Home schooling is allowed but you have to get it approved by the authorities, unlike this is happening. Legally children have to be in some sort of education but travellers seem to operate outside of the law anyway.
I'm not sure it's a loophole- it's just a choice that's free to all parents. As TTT says there are some requirements for education but I am not sure they are monitored too closely and maybe hardly at all for travellers. Certainly OFSTED don't give a rating as far as I know
OFSTED can ONLY investigate a private school that has no taxpayer funding if they are actually invited to do so by the school concerned! That is how the Muslim schools that teach separate education for boys and girls can exist !
>I doubt the council would do so for fear of being labelled Racist.
The policy which includes possible informal enquiries seems to apply to all home school pupils regardless of race as race isn't mentioned on the gov.uk site. In practice I doubt that many meaningful informal enquiries take place for any home-educated pupil but I can see that the frequency could well be less for travellers simply because it is more difficult to keep track of them.