I think the proper ethical position is to keep the prices at the same level where it is based on the value of the outcome of the service, not the cost of providing it.
Some schools in the US choose to do so when paying their international student-becoming-instructors on J1 etc less than American instructors (still crap pay for what they do, but that's another debate).
I don't know that much about costing and expenses of flight school in the UK. Not many US schools would pay their instructors full 'instructor charge' paid by student on top of rental, I presume.
What cost would PPL FI constitute to flight school if it's not paying him retainer, covering housing or some side benefits? Part time FI flying for the fun/satisfaction of it. I would have mixed view on this as student in the UK, especially with small club style school. (I still am newbie in aviation world) Not likely to happen to me.
The whole thing with current UK regulations surrounding flight training and insurance requirements etc don't exactly help PPL FIs in my view/from what I've read so far.
The PPL holding microlight instructors can instruct in microlights for renumeration, but not in C152 etc? Ehm. Double standards?