Late to the topic, sorry, too much festive cheer, but as I also work with schools (which while a generally low risk sector, offer a whole host of challenges due to being locally autonomous and rarely operationally controlled by the employer) I think this is an interesting scenario with not necessarily an immediately right or wrong answer. Let me explain...
Working on the assumption that I'm on site for some reason other than lighted candle spot-checks, if I were to walk into a classroom and see this (which I have and for the same perceived benefits as outlined here), it would absolutely be jumping to near if not the top of 'things I need to make enquiries about'.
If, through discussion with the person in charge (probably the teacher in this space) it transpires that the risk has been properly considered and documented (FRA or elsewhere); the teacher/person in charge is able to make an argument for the justification of 'why' this is desired and alternatives are not suitable; in the course of open questioning they can demonstrate they have considered emergency arrangements, and what they do if they leave the classroom etc, then I might be open to leaving it as is and including in my report reference to these discussions and the importance of the control measures being maintained.
Things that might change my opinion would be: lack of demonstrable understanding of the risks from the person in charge; apathy; blatantly dangerous location (next to the crepe paper, say) or number of candles; efficacy/reliability of fire evac procedures; maintenance of alarm and detection systems; is the building multistorey/residential/listed; evidence of candles being used throughout the school and in some cases perhaps burning in unoccupied rooms...etc
In this scenario, I’d be particularly interested in hearing the teacher’s argument as to why it needs to be a real candle/flame. As others have said, there are plenty alternatives out there. I suspect false but not ill-intentioned assumptions are to blame, “ I have candles at home with my children so I can have them here”.
I'd make a point of flagging this with the head during my debrief to make sure they were aware - as they don’t always know when a colleague has acted on free will out of good intentions, and they have an unquestioned ability to 'snuff' the issue out. (sorry). As you say, clane, flag your concern, give your opinion and let the decision makers make their decision.
Like Messey, I try to engage with most problems from a 'let's see what it takes to do this appropriately' perspective and work back from there. On the rare occasion that the conclusion of this process is actually the prohibition/cessation of an activity, I find this outcome is more readily bought into when the person in charge makes this decision once they understand the full range of matters to be considered and the level of effort required. It can also help prevent the negative connotation around 'H&S says no' – there are times/audiences when this is undoubtedly the best approach, but I find treating teachers like the professionals they are to be better at achieving positive and lasting outcomes.
In summary, the outcome for me would probably be that the candle(s) would need to go unless they could evidence robust management across all relevant areas, i.e. prove to me you can do this safely. Some schools may decide it’s too much effort, but they would be doing so with a better understanding of why it’s an issue and what it might take to manage the risk appropriately.
However, in my case and I suspect others as well, all of this is moot as our insurers have made clear that naked flames outside of controlled environments in science, D&T and catering (with the exception of hot works, which require a whole other set of considerations) are forbidden and could result in an uninsured loss. In our case, whether or not the H&S risks can be managed becomes irrelevant.