funded, have to pay VAT which I think is a nonsense.
I am still trying to grapple with what is it that is so vital
for either the private hospitals or not-for-profit schools that
you need to have charitable status? If charitable status was removed
tomorrow what practical difference would it make other than you
would not have it stated on your notepaper that you were a registered
charity? Every week in my town there are flag days for charities.
I have yet to see a flag day for any of the schools. Why is it
necessary for private schools to be charities when the perception
in the public's mind of charities is not private schools?
Mr Shephard: The main effect of
charitable status is to widen access. It provides us with some
money to widen access, it also provides us with a social purpose
to widen access to people who cannot afford the fees and it is
the final and conclusive answer to those parents who say, "Why
should my fees be used to subsidise other children who cannot
pay," the answer is because it is our job. That is the key
thing.
Dr Stephen: I support everything
that Jonathan said. The other thing I would say is that there
is a very interesting contrast between the culture in the UK and
the culture in the United States. The culture in the United States
is very much that not very well off people will at some stage
in their life contribute towards education. This is not merely
independent schools, it is high schools, universities. We do not
have that culture here. I believe the independent sector, among
many other things, is leading a movement to recreate the culture
of giving to education in the UK, which is highly ironical because
we had it for 300 years and we lost it when the Industrial Revolution
gave us sufficient money to pay for education out of the state
income. Our tradition in Manchester is that all these schools
were founded by private and charitable giving. The amount of private
donations to education in the United States is phenomenally important.
I believe the independent sector is leading the way in recreating
the culture whereby normal people see giving to education as a
charity as important.
Q525 Bob Russell: I can understand
that when the state did not provide education the independent
sector was there, the Church sector, but the state brought in
the Education Act in the 1880s and thus funded education for all,
so why, 120 or 125 years later, do we need to have charitable
status for those schools that were around at that time?
Dr Stephen: Because these schools
are still providing a wonderful education and charitable status
is a huge help to them in doing it.
Dr Seldon: We talk about a free
education system in Britain. There is no free education system
in Britain, it is a myth. The middle classes pay for their education
either by fees, mostly at schools like mine which are indistinguishable
in social make up from grammar schools and elite comprehensives,
or they pay by going to those schools through their house prices,
through tuition etc. We no longer have a free education system
in this country for the middle classes, that is a myth.
Q526 Bob Russell: Chairman, I recognise
that point, but I still come back to my basic question which is
why should it be necessary for any educational establishment to
have the title of charity against its name when perhaps there
are other ways of rearranging the taxation system so that the
perceived public benefit can be taken account of and leave charities
to what the public perceive to be charities? It is not, with respect,
the private education sector.
Dr Stephen: Can there be any greater
good for the public good than education and health?
Dr Seldon: Because I think that
it would help sift out the sheep from the goats. The great majority
are the sheep. The schools which are operating on very tight margins,
with a very broad social intake, giving bursaries away, up to
50%, are extremely dependant on support and top-up fees for their
children. Those schools which I think are socially elitist, which
no longer have any place in a one nation system, I think should
be brought under the spotlight because they are, in the public's
mind, what public schools and independent schools are all about.
They represent 3 or 5%, prep schools and public schools. They
are responsible for this damning or blackening of the image of
what the independent sector actually does for the social cohesion
of this country.
Q527 Chairman: Dr Seldon, so your
argument is that what you describe as the elitist institutions
are not deserving of charitable status?
Dr Seldon: Yes, I do. I think
they are not innovative. I am not going to mention any names.
Q528 Chairman: Go on!
Dr Seldon: No. If you take our
great names amongst our prep schools and amongst our senior schools
from whom much is given, very rich endowments, very rich parent
bodies, I think much more should be expected in terms of innovation,
making real contributions to the national education debate and
they singly have failed to make that contribution and I think
there should be much more by way of giving because otherwise they
are damaging the whole image of what the independent sector is
all about in this country. I would not expect the ISC to make
that point but I can make that point.
Q529 Chairman: You go further in
your IPPR pamphlet and I do not know whether you wish to argue
this case today, you may have changed your mind, but you argue
that in fact charitable status should be made conditional more
generally for independent schools on participation in partnership
activities specifically with the state sector. Is that still your
view?
Dr Seldon: I think that we are
one country. I think that the perpetuation of a socially divisive
education system is not conducive to social integration, but I
would also say that our grammar schools and our socially elitist
comprehensives often have parents who are far more affluent than
in many single sex day schools for girls, eg the girls' day school
trusts and other schools wth low fees, low margins, a very broad
intake of parents. We have to distinguish. My general point, Chairman,
is that to those schools to whom much is given much should be
expected and we should break up this monolithic vision. Yes, I
would be prepared to say that certain schools which are very richly
endowed, who have very affluent parents who can pay the full fees,
should be doing the most because they are the kinds of people
whose children go on to elitist universities, go on to elitist
jobs and I think that in 2004 that is wholly inappropriate.
Q530 Mr Foulkes: I wanted to follow
up an earlier line of questioning about paying trustees to run
multi-million pound organisations, namely the Nuffield Hospitals.
The public might be mystified as to why private schools are charities,
but I think they would be astonished to know that the Nuffield
Hospitals group is a charity. How come historically Nuffield is
a charity but BUPA is not and the BMI hospitals, the general health
care group, are not charities and they are your direct competitors?
Mr Jones: I think the simple answer
to that is they chose not to elect to be registered as charities
when they were formed. In the case of BUPA, they chose to be a
registered provident association and in the case of BMI, they
chose to be a venture capital backed organisation with a group
of equity shareholders who were looking to make profits out of
health care.
Q531 Mr Foulkes: Either an industrial
and provident society or a company, is that not a more appropriate
vehicle for running private hospitals than to set up as a charity
and take advantage of current provision which enables you to be
a charity?
Mr Jones: I do not believe it
is a current loophole. We have been a charity for approaching
50 years. It is not a current loophole that we used to become
a charity. As a provident association they do enjoy certain tax
benefits. We believe that the public feels more comfortable in
purchasing health care services from a not-for-profit company.
I will do further research to determine whether there are alternative
legal forms that we could employ that would allow us to operate
in a not-for-profit environment without being a charity.
Q532 Mr Foulkes: So if charitable
status was withdrawn from you it would not create a huge problem
then, would it?
Mr Jones: In the short term it
would mean that we would have to revisit our capital development
programme, the range of services we provide, the level of prices
that we charge and make adjustments for the fact that we were
no longer enjoying the taxation benefits of charitable status.
I am committed to trying to develop an organisation that provides
health care on a not-for-profit basis.
Q533 Mr Foulkes: But you have the
same charges as the BMI hospitals or BUPA hospitals and you have
highly paid executives as well, do you not?
Mr Jones: I have not got a clue
what BMI or BUPA charge for their services.
Q534 Chairman: That is absolutely
surprising as it is the finance director of your major competitor.
Mr Jones: It is not information
which is in the public domain and you can be confident that I
do not discuss our prices with them.
Q535 Mr Foulkes: I am sure there
are ways of finding out. On the question of highly paid executives,
what does David Mobbs, your Chief Executive, get paid per annum?
Mr Jones: Am I obliged to answer
that? I think that is personal information. It is not information
that I should have to put into the public domain.
Mr Foulkes: You are a charity and you
are getting public benefit.
Q536 Mr Mitchell: Is it published
in your annual accounts?
Mr Jones: It is published in the
Annual Report and Accounts. If my memory serves me correctly,
he is paid just over £200,000 per annum. It is an organisation
with £400 million turnover and 8,000 employees and it is
providing services to several million people a year.
Q537 Mr Foulkes: And receiving substantial
tax breaks because of the charitable status.
Mr Jones: Mr Mobbs does not, no.
Chairman: It sounds as though he does
not need to.
Mr Foulkes: I am sure he will be enjoying
his holiday wherever he is. I doubt if it is on the Clyde coast.
Q538 Chairman: Not that there is
anything wrong with the Clyde coast.
Mr Jones: I cannot deny that we
do enjoy the benefits of charitable status. We believe that we
have used those benefits wisely over the last 50 years. We have
made investments into communities that a pure for profit provider
of health care services might not have made.
Q539 Mr Foulkes: As my colleague
Bob Russell said, charitable status is principally designed for
voluntary organisations raising money from the public for good
causes. Do you not think it is strange that a multi-million pound
private health care organisation has charitable status? Does that
not suddenly create some question mark in your mind?
Mr Jones: I think there are clearly
issues about the public's perception of what is a charity. I believe
that we have used our charitable status wisely and I do not have
a problem with it.
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