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Externalities and Taxes - What to do when the interests of the individual and society do not coincide?

 From The Economist

LOUD conversation in a train carriage that makes concentration impossible for fellow-passengers. A farmer spraying weedkiller that destroys his neighbour’s crop. Motorists whose idling cars spew fumes into the air, polluting the atmosphere for everyone. Such behaviour might be considered thoughtless, anti-social or even immoral. For economists these spillovers are a problem to be solved.

Markets are supposed to organise activity in a way that leaves everyone better off. But the interests of those directly involved, and of wider society, do not always coincide. Left to their own devices, boors may ignore travellers’ desire for peace and quiet; farmers the impact of weedkiller on the crops of others; motorists the effect of their emissions. In all of these cases, the active parties are doing well, but bystanders are not. Market prices—of rail tickets, weedkiller or petrol—do not take these wider costs, or “externalities”, into account.

The examples so far are the negative sort of externality. Others are positive. Melodious music could improve everyone’s commute, for example; a new road may benefit communities by more than a private investor would take into account. Still others are more properly known as “internalities”. These are the overlooked costs people inflict on their future selves, such as when they smoke, or scoff so many sugary snacks that their health suffers.

The first to lay out the idea of externalities was Alfred Marshall, a British economist. But it was one of his students at Cambridge University who became famous for his work on the problem. Born in 1877 on the Isle of Wight, Arthur Pigou cut a scruffy figure on campus. He was uncomfortable with strangers, but intellectually brilliant. Marshall championed him and with the older man’s support, Pigou succeeded him to become head of the economics faculty when he was just 30 years old.

In 1920 Pigou published “The Economics of Welfare”, a dense book that outlined his vision of economics as a toolkit for improving the lives of the poor. Externalities, where “self-interest will not…tend to make the national dividend a maximum”, were central to his theme.

Although Pigou sprinkled his analysis with examples that would have appealed to posh students, such as his concern for those whose land might be overrun by rabbits from a neighbouring field, others reflected graver problems. He claimed that chimney smoke in London meant that there was only 12% as much sunlight as was astronomically possible. Such pollution imposed huge “uncharged” costs on communities, in the form of dirty clothes and vegetables, and the need for expensive artificial light. If markets worked properly, people would invest more in smoke-prevention devices, he thought.

Pigou was open to different ways of tackling externalities. Some things should be regulated—he scoffed at the idea that the invisible hand could guide property speculators towards creating a well-planned town. Other activities ought simply to be banned. No amount of “deceptive activity”—adulterating food, for example—could generate economic benefits, he reckoned.

But he saw the most obvious forms of intervention as “bounties and taxes”. These measures would use prices to restore market perfection and avoid strangling people with red tape. Seeing that producers and sellers of “intoxicants” did not have to pay for the prisons and policemen associated with the rowdiness they caused, for example, he recommended a tax on booze. Pricier kegs should deter some drinkers; the others will pay towards the social costs they inflict.

This type of intervention is now known as a Pigouvian tax. The idea is not just ubiquitous in economics courses; it is also a favourite of policymakers. The world is littered with apparently externality-busting taxes. The French government imposes a noise tax on aircraft at its nine busiest airports. Levies on drivers to counterbalance the externalities of congestion and pollution are common in the Western world. Taxes to fix internalities, like those on tobacco, are pervasive, too. Britain will join other governments in imposing a levy on unhealthy sugary drinks starting next year.

Pigouvian taxes are also a big part of the policy debate over global warming. Finland and Denmark have had a carbon tax since the early 1990s; British Columbia, a Canadian province, since 2008; and Chile and Mexico since 2014. By using prices as signals, a tax should encourage people and companies to lower their carbon emissions more efficiently than a regulator could by diktat. If everyone faces the same tax, those who find it easiest to lower their emissions ought to lower them the most.

Such measures do change behaviour. A tax on plastic bags in Ireland, for example, cut their use by over 90% (with some unfortunate side-effects of its own, as thefts of baskets and trolleys rose). Three years after a charge was introduced on driving in central London, congestion inside the zone had fallen by a quarter. British Columbia’s carbon tax reduced fuel consumption and greenhouse-gas emissions by an estimated 5-15%. And experience with tobacco taxes suggests that they discourage smoking, as long as they are high and smuggled substitutes are hard to find.

Champions of Pigouvian taxes say that they generate a “double dividend”. As well as creating social benefits by pricing in harm, they raise revenues that can be used to lower taxes elsewhere. The Finnish carbon tax was part of a move away from taxes on labour, for example; if taxes must discourage something, better that it be pollution than work. In Denmark the tax partly funds pension contributions.

Pigou flies

Even as policymakers have embraced Pigou’s idea, however, its flaws, both theoretical and practical, have been scrutinised. Economists have picked holes in the theory. One major objection is the incompleteness of the framework, since it holds everything else in the economy fixed. The impact of a Pigouvian tax will depend on the level of competition in the market it is affecting, for example. If a monopoly is already using its power to reduce supply of its products, a new tax may not do any extra good. And if a dominant drinks firm absorbs the cost of an alcohol tax rather than passes it on, then it may not influence the rowdy. (A similar criticism applies to the idea of the double dividend: taxes on labour could cause people to work less than they otherwise might, but if an environmental tax raises the cost of things people spend their income on it might also have the effect of deterring work.)

Another assault on Pigou’s idea came from Ronald Coase, an economist at the University of Chicago (whose theory of the firm was the subject of the first brief in this series). Coase considered externalities as a problem of ill-defined property rights. If it were feasible to assign such rights properly, people could be left to bargain their way to a good solution without the need for a heavy-handed tax. Coase used the example of a confectioner, disturbing a quiet doctor working next door with his noisy machinery. Solving the conflict with a tax would make less sense than the two neighbours bargaining their way to a solution. The law could assign the right to be noisy to the sweet-maker, and if worthwhile, the doctor could pay him to be quiet.

In most cases, the sheer hassle of haggling would render this unrealistic, a problem that Coase was the first to admit. But his deeper point stands. Before charging in with a corrective tax, first think about which institutions and laws currently in place could fix things. Coase pointed out that laws against nuisance could help fix the problem of rabbits ravaging the land; quiet carriages today assign passengers to places according to their noise preferences.

Others reject Pigou’s approach on moral grounds. Michael Sandel, a political philosopher at Harvard University, has worried that relying on prices and markets to fix the world’s problems can end up legitimising bad behaviour. When in 1998 one school in Haifa tried to encourage parents to pick their children up on time by fining them, tardy pickups increased. It turned out that parental guilt was a more effective deterrent than cash; making payments seems to have assuaged the guilt.

Besides these more theoretical qualms about Pigouvian taxes, policymakers encounter all manner of practical ones. Pigou himself admitted that his prescriptions were vague; in “The Economics of Welfare”, though he believed taxes on damaging industries could benefit society, he did not say which ones. Nor did he spell out in much detail how to set the level of the tax.

Prices in the real world are no help; their failure to incorporate social costs is the problem that needs to be solved. Getting people to reveal the precise cost to them of something like clogged roads is asking a lot. In areas like these, policymakers have had to settle on a mixture of pragmatism and public acceptability. London’s initial £5 ($8) fee for driving into its city centre was suspiciously round for a sum meant to reflect the social cost of a trip.

Inevitably, a desire to raise revenue also plays a role. It would be nice to believe that politicians set Pigouvian taxes merely in order to price in an externality, but the evidence, and common sense, suggests otherwise. Research may have guided the initial level of a British landfill tax, at £7 a tonne in 1996. But other considerations may have boosted it to £40 a tonne in 2009, and thence to £80 a tonne in 2014.

Things become even harder when it comes to divining the social cost of carbon emissions. Economists have diligently poked gigantic models of the global economy to calculate the relationship between temperature and GDP. But such exercises inevitably rely on heroic assumptions. And putting a dollar number on environmental Armageddon is an ethical question, as well as a technical one, relying as it does on such judgments as how to value unborn generations. The span of estimates of the economic loss to humanity from carbon emissions is unhelpfully wide as a result, ranging from around $30 to $400 a tonne.

It’s the politics, stupid

The question of where Pigouvian taxes fall is also tricky. A common gripe is that they are regressive, punishing poorer people, who, for example, smoke more and are less able to cope with rises in heating costs. An economist might shrug: the whole point is to raise the price for whoever is generating the externality. A politician cannot afford to be so hard-hearted. When Australia introduced a version of a carbon tax in 2012, more than half of the money ended up being given back to pensioners and poorer households to help with energy costs. The tax still sharpened incentives, the handouts softened the pain.

A tax is also hard to direct very precisely at the worst offenders. Binge-drinking accounts for 77% of the costs of excessive alcohol use, as measured by lost workplace productivity and extra health-care costs, for example, but less than a fifth of Americans report drinking to excess in any one month. Economists might like to charge someone’s 12th pint of beer at a higher rate than their first, but implementing that would be a nightmare.

Globalisation piles on complications. A domestic carbon tax could encourage people to switch towards imports, or hurt the competitiveness of companies’ exports, possibly even encouraging them to relocate. One solution would be to apply a tax on the carbon content of imports and refund the tax to companies on their exports, as the European Union is doing for cement. But this would be fiendishly complicated to implement across the economy. A global harmonised tax on carbon is the stuff of economists’ dreams, and set to remain so.

So, Pigou handed economists a problem and a solution, elegant in theory but tricky in practice. Politics and policymaking are both harder than the blackboard scribblings of theoreticians. He was sure, however, that the effort was worthwhile. Economics, he said, was an instrument “for the bettering of human life.”

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The Debate that Wasn't

There is no longer any justification for private schools in Britain

Labour is right to debate the future of these unjust institutions, which at last are no longer seen as untouchable writes Frances Ryan in The Guardian

 

Pupils at Harrow school, London: ‘Removing charitable status is rightly no longer seen as radical.’ Photograph: Alamy Stock Photo


A few years back, I finished a PhD on how to tackle Britain’s unequal life chances – which, among other measures, included abolishing private schools. Dusty academia seemed the home for this sort of proposal, one that has long filled endless papers but never quite makes it off the page and into reality.

That is no longer the case. In a few days, the Labour party will debate the future of private schools. The grassroots group Labour Against Private Schools (Laps) will bring a motion to the annual party conference in Brighton calling for the full integration of state and private schools, including nationalising the endowments of the hugely wealthy public schools. It has support from six constituency parties so far and the backing of senior party figures, with the shadow chancellor, John McDonnell, putting his weight behind the motion this week. A leaked memo to the Telegraph last week noted that the party is already considering making a manifesto pledge to remove tax breaks from the sector – while leaving the door open to getting rid of the schools altogether.

Removing charitable status is rightly no longer seen as radical. In 2017, that well-known lefty Michael Gove declared that private schools were “welfare junkies”, calling the VAT exemption “egregious state support to the already wealthy so that they might buy advantage for their own children”. The classic argument that private schools deserve tax breaks because they provide bursaries to poorer children is as thin as paper: in 2017, only 1% of private school pupils were schooled for free, while figures show “financial assistance” is considerably more likely to go to affluent middle-class families than children in need. 

It’s exciting, then, that the conversation is no longer restricted to this. For decades, private schools have held an untouchable air in this country. We know very well the damage they cause – both to the children whose education is harmed by losing advantaged peers and their influential parents, and to a society that is stifled by positions of power handed out on the basis of wealth rather than talent. We know how bizarre this set-up is – that 7% of schoolchildren will go on to control much of the media, the judiciary and parliament. And yet it is greeted with borderline rabid resistance by many commentators, while even those on the left have been reluctant to argue for comprehensive solutions. It typifies the worst of class privilege, where a small section of society is permitted to buy power and influence despite all the evidence of the damage that causes, and the rest of us must shrug our shoulders and accept this as an inevitability.

What feels different now is that these ideas are becoming mainstream at a tipping point in this country. Years of austerity have highlighted the resources gap between the highly funded private sector and the starved state sector. When many working-class children don’t have basic equipment in class, the dominance of elite schools feels even more obscene. The calamity of Eton alumni taking their turn at Downing Street, meanwhile, is now a real-time display of how dysfunctional a nation becomes when structured to be forever run by a tiny pocket of the wealthy.

The abolition of private schools is not an outlandish idea but rather an extension of what we already do. Societies constantly set limits on how far a parent can go in giving their child an advantage in life – that’s why it’s illegal for a mother to bribe a university admissions officer to give her son a place, and unethical for a father to do his daughter’s GCSE coursework. This is because it is widely understood that no matter how natural a parent’s desire to do the best for their child, it does not trump the good of society. Other countries, such as Finland, have already acted on this by slowly merging private and state schools.

When many working-class children don’t have basic equipment in class, the dominance of elite schools feels even more obscene

That the recent Telegraph front page had to rely on the retro “politics of envy” accusation to describe Labour’s ideas – akin to a playground cry of “You’re just jealous!” – shows how weak critics’ arguments are. In an era in which the damage of inequality is ever clearer and the movements to tackle it are growing stronger, those who cannot comprehend a desire to make life fairer for other people’s children sound increasingly out of touch.

It’s clear that tackling private schools alone is not enough to level the playing field, but that there are multiple causes of inequality doesn’t seem a good argument to ignore one of them.

The protection of a two-tier school system comes down to a fundamental question about what we think education should be. If we want the education system to be about giving every child a fair shot, then merging state and private schools is the logical move. The question is: what is really stopping our children being educated together?

Never mind ‘tax raids’, Labour – just abolish private education

As drivers of inequality, private schools are at the heart of Britain’s problems. Labour must be bold and radical on this writes Owen Jones in The Guardian

 

Labour leader Jeremy Corbyn at the TUC Congress in Brighton. Photograph: Ben Stansall/AFP/Getty Images


The British class system is an organised racket. It concentrates wealth and power in the hands of the few, while 14 million Britons languish in poverty.

If you are dim but have rich parents, a life of comfort, affluence and power is almost inevitable – while the bright but poor are systematically robbed of their potential. The well-to-do are all but guaranteed places at the top table of the media, law, politics, medicine, military, civil service and arts. As inequality grows, so too does the stranglehold of the rich over democracy. The wealthiest 1,000 can double their fortunes in the aftermath of financial calamity, while workers suffer the worst squeeze in wages since the Napoleonic wars. State support is lavished on rich vested interests – such as the banks responsible for Britain’s economic turmoil – but stripped from disabled and low-paid people. The powerful have less stressful lives, and the prosperous are healthier, expecting to live a decade longer than those living in the most deprived areas.

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Unless this rotten system is abolished, Britain will never be free of social and political turmoil. It is therefore welcome – overdue, in fact – to read the Daily Telegraph’s horrified front-page story: “Corbyn tax raid on private schools”.

The segregation of children by the bank balances of their parents is integral to the class system, and the Labour Against Private Schools group has been leading an energetic campaign to shift the party’s position. The party is looking at scrapping the tax subsidies enjoyed by private education, which are de facto public subsidies for class privilege: moves such as ending VAT exemptions for school fees, as well as making private schools pay the rates other businesses are expected to. If the class system has an unofficial motto, it is “one rule for us, and one rule for everybody else”. Private schools encapsulate that, and forcing these gilded institutions to stand on their own two feet should be a bare minimum.

More radically, Labour is debating whether to commit to abolishing private education. This is exactly what the party should do, even if it is via the “slow and painless euthanasia” advocated by Robert Verkaik, the author of Posh Boys: How English Public Schools Ruin Britain. Compelling private schools to apply by the same VAT and business rate rules as others will starve them of funds, forcing many of them out of business.

Private education is, in part, a con: past OECD research has suggested that there is not “much of a performance difference” between state and private schools when socio-economic background is factored in. In other words, children from richer backgrounds – because the odds are stacked in their favour from their very conception – tend to do well, whichever school they’re sent to. However unpalatable it is for some to hear it, many well-to-do parents send their offspring to private schools because they fear them mixing with the children of the poor. Private schools do confer other advantages, of course: whether it be networks, or a sense of confidence that can shade into a poisonous sense of social superiority.

Mixing together is good for children from different backgrounds: the evidence suggests that the “cultural capital” of pupils with more privileged, university-educated parents rubs off on poorer peers without their own academic progress suffering. Such mixing creates more well-rounded human beings, breaking down social barriers. If sharp-elbowed parents are no longer able to buy themselves out of state education, they are incentivised to improve their local schools. 

Look at Finland: it has almost no private or grammar schools, and instead provides a high-quality local state school for every pupil, and its education system is among the best performing on Earth. It shows why Labour should be more radical still: not least committing to abolishing grammar schools, which take in far fewer pupils who are eligible for free school meals.

Other radical measures are necessary too. Poverty damages the educational potential of children, whether through stress or poor diet, while overcrowded, poor-quality housing has the same impact too. Gaps in vocabulary open up an early age, underlining the need for early intervention. The educational expert Melissa Benn recommends that, rather than emulating the often narrow curriculums of private schools, there should be a move by state schools away from exam results: a wrap-around qualification could include a personal project, community work and a broader array of subjects.

In the coming election, Labour has to be more radical and ambitious than it was 2017. At the very core of its new manifesto must be a determination to overcome a class system that is a ceaseless engine of misery, insecurity and injustice.

Britain is a playground for the rich, but this is not a fact of life – and a commitment to ending private education will send a strong message that time has finally been called on a rotten class system.

Who owns the country? The secretive companies hoarding England's land

Multi-million pound corporations with complex structures have purchased the very ground we walk on – and we are only just beginning to discover the damage it is doing to Britain. By Guy Shrubsole in The Guardian 


Despite owning 15,000 hectares (37,000 acres) of land, managing a property portfolio worth £2.3bn and having control over huge swaths of central Manchester and Liverpool, very few people have heard of a company named Peel Holdings. It owns the Manchester Ship Canal. It built the Trafford Centre shopping complex and, more recently, sold it in the largest single property acquisition in Britain’s history. It was the developer behind the MediaCityUK site in Salford, to which the BBC and ITV have relocated many of their operations in recent years. Airports, fracking, retail – the list of Peel business interests stretches on and on.

Peel Holdings operates behind the scenes, quietly acquiring land and real estate, cutting billion-pound deals and influencing numerous planning decisions. Its investment decisions have had an enormous impact, whether for good or ill, on the places where millions of people live and work.

Peel’s ultimate owner, the billionaire John Whittaker, is notoriously publicity-shy: he lives on the Isle of Man, has never given an interview and helicopters into his company’s offices for board meetings. He built Peel Holdings in the 1970s and 80s by buying up a series of companies whose fortunes had decayed, but which still controlled valuable land. Foremost among these was the Manchester Ship Canal Company, purchased in 1987. The canal turned out to be valuable not simply as a freight route, but also because of the redevelopment potential of the land that flanked it.

Half of England is owned by less than 1% of the population



Peel Holdings tends not to show its hand in public. Like many companies, it prefers its forays into public political debate to be conducted via intermediary bodies and corporate coalitions. In 2008, it emerged that Peel was a dominant force behind a business grouping that had formed to lobby against Manchester’s proposed congestion charge. The charge was aimed at cutting traffic and reducing the toxic car fumes choking the city. But Peel, as owners of the out-of-town Trafford Centre shopping mall, feared that a congestion charge would be bad for business, discouraging shoppers from driving through central Manchester to reach the mall. Peel’s lobbying paid off: voters rejected the charge in the local referendum and the proposal was dropped.

Throughout England, cash-strapped councils are being outgunned by corporate developers pressing to get their way. The situation is exacerbated by a system that has allowed companies like Peel to keep their corporate structures obscure and their landholdings hidden. A 2013 report by Liverpool-based thinktank Ex Urbe found “well in excess of 300 separately registered UK companies owned or controlled” by Peel. Tracing the conglomerate’s structure is an investigator’s nightmare. Try it yourself on the Companies House website: type in “Peel Land and Property Investments PLC”, and then click through to persons with significant control. This gives you the name of its parent company, Peel Investments Holdings Ltd. So far, so good. But then repeat the steps for the parent company, and yet another holding company emerges; then another, and another. It’s like a series of Russian dolls, one nested inside another.

Until recently, it was even harder to get a handle on the land Peel Holdings owns. Sometimes the company has provided a tantalising glimpse: one map it produced in 2015, as part of some marketing spiel around the “northern powerhouse”, showcases 150 sites it owns across the north-west. It confirms the vast spread of Peel’s landed interests – from Liverpool John Lennon airport, through shale gas well pads, to one of the UK’s largest onshore wind farms. But it’s clearly not everything. A more exhaustive, independent list of the company’s landholdings might allow communities to be forewarned of future developments. As Ex Urbe’s report on Peel concludes: “Peel schemes rarely come to light until they are effectively a fait accompli and the conglomerate is confident they will go ahead, irrespective of public opinion.”

While Peel Holdings is unusual for the sheer amount of land it controls, it is also illustrative of corporate landowners everywhere. Corporations looking to develop land have numerous tricks up their sleeve that they can use to evade scrutiny and get their way, from shell company structures to offshore entities. Companies with big enough budgets can often ride roughshod over the planning system, beating cash-strapped councils and volunteer community groups. And companies have for a long time benefited from having their landholdings kept secret, giving them the element of surprise when it comes to lobbying councils over planning decisions and the use of public space. But now, at long last, that is starting to change. If we want to “take back control” of our country, we need to understand how much of it is currently controlled by corporations.

In 2015, the Private Eye journalist Christian Eriksson lodged a freedom of information (FOI) request with the Land Registry, the official record of land ownership in England and Wales. He asked it to release a database detailing the area of land owned by all UK-registered companies and corporate bodies. Eriksson later shared this database with me, and what it revealed was astonishing. Here, laid bare after the dataset had been cleaned up, was a picture of corporate control: companies today own about 2.6m hectares of land, or roughly 18% of England and Wales.

In the unpromising format of an Excel spreadsheet, a compelling picture emerged. Alongside the utilities privatised by Margaret Thatcher and John Major – the water companies, in particular – and the big corporate landowners, were PLCs with multiple shareholders. There were household names, such as Tesco, Tata Steel and the housebuilder Taylor Wimpey, and others more obscure. MRH Minerals, for example, appeared to own 28,000 hectares of land, making it one of the biggest corporate landowners in England and Wales.

Gradually, I pieced together a list of what looked to be the top 50 landowning companies, which together own more than 405,000 hectares of England and Wales. Peel Holdings and many of its subsidiaries, unsurprisingly, feature high on the list. But while the dataset revealed in stark detail the area of land owned by UK-based companies, it did nothing to tell us what they owned, and where.

That would take another two years to emerge. Meanwhile, Eriksson had been busy at work with his Private Eye colleague Richard Brooks and the computer programmer Anna Powell-Smith, delving into another form of corporate landowner – firms based overseas, yet owning land in the UK. Of particular interest were companies based in offshore tax havens, a wholly legal but controversial practice, given the opportunities offshore ownership gives for possible tax avoidance and for concealing the identities of who ultimately controls a company. Further FOI requests to the Land Registry by Eriksson hit the jackpot when he was sent – “accidentally”, the Land Registry would later claim – a huge dataset of overseas and offshore-registered companies that had bought land in England and Wales between 2005 and 2014: some 113,119 hectares of land and property, worth a staggering £170bn.

 

Victoria Harbour building at Salford Quays, owned by Peel Holdings. Photograph: Mike Robinson/Alamy

Private Eye’s work revealed that a large chunk of the country was not only under corporate control, but owned by companies that – in many cases – were almost certainly seeking to avoid paying tax, that most basic contribution to a civilised society. Some potentially had an even darker motive: purchasing property in England or Wales as a means for kleptocratic regimes or corrupt businessmen to launder money, and to get a healthy return on their ill-gotten gains in the process. This was information that clearly ought to be out in the open, with a huge public interest case for doing so. And yet the government had sat on it for years.

The political ramifications of these revelations were profound. They kickstarted a process of opening up information on land ownership that, although far slower and less complete than many would have liked, has nevertheless transformed our understanding of what companies own. In November 2017, the Land Registry released its corporate and commercial dataset, free of charge and open to all. It revealed, for the first time, the 3.5m land titles owned by UK-based corporate bodies – covering both public sector institutions and private firms – with limited companies owning the majority, 2.1m, of these. But there were two important caveats. Although we now had the addresses owned by companies, the dataset omitted to tell us the size of land they owned. Second, the data lacked accurate information on locations, making it hard to map.

Despite this, what can we now say about company-owned land in England and Wales? Quite a lot, it turns out. We know, for example, that the company with the third-highest number of land titles is the mysterious Wallace Estates, a firm with a £200m property portfolio but virtually no public presence, and which is owned ultimately by a secretive Italian count. Wallace Estates makes its money from the controversial ground rents market, whereby it owns thousands of freehold properties and sells on long leases with annual ground rents.

We also now know that Peel Holdings and its numerous subsidiaries owns at least 1,000 parcels of land across England – not just shopping centres and ports in the north-west, but also a hill in Suffolk, farmland along the Medway and an industrial estate in the Cotswolds. Councils, MPs and residents wanting to keep an eye on what developers and property companies are up to in their area now have a powerful new tool at their disposal.

The data is full of odd quirks and details. Who would have guessed, for instance, that the arms manufacturer BAE owns a nightclub in Cardiff, a pub on Blackpool’s promenade and a service station in Pease Pottage, Sussex? It turns out that they are all investments made by BAE’s pension fund; if selling missiles to Saudi Arabia doesn’t prove profitable enough, it appears the company’s strategy is to make a few quid out of tired drivers stopping for a coffee break off the M23.

The data also lets us peer into the property acquisitions of the big supermarkets, which back in the 1990s and early 2000s involved building up huge land banks to construct ever more out-of-town retail parks. Tesco, via a welter of subsidiaries, owns more than 4,500 hectares of land – and although much of this comprises existing stores, a good chunk also appears to be empty plots, apparently earmarked for future development. One analysis by the Guardian in 2014 estimated that the supermarket was hoarding enough land to accommodate 15,000 homes. More recently, however, Tesco’s financial travails have prompted it to sell off some of its sites. Internet shopping and pricier petrol have made giant hypermarkets built miles from where people live look less and less like smart investments. In 2016, Tesco’s beleaguered CEO announced the company was looking to make better use of the land it owned by selling it for housing, and even by building flats on top of its superstores. As for the supermarkets’ internet shopping rival Amazon, whose gigantic “fulfilment centres” resemble the vast US government warehouse at the end of Raiders of the Lost Ark – well, Amazon currently has 16 of those across the UK. And it has grown very quickly: all but one of its property leases have been bought in the past decade.

Companies are increasingly taking over previously public space in cities, too. Recent years have seen a proliferation of Pops – privately owned public spaces – as London, Manchester and other places redevelop and gentrify. You know the sort of thing: expensively landscaped swaths of “public realm”. Aesthetically, they are all very nice, but try to use Pops for some peaceful protest, and you are in for trouble. They are invariably governed by special bylaws and policed by private security, itching to get in your face. I once found this to my cost when staging a tiny, two-person anti-fracking demo outside shale-gas financiers Barclays bank in Canary Wharf. Canary Wharf is partly owned by the Qatari Investment Authority, and – bizarrely – photography is banned. Within a minute of us taking the first selfie on our innocuous protest, security guards had descended en masse, and we spent the next hour running around Canary Wharf trying to evade them.

The Land Registry’s corporate ownership dataset contains millions of entries, and much remains to be uncovered. Some of the information appears trivial at first glance – a company owns a factory here, an office there: so what? But as more people pore over the data, more stories will likely emerge. Future researchers might find intriguing correlations between the locations of England’s thousands of fast-food stores and the health of nearby populations, be able to track gentrification through the displacement of KFC outlets by Nando’s restaurants, and so on.

But to really get under the skin of how companies treat the land they own, and the wider repercussions, we need to zoom in on the housing sector, where debates about companies involved in land banking and profiteering from land sales are crucial to our understanding of the housing crisis.

One particularly controversial aspect of the housing debate that has generated much heat, and little light, in recent years is the debacle over land banking, the practice of hoarding land and holding it back from development until its price increases.

In 2016, the then housing secretary, Sajid Javid, furiously accused large housing developers of land banking and demanded they “release their stranglehold” on land supply. Housebuilders, not used to such impertinence from a Conservative minister, hit back. “As has been proved by various investigations in the past, housebuilders do not land bank,” a spokesperson for the Home Builders Federation told the Telegraph. “In the current market where demand is high, there is absolutely no reason to do so.”

So who is right? This is a complex area, but one that is important to investigate. Can the Land Registry’s corporate ownership data help us get to the bottom of it?

It is common for UK pension funds and insurance companies to buy up land as a long-term strategic investment. Legal & General, for example, owns 1,500 hectares of land that it openly calls a “strategic land portfolio … stretching from Luton to Cardiff”. Its rationale for buying land is simple: “Strategic land holdings are underpinned by their existing use value [such as farming] and give us the opportunity to create further value through planning promotion and infrastructure works over the medium to long term.”

When I looked into where Legal & General’s land was located, I noticed something odd. Nearly all of it lay within green belt areas, where development is restricted. The company appears to have bought it with the aim of lobbying councils to ultimately rip up such restrictions and redesignate the site for development in future.

In the case of pension funds lobbying to rip up the green belt, it’s the planning system that is (rightly) constraining development, not land banking itself. And none of this implicates the usual bogeymen of the housing crisis, the big housebuilding companies. By examining what these major developers own, is it possible to say whether they’re actively engaged in land banking?

There is no doubt that many of the major housebuilding companies own a lot of land. What’s more, housing developers themselves talk about their “current land banks” and publish figures in annual reports listing the number of homes they think they can build using land where they have planning permission. As the housing charity Shelter has found, the top 10 housing developers have land banks with space for more than 400,000 homes – about six years’ supply at current building rates.

Prompted by such statistics, the government ordered a review into build-out rates in 2017, led by Sir Oliver Letwin. Yet when Letwin delivered his draft report, he once again exonerated housebuilders from the charge of land banking. “I cannot find any evidence that the major housebuilders are financial investors of this kind,” he stated, pointing the finger of blame instead at the rate at which new homes could be absorbed into the marketplace.

Part of the problem is that the data on what companies own still isn’t good enough to prove whether or not land banking is occurring. The aforementioned Anna Powell-Smith has tried to map the land owned by housing developers, but has been thwarted by the lack in the Land Registry’s corporate dataset of the necessary information to link data on who owns a site with digital maps of that area. That makes it very hard to assess, for example, whether a piece of land owned by a housebuilder for decades is a prime site accruing in value or a leftover fragment of ground from a past development.

 

Shoppers in the Trafford Centre, a shopping mall until recently owned by Peel Holdings. Photograph: Oli Scarff/AFP/Getty

Second, the scope of Letwin’s review was drawn too narrowly to examine the wider problem of land banking by landowners beyond the major housebuilders. As the housing market analyst Neal Hudson said when it was published, the “review remit ignored the most important and unknown bit of the market: sites and land ownership pre-planning.”

In fact, if Letwin had raised his sights a little higher, he would have seen there is a whole industry of land promoters working with landowners to promote sites, have them earmarked for development in the council’s local plan, and increase their asking price. As investigations by Isabelle Fraser of the Telegraph have revealed: “A group of private companies, largely unknown to the public, have carved out a lucrative niche locating and snapping up land across the UK.”

One such company, Gladman Land, boasts on its website of a 90% success rate at getting sites developed. Few of these firms appear to own much land themselves; rather, they work with other landowners, perhaps signing options agreements or other such deals. Consultants Molior have estimated that between 25% and 45% of sites with planning permission in London are owned by companies that have never built a home.

This gets us to the heart of the housing crisis. Sure, we need housing developers to build more homes. But most of all we need them to build affordable homes. And developers that are forced to pay through the nose to persuade landowners to part with their land end up with less money left over for good-quality, affordable housing. By all means, let’s continue to pressure housebuilders whenever they try to renege on their planning agreements. But at root, we have to find ways to encourage landowners of all kinds – corporate or otherwise – to part with their land at cheaper prices.

Since the first appearance of modern corporations in the Victorian period, companies have expanded to become the owners of nearly a fifth of all land in England and Wales. Much of this land acquisition is uncontested: space for a factory here, an office block there. But some of it has proven highly controversial. Huge retailers and property groups like Tesco and Peel Holdings have eroded town centres and high streets by amassing land for out-of-town superstores, and lobbied to maintain a culture of car dependency. Multinational agribusinesses have exacerbated the industrialisation of our food supply and accelerated the decline of small-scale farmers. Property firms have made tidy profits from the privatisation of formerly public land – which might otherwise have gone into the public purse, had previous governments treated their assets more wisely.

Though the veil of secrecy around company structures and what corporations own is at last lifting, thanks to recent data disclosures by government, there’s still much that needs to be done to make sense of this new information. The Land Registry needs to disclose proper maps of what companies own if we are to get to the bottom of suspect practices like land banking, and give communities a fighting chance in local planning battles.

Legally obliged to maximise profits for their shareholders, and biased towards short-term returns, companies make for poor custodians of land. Nor are corporate landowners capable of solving the housing crisis. Hoarded, developed, polluted, dug up, landfilled: the corporate control of England’s acres has gone far enough.

Britain’s private school problem

While many agree that private education is at the root of inequality in Britain, open discussion about the issue remains puzzlingly absent. In their new book, historian David Kynaston and economist Francis Green set out the case for change in The Guardian 


The existence in Britain of a flourishing private-school sector not only limits the life chances of those who attend state schools but also damages society at large, and it should be possible to have a sustained and fully inclusive national conversation about the subject. Whether one has been privately educated, or has sent or is sending one’s children to private schools, or even if one teaches at a private school, there should be no barriers to taking part in that conversation. Everyone has to live – and make their choices – in the world as it is, not as one might wish it to be. That seems an obvious enough proposition. Yet in a name-calling culture, ever ready with the charge of hypocrisy, this reality is all too often ignored. 

For the sake of avoiding misunderstanding, we should state briefly our own backgrounds and choices. One of our fathers was a solicitor in Brighton, the other was an army officer rising to the rank of lieutenant-colonel; we were both privately educated; we both went to Oxford University; our children have all been educated at state grammar schools; in neither case did we move to the areas (Kent and south-west London) because of the existence of those schools; and in recent years we have become increasingly preoccupied with the private-school issue, partly as citizens concerned with Britain’s social and democratic wellbeing, partly as an aspect of our professional work (one as an economist, the other as a historian).

In Britain, private schools – including their fundamental unfairness – remain the elephant in the room. It would be an almost immeasurable benefit if this were no longer the case. Education is different. Its effects are deep, long-term and run from one generation to the next. Those with enough money are free to purchase and enjoy expensive holidays, cars, houses and meals. But education is not just another material asset: it is fundamental to creating who we are.

What particularly defines British private education is its extreme social exclusivity. Only about 6% of the UK’s school population attend such schools, and the families accessing private education are highly concentrated among the affluent. At every rung of the income ladder there are a small number of private-school attenders; but it is only at the very top, above the 95th rung of the ladder – where families have an income of at least £120,000 – that there are appreciable numbers of private-school children. At the 99th rung – families with incomes upwards of £300,000 – six out of every 10 children are at private school. A glance at the annual fees is relevant here. The press focus tends to be on the great and historic boarding schools – such as Eton (basic fee £40,668 in 2018–19), Harrow (£40,050) and Winchester (£39,912) – but it is important to see the private sector in the less glamorous round, and stripped of the extra cost of boarding. In 2018 the average day fees at prep schools were, at £13,026, around half the income of a family on the middle rung of the income ladder. For secondary school, and even more so sixth forms, the fees are appreciably higher. In short, access to private schooling is, for the most part, available only to wealthy households. Indeed, the small number of income-poor families going private can only do so through other sources: typically, grandparents’ assets and/or endowment-supported bursaries from some of the richest schools. Overwhelmingly, pupils at private schools are rubbing shoulders with those from similarly well-off backgrounds.
They arrange things somewhat differently elsewhere: among affluent countries, Britain’s private‑school participation is especially exclusive to the rich. In Germany, for instance, it is also low, but unlike in Britain is generously state-funded, more strongly regulated and comes with modest fees. In France, private schools are mainly Catholic schools permitted to teach religion: the state pays the teachers and the fees are very low. In the US there is a very small sector of non-sectarian private schools with high fees, but most private schools are, again, religious, with much lower fees than here. Britain’s private-school configuration is, in short, distinctive.

 

Some of the public figures of the past 20 years to have attended private schools (l-r from top): Tony Blair, former Bank of England governor Eddie George, Princess Diana, Prince Charles, Charles Spencer, businesswoman Martha Lane Fox, Dominic West, James Blunt, former Northern Rock chairman Matt Ridley, Boris Johnson, David Cameron, George Osborne, Jeremy Paxman, fashion journalist Alexandra Shulman, footballer Frank Lampard, Theresa May, Jeremy Corbyn and cricketer Joe Root. Composite: Rex, Getty

And so what, accordingly, does Britain look like in the 21st century? A brief but expensive history, 1997–2018, offers some guide. As the millennium approaches, New Labour under Tony Blair (Fettes) sweeps to power. The Bank of England under Eddie George (Dulwich) gets independence. The chronicles of Hogwarts school begin. A nation grieves for Diana (West Heath); Charles (Gordonstoun) retrieves her body; her brother (Eton) tells it as it is. Martha Lane Fox (Oxford High) blows a dotcom bubble. Charlie Falconer (Glenalmond) masterminds the Millennium Dome. Will Young (Wellington) becomes the first Pop Idol. The Wire’s Jimmy McNulty (Eton) sorts out Baltimore. James Blunt (Harrow) releases the bestselling album of the decade. Northern Rock collapses under the chairmanship of Matt Ridley (Eton). Boris Johnson (Eton) enters City Hall in London. The Cameron-Osborne (Eton-St Paul’s) axis takes over the country; Nick Clegg (Westminster) runs errands. Life staggers on in austerity Britain mark two. Jeremy Clarkson (Repton) can’t stop revving up; Jeremy Paxman (Malvern) still has an attitude problem; Alexandra Shulman (St Paul’s Girls) dictates fashion; Paul Dacre (University College School) makes middle England ever more Mail-centric; Alan Rusbridger (Cranleigh) makes non-middle England ever more Guardian-centric; judge Brian Leveson (Liverpool College) fails to nail the press barons; Justin Welby (Eton) becomes top mitre man; Frank Lampard (Brentwood) becomes a Chelsea legend; Joe Root (Worksop) takes guard; Henry Blofeld (Eton) spots a passing bus. The Cameron-Osborne axis sees off Labour, but not Boris Johnson+Nigel Farage (Dulwich)+Arron Banks (Crookham Court). Ed Balls (Nottingham High) takes to the dance floor. Theresa May (St Juliana’s) and Jeremy Corbyn (Castle House prep school) face off. Prince George (Thomas’s Battersea) and Princess Charlotte (Willcocks) start school.

The statistics also tell a story. The proportion of prominent people in every area who have been educated privately is striking, in some cases grotesque. From judges (74% privately educated) through to MPs (32%), the numbers tell us of a society where bought educational privilege also buys lifetime privilege and influence. “The dogged persistence of the British ‘old boy”’ is how a 2017 study describes the traditional dominance of private-school alumni in British society. This reveals the fruits of exploring well over a century of biographical data in Who’s Who, that indispensable annual guide to the composition of the British elite. For those born between the 1830s and 1920s, roughly 50-60% went to private schools; for those born between the 1930s and 1960s, the proportion was roughly 45-50%. Among the new entrants to Who’s Who in the 21st century, the proportion of the privately educated has remained constant at around 45%. Going to one of the schools in the prestigious Headmasters’ and Headmistresses’ Conference (HMC) still gives a 35 times better chance of entering Who’s Who than if one has not attended an HMC school; while those attending the historic crème de la crème, the so-called Clarendon Schools (Charterhouse, Eton, Harrow, Merchant Taylors’, Rugby, St Paul’s, Shrewsbury, Westminster, Winchester), are 94 times more likely to join the elite than any ordinary British-educated person.

Even if one’s child never achieves celebrity, sending him or her to a private school is usually a shrewd investment – indeed, increasingly so, to judge by the relevant longitudinal studies of two different generations. Take first the cohort born in 1958: in terms of those with comparable social backgrounds, demographic characteristics and early tested skills, and different only in what type of school they attended when they were 11, by the time they were in their early 30s (around 1990) the privately educated were earning 7% more than the state-educated. Compare that with those born in 1970: by the same stage (the early 2000s), the gap between the two categories – again, similar in all other respects – had risen to 21% in favour of the privately educated.

The only realistic starting point for an analysis lies with the assertion that, in the modern era, most of these schools are of high quality, offering a good educational environment. They deploy very substantial resources; respect the need for a disciplined environment for learning; and give copious attention to generating a positive and therefore motivating experience. This argument – the resources point aside – is not an altogether easy one for the left to accept, against a background of it having historically been undecided whether (in the words of one Labour education minister’s senior civil servant in the 1960s) “these schools are so bloody they ought to be abolished, or so marvellous they ought to be made available to everyone”. We do not necessarily accept that all private schools are “marvellous”; but by and large we recognise that, in their own terms of fulfilling what their customers demand, they deliver the goods.

Above all, private schools succeed when it comes to preparing their pupils for public exams – the gateways to universities. In 2018 the proportion of private-school students achieving A*s and As at A-level was 48%, compared with a national average of 26%; while for GCSEs, in terms of achieving an A or grade seven or above, the respective figures were 63% and 23%. At both stages, GCSE and A-level, the gap is invariably huge.

A famous image of school privilege: Harrovians Peter Wagner and Thomas Dyson and local schoolboys George Salmon, Jack Catlin and George Young photographed outside Lord’s cricket ground in 1937 by Jimmy Sime. Photograph: Jimmy Sime/Allsport

There are, of course, some very real contextual factors to these bald and striking figures. Any study must take account of where the children are coming from. Nevertheless, the picture presented by several studies is one of relatively small but still significant effects at every stage of education; and over the course of a school career, the cumulative effects build up to a notable gain in academic achievements.

Yet academic learning and exam results are not all there is to a quality education, and indeed there is more on offer from private schools. At Harrow, for example, its vision is that the school “prepares boys… for a life of learning, leadership, service and personal fulfilment”. It offers “a wide range of high-level extracurricular activities, through which boys discover latent talent, develop individual character and gain skills in leadership and teamwork”. Lesser-known schools trumpet something similar. Cumbria’s Austin Friars, for example, highlights a well-rounded education, proclaiming that its alumni will be “creative problem-solvers… effective communicators… and confident, modest and articulate members of society who embody the Augustinian values of unity, truth and love...”

If, on the whole, Britain’s private schools provide a quality education in both academic and broader terms, how do they deliver that? Four areas stand out.

First, especially small class sizes are a major boon for pupils and teachers alike. Second, the range of extracurricular activities and the intensive cultivation of “character” and “confidence” are important. Third, the high – and therefore exclusive – price tag sustains a peer group of children mainly drawn from supportive and affluent families. And fourth, to achieve the best possible exam results and the highest rate of admission to the top universities, “working the system” comes into play. Far greater resources are available for diagnosing special needs, challenging exam results and guiding university applications. Underpinning all these areas of advantage are the high revenues from fees: Britain’s private schools can deploy resources whose order of magnitude for each child is approximately three times what is available at the average state school.

The relevant figures for university admissions are thus almost entirely predictable. Perhaps inevitably, by far the highest-profile stats concern Oxbridge, where between 2010 and 2015 an average of 43% of offers from Oxford and 37% from Cambridge were made to privately educated students, and there has been no sign since of any significant opening up. Top schools, top universities: the pattern of privilege is systemic, and not just confined to the dreaming spires. Going to a top university, it hardly needs adding, signals a material difference, especially in Britain where universities are quite severely ranked in a hierarchy.
Ultimately, does any of this matter? Why can one not simply accept that these are high-quality schools that provide our future leaders with a high-quality education? Given the thorniness – and often invidiousness – of the issue, it is a tempting proposition. Yet for a mixture of reasons – political and economic, as well as social – we believe that the issue represents in contemporary Britain an unignorable problem that urgently needs to be addressed and, if possible, resolved. The words of Alan Bennett reverberate still. Private education is not fair, he famously declared in June 2014 during a sermon at King’s College Chapel, Cambridge. “Those who provide it know it. Those who pay for it know it. Those who have to sacrifice in order to purchase it know it. And those who receive it know it, or should.”

Consider these three fundamental facts: one in every 16 pupils goes to a private school; one in every seven teachers works at a private school; one pound in every six of all school expenditure in England is for the benefit of private-school pupils.

The crucial point to make here is that although extra resources for each school (whether private or state) are always valuable, that value is at a diminishing rate the wealthier the school is. Each extra teacher or assistant helps, but if you already have two assistants in a class, a third one adds less value than the second. Given the very unequal distribution of academic resources entailed by the British private school system, it is unarguable that a more egalitarian distribution of the same resources would enhance the total educational achievement. There is, moreover, the sheer extravagance. Multiple theatres, large swimming pools and beautiful surroundings with expensive upkeep are, of course, nice to have and look suitably seductive on sales brochures – but add relatively little educational value.

Further inefficiency arises from education’s “positional” aspect. The resources lift up children in areas where their rank position on the ladder of success matters, such as access to scarce places at top universities. To the considerable extent this happens, the privately educated child benefits but the state-educated child loses out. This lethal combination of private benefit and public waste is nowhere more apparent than in the time and effort that private schools devote to working the system, to ease access to those scarce places.

What about the implications for our polity? The way the privately educated have sustained semi-monopolistic positions of prominence and influence in the modern era has created a serious democratic deficit. The unavoidable truth is that, by and large, the increasingly privileged and entitled products of an elite private education have – almost inevitably – only a limited and partial understanding of, and empathy with, the realities of everyday life as lived by most people. One of those realities is, of course, state education. It marked some kind of apotheosis when in July 2014 the appointment of Nicky Morgan (Surbiton High) as education secretary meant that every minister in her department at that time was privately educated.

On social mobility, there has been in recent years an abundance of apparently sincere, well-meaning rhetoric, not least from our leading politicians. “Britain has the lowest social mobility in the developed world,” laments David Cameron in 2015. “Here, the salary you earn is more linked to what your father got paid than in any other major country. We cannot accept that.” In 2016 Jeremy Corbyn declares his movement will “ensure every young person has the opportunities to maximise their talents”, while Theresa May follows on: “I want Britain to be a place where advantage is based on merit not privilege; where it’s your talent and hard work that matter, not where you were born, who your parents are or what your accent sounds like.” Rather like corporate social responsibility in the business world, social mobility has become one of those motherhood-and-apple-pie causes that it is almost rude not to utter warm words about.

Yet the mismatch between such sentiments and policymakers’ practical intentions is palpable. The Social Mobility Commission, with cross-party representation, reported regularly on what government should do, but in December 2017 all sitting members resigned in frustration at the lack of policy action in response to their recommendations.

The underlying reality of our private-school problem is stark. Through a highly resourced combination of social exclusiveness and academic excellence, the private-school system has in our lifetimes powered an enduring cycle of privilege. It is hard to imagine a notable improvement in our social mobility while private schooling continues to play such an important role. Allowing, as Britain still does, an unfettered expenditure on high-quality education for only a small minority of the population condemns our society in seeming perpetuity to a damaging degree of social segregation and inequality. This hands-off approach to private schools has come to matter ever more, given over the past half-century the vastly increased importance in our society of educational credentials. Perhaps once it might have been conceivable to argue that private education was a symptom rather than a cause of how privilege in Britain was transferred from one generation to the next, but that day is long gone: the centrality of schooling in both social and economic life – and the Noah’s flood of resources channelled into private schools for the few – are seemingly permanent features of the modern era. The reproduction of privilege is now tied in inextricably with the way we organise our formal education.
Ineluctably, as we look ahead, the question of fairness returns. If private schooling in Britain remains fundamentally unreconstructed, it will remain predominantly intended and destined for the advantage of the already privileged children who attend.

We need to talk openly about this problem, and it is time to find some answers. Some call for the “abolition” of private schools – whatever that might mean. We do not call for that, because we think it is better – and feasible – to harness for all the good qualities of private schools. Feasible reforms are available; these do not require excessive commitments from the Treasury, but do require a political commitment.

We are, however, under no illusions about the task of reform. The schools’ links with powerful vested interests are close and continuous. London’s main clubs (dominated by privately educated men) would be one example; the Church of England (closely connected with many private schools, from Westminster downwards) would be another. Or take the City of London, where in that historic and massively wealthy square mile not only do individual livery companies have an intimate involvement with a range of private schools, but the City corporation itself supports an elite trio in Surrey and London (City of London, City of London school for girls, City of London Freemen’s school). While as for the many hundreds of individual links between “top people” and private schools, often in the form of sitting on governing bodies, it only needs a glance at Who’s Who to get the gist. The term “the establishment” can be a tiresome one, too often loosely and inaccurately used, but in the sense of complementary networks of people at or close to the centres of power and wealth, it actually does mean something.

All of which leaves the private schools almost uniquely well placed to make their case and protect their corner. They have ready access to prominent public voices speaking on their behalf, especially in the House of Lords; they enjoy the passive support of the Church of England, which is distinctly reluctant to draw attention to the moral gulf between the aims of ancient founders and the socioeconomic realities of the present; and of course, they have no qualms about utilising all possible firepower, human as well as media and institutional, to block anything they find threatening.

The great historian EP Thompson wrote more than half a century ago about The Peculiarities of the English. Historically, those peculiarities have been various, but the most important – and pervasive in its consequences – has been social class. Of course, things to a degree have changed since Thompson’s time. The visible distinctions of dress and speech have been somewhat eroded, if far from obliterated; the obvious social manifestations of a manufacturing economy have been replaced by the more fluid forms of a service economy; the increasing emphasis of reformers and activists has been on issues of gender and ethnicity; and a series of politicians and others have sought to assure us that we are moving into “a classless society”. Yet the fundamental social reality remains profoundly and obstinately otherwise. Britain is still a place where more often than not it matters crucially not only to whom one has been born, but where and in what circumstances one has grown up.

It would be manifestly absurd to pin the blame entirely on the existence over the past few centuries of a flourishing private-school sector. Even so, given that these schools have been and still are places that – when the feelgood verbiage is stripped away – ensure that their already advantaged pupils retain and extend their socio‑economic advantages in later life, common sense places them squarely in the centre of the frame.

Is it possible in Britain over the next 10 or 20 years to build a sufficiently widespread consensus for reform? Or, at the very least, to begin to have a serious, sustained, non-name-calling, non-guilt-ridden national conversation on the subject of private education? A poll we commissioned from Populus shows a virtually landslide majority for a perception of unfairness about private education, indicating that public opinion is potentially receptive to grappling with the issue and what to do about it. The poll reveals, moreover, that even those who have been privately educated, or have chosen to educate their own children privately, are more likely than not to have a perception of unfairness.

The question of what to do about a sector educating only some 6% of our school population might seem relatively trifling, and difficult to prioritise (especially in challenging economic circumstances), compared with say the challenges of quality teacher recruitment across the state sector or the whole vital area of early-years learning. Yet it would be a huge mistake to underestimate the seriously negative educational aspects of the current dispensation and to continue to marginalise the private-school question. The private schools’ reach is very much broader than their minority share of school pupils implies. Unless some radical reform is set in train, an unreconstructed private-school system, with its enormous resource superiority and exclusiveness hanging over the state system as a beacon for unequal treatment and privilege, would make it hard to sustain a fully comprehensive and fair state education system.

Ultimately, the issue is at least as much about what kind of society one might hope the Britain of the 2020s and 2030s to be. A more open society in which upward social mobility starts to become a real possibility for many children, not just a few lucky ones? A society in which the affluent are not educated in enclaves, and in which schooling for the affluent is not funded at something like three times the level of schooling for the less affluent? A society in which the pursuit through education of greater equality of life chances, seeking to harness the talents of all our children, is a matter of real and rigorous intent? A society in which there is a just relationship between the competing demands of liberty and equity, and in which we are, to coin a phrase, all in it together? For the building of such a society, or anything even remotely close, the issue of private education is pivotal, both symbolically and substantively. The reform of private schools will not alone be sufficient to achieve a good education system for all, let alone the good society; but it surely is a necessary condition. At this particular moment in our island story, the future seems peculiarly a blank sheet. Everything is potentially on the table. And for once, that has to include the engines of privilege. For if not now, when?

• Engines of Privilege: Britain’s Private School Problem by Francis Green and David Kynaston is published by Bloomsbury on 7 February (£20). To order a copy for £17.60 go to guardianbookshop.com or call 0330 333 6846. Free UK p&p over £10, online orders only. Phone orders min p&p of £1.99

How to do it: feasible reform options

There are broadly two types of option: those that handicap private schools, making them less attractive to parents, and those that envisage “crossing the tracks” – some form of integration with the state-school sector. Some reforms would have much more of an impact than others.

1. Handicaps

Contextual admissions to universities Where universities, especially the high-status ones, make substantial allowances for candidates’ school background; alternatively, as another method of positive discrimination, some form of a quota system.

Upping the cost Where the fees are substantially raised, making some parents switch away from the private-school sector and opt for state schools. Even though tax subsidies are not huge, the government could reduce them, for example by taking away charitable status (from those schools that are charities) or by requiring that all schools pay business rates in full (as in Scotland from 2020).

Alternatively, something that would “hurt” a bit more, government could directly tax school fees (as in Labour’s manifesto pledge to impose VAT or in Andrew Adonis’s proposed 25% “educational opportunity tax”).

2. Crossing the tracks

There are several proposed schemes for enabling children from low-income families to attend private schools. Mainly, these would leave it to schools to choose how they select their pupils. Some are relatively small in scope, including a proposal from the Independent Schools Council that would involve no more than 2% of the private-school population. Others are more ambitious: the Sutton Trust’s Open Access Scheme proposes that all places at about 80 top private secondary day schools would be competed for on academic merit. The government would subsidise those who could not afford the fees.

In another type of partial integration, schools would select a proportion of state-funded pupils according to the Schools Admissions Code, meaning that the government or local government would set the principles for selection and the extra places would become an extension to the state system. We suggest a Fair Access Scheme, where the schools would be obliged initially to recruit one-third of their pupils in this way, with a view to the proportion rising significantly over time.