Why Scotland's private schools face high-profile mergers as tax hikes squeeze finances

The proximity of five railway stations only a ten-minute ride from Central Station, desirable Victorian flats and a lovely big park – not to mention some good bars and restaurants – now mean the offers-over estimates bear little relationship to the eventual purchase price. Fifty per cent above the advertised price for flats is commonplace.

So good news this week, for property developers anyway, that a significant historic building in the heart of the area and ripe for conversion into flats will soon be available. If the old Boroughmuir High School in Edinburgh is anything to go by, Hutchesons’ Grammar School’s governors can name their price for Kingarth Street, the Edwardian home of Hutchesons’ Girls School until the boys, including me, started arriving in 1974 as the two Hutchesons’ schools went co-ed.

Since then, it has housed the primary school, which will flit in 2027 to the school’s new-ish premises in Pollok Park, until 2020 the sports ground for the now defunct Craigholme girls’ school and a short walk along Titwood Road to Hutchie’s main Beaton Road campus.

Want the latest Scottish headlines sent directly to your phone? Sign up to our new WhatsApp Channel here.

Bad economics

Plans to sell Kingarth Street pre-date Labour’s ongoing financial assault on independent schools, but this year’s imposition of VAT on fees has forced all private schools to look at ‘sweating the assets’ to keep fee increases to a minimum. On top of the unexpected hike in employers’ National Insurance, as well as the withdrawal of charitable business rates relief by the SNP five years ago, it’s a tall order.

Crucially, analysis of the latest figures from the Scottish Independent Schools Council (SCIS) shows the numbers of pupils entering P1 are 13.3 per cent down on 2023, and S1 entrants are 14.6 per cent lower.

If calculations by the Biggar Economics consultancy are correct, anything over a 13 per cent fall will cost the Scottish Government money to educate children in state schools who would otherwise have gone private. Ironically, the declining Scottish birthrate may come to the rescue, and the influx keeps state school rolls relatively static. Edinburgh Council is certainly relying on fewer births relieving pressure on its most popular secondaries like James Gillespie’s and Boroughmuir.

The VAT effect

The new figures also expose the nonsense at the heart of UK Education Secretary Bridget Phillipson’s argument that VAT on fees would make little difference to private school rolls because numbers hadn’t been badly affected by recent fee increases.

From a high point in 2018 (the same year Hutchesons’ expanded nursery provision at Kingarth Street to meet demand) when there were 29,495 privately educated pupils in Scotland, there are now 25,919, a drop of just over 12 per cent. But ten per cent was in the last two years, a significant acceleration since it became clear VAT would be an immediate priority for an incoming Labour government.

If the big decline in entry numbers is sustained, as seems highly likely with more tax rises on the way in this month’s Budget, Ms Phillipson can kiss goodbye to the £1.5 billion she said VAT would raise for state education in this financial year.

Some famous names may disappear

These are unquestionably miserable times for private schools and when I was over at Braidholm on Saturday, where GHA hosted Watsonians in the Arnold Clark Scottish Rugby Premiership, there was no shortage of discussion about their future.

GHA, or Glasgow Hutchesons’ Aloysians to give the club its full title, is an amalgamation of two former pupil clubs and the old Glasgow Southern outfit, and in a deteriorating financial landscape the talk was about more famous names disappearing if consolidation is the only means of avoiding insolvency in a shrinking sector, as vulnerable to falling births as state schools.

There’s nothing new in mergers. Hutchesons’ swallowed both Craigholme and, controversially, Laurel Park, itself an amalgamation of Laurel Bank and Park School, while Glasgow Academy absorbed the Westbourne girls’ school. St George’s is Edinburgh’s last private all-girls school, since Mary Erskine fully combined with Stewart’s Melville, but an amalgamation with Edinburgh Academy has been tipped by many observers as inevitable.

Hopes for St George’s fortunes will be pinned on the recent sale of its old Lansdowne House “lower school” in Coltbridge to a care home company, with the proceeds used to upgrade the Ravelston campus across the road, much like Hutchie’s disposal of Kingarth Street will fund improvements at Beaton Road.

Kelvinside High School?

Most controversial of all would be a deal between Kelvinside and the High School of Glasgow, and as Aberdeen’s economy fights against both the UK and Scottish Government’s aversion to oil and gas, is Albyn, St Margaret’s and Robert Gordon’s one private school too many for the Granite City?

The Scottish Council for Independent Schools dismisses such rumours as parents’ gossip, but without the disposal of assets, the continued decline in pupil numbers means developing new income streams is the only way to remain competitive, such as George Watson’s plans to increase hire charges for all its facilities.

Many of the big English schools are doing so by establishing “brand extensions” in the Far East and the Gulf, but one insider I spoke to last week described many for-profit overseas outposts set up specifically as cash cows for the parent institution as a rip-off.

Were it not for gift aid on donations, more might question the value of charitable status now business rates relief has gone, especially if it locks schools into increasingly unaffordable bursary places. But charity and excellence are core values and sacrificing both really would be the death knell.