A very interesting discussion. No comment about the "accidents".
Perhaps, as a start, all exams should to be invigilated at a CAA exam hall. Then there can be no "helpful invigilators/instructors" to overlook a lack of knowledge. A fail is a fail.
Perhaps, a more demanding test would be appropriate. Not: take off/hover taxi/turn/circuit/land etc but: here is a forest, where shall we land? kind of test. A real life decision making test. I could go on.
Anyway, the margins are small for these flight schools, I appreciate that; but the margins are also very small for the freelance flight instructors.
I say charge the students more and give them a structured training regime. Pass or fail, it's entirely up to them. Frankly, the triers will pass, and the arrogant will fail.
You don't see super cars for sale with a 50 quid margin. So, charge more! And the quality may, just maybe, improve........
It will never happen but, good evening anyway, I'm enjoying the comedy show.