Office of Fair Trading Investigation Into Charitable Independent Schools

The Office of Fair Trading (OFT) has been investigating the exchange of financial information by charitable, independent schools including our own school. The OFT has issued Statements of Objections to about fifty schools, including Woldingham, indicating that they believe that there has been a breach of competition law.  

As you can imagine, we are extremely disappointed by this announcement and we strongly refute the OFT’s implication that the sharing of information led to higher fees. We would reiterate that our intention is, and has always been, to keep fee increases to a minimum whilst providing a first class, all round education.  As a charity we have no motive to raise more funds than are necessary for the school’s running and development.

We are co-operating fully with the OFT and are preparing a detailed response.

Please view below a copy of the Independent School’s Council Press Release, released on 9th November.

ISC Press Release 9 November 2005

OFT investigation a “scandalous waste of public money”
Will charity shops and care homes be next?

The Office of Fair Trading has informed fifty charitable independent schools that it intends to fine them for exchanging financial information. The schools have until March 2006 to respond, and the whole process is likely to take another year from now, at which stage it will have lasted for three and a half years, at massive public expense.

Exchange of information is commonplace among charities. Until March 2000, schools were specifically exempted from competition law and were freely able to exchange any information without restriction. This exemption was silently removed - without debate (or even any mention) in Parliament - and without any consultation with schools or their representatives. Schools continued to exchange information in ignorance that the law had changed.

Commenting on the OFT’s actions, Jonathan Shephard, ISC General Secretary, said:

“This is a Kafkaesque situation. The law seems to have changed without Parliament realising - and without the independent sector being consulted - contrary to the Government’s own strict guidelines on consultation. Schools are now being held liable for breaking a law which no-one knew applied to them. The moment that schools realised that the law had changed they immediately stopped exchanging information. This was done before the OFT launched its investigation, and was quickly backed up by a Code of Practice agreed with the OFT.

“The OFT’s broad assertion that sharing information produced higher fees is highly contentious. Fees in the independent sector rise in line with costs in the maintained sector, for the obvious reason that most of the costs are staff salaries and pensions. Schools - along with care homes and other charities - are concerned to keep their fees as low as practicable. Sharing information is an effective - though no longer legal - way of doing just that.

“The OFT has so far spent two and a half years and hundreds of thousands of pounds on this investigation. It is a scandalous waste of public money. The OFT needs a result for the sake of its own credibility. We note that fines go into the Consolidated Fund, which pays money to the OFT for its operating expenses.

“The OFT has failed to understand that charities have no motive for raising more money than is needed for charitable activities. All surpluses stay within the charity and must be used for charitable purposes. There is no possibility of any personal gain. The fines which the OFT intends to impose will diminish charitable assets, or force charities to raise charges - damaging the very people whom the OFT is supposed to protect. The arguments against fines are very strong, and will be made robustly as the process continues.                                                                                                                    

“The attack by the OFT on the charitable sector is something that should worry all charities. The OFT appears to have no understanding of the charitable ethos of sharing information. We have no doubt that exchange of information among charities in non-educational sectors still continues - and these are sectors which have never had an exemption from competition law. Will charity shops and care homes be next?”