Labour, private schools VAT and universities

[BloodyHellKen]

Following on from the thread about Labour, private schools and VAT please could someone explain to me why we shouldn't be concerned that a Labour govt wouldn't remove tax exemption from universities also as they are also VAT exempt in the same way private schools are.

I'm not personally worried about VAT being added onto private school fees and I recognise arguments for and against but the possibility of VAT being added onto a university education does really concern me.

Anyone?

It's a tax on the education, the pasty tax was a tax on the pasty. It's an education tax.

There's no such thing as "free at the point of delivery", it just means "paid for by others". Every independent school place saves the taxpayer directly the cost of state school, worth 3-4x the value of the tax exemption; make that 10x if you include the upstream and downstream tax contribution of the schools themselves.

I wonder what you taught? Education isn't a luxury. Education is a merit good. It has future social benefit, regardless who pays and particular social benefit if the taxpayer is off-the-hook.

You can read about it here."A private school provides an external benefit because the workforce will be more educated in the future and it saves the cost of government education in a publically-funded school"

But it’s still a tax equivalent to VAT and it’s levied at 15%.

NZ private schools receive about $1600 state funding per pupil - $42.2 m in total - and contribute $64 m in GST on fees.

No it doesn’t. Taxing education (where the state provision may have failed a child) is indefensible when things such as cake and chocolate body paint are VAT free.

Yes. It should be a right for all. People shouldn’t be able to buy it as a privilege with a load of tax breaks and charity concessions.

There's no such thing as "free at the point of delivery", it just means "paid for by others".
@MisterChips that makes no sense. It is free at the point of delivery because you don’t pay for it when it’s delivered to you. That isn’t at all the same thing as saying it’s a free service not paid for at any point. It’s beyond me that people think that’s a bad thing. You’re clearly all out for yourself with no care for your fellow citizens based on that remark, so it’s pretty pointless discussing this with you any more.

Of course a state education is free at the point of delivery. Exactly like the NHS. It may not be in accordance with right wing principles but it is ridiculous to assert otherwise.

Assuming your figures are correct, GST brings in $64m. They then receive funding of $42m. So, the net tax take is only around $22m. That is vastly different from a tax charge of 20%.

I’m more than happy to pay VAT on my fees if the government gives a credit for the equivalent state school funding.

So every child that leaves private school requires the state to fund a place plus there is no VAT levied on that child.
So far rolls are down by 2.7% in private schools and that is before Labour is in power. Private schools save the state and tax payer 8K per year per child. There are over 500 000 DC in private schools. Where the hell would the state get the money to fund their places?.

The state system should provide an excellent education for all. People then wouldn’t feel the need to use the private sector, unless they wanted flash facilities etc.

The state system should also be equal across the entire country, rather than the current skew towards great state provision in London and the South East whilst the rest of the country often has no decent state provision.

Here you go I'm afraid it's not the example you're looking for. In New Zealand they subsidise independent school. As in, they actually subsidise them, rather than exempting from tax and then mistakenly calling that a "subsidy".

"the government can't afford to stop funding private schools"
"In 2019, private school per-student subsidies, operational and salary costs were funded at 19 percent of the equivalent funding for state and state-integrated schools.
Essentially, the Government saves money by keeping private schools open."

Additionally, the NZ Government contributes to capital expenditure for private schools.

Also here the Adam Smith Institute notes that the return on the subsidy - the actual subsidy- is 1800% - that's the GST revenue plus the saving to taxpayers from state school expense not incurred.

Presumably that is a rhetorical question as it would only be a minority that would leave?

If 7-10% (realistic number and we are already seeing it happen) leave then that's up to 50,000 pupils needing state funding at 8K per pupil = £4 million That's also the VAT lost on 50,000 pupils.

It's perfect sense, and it's called economics. What do you teach?

Look, you wrote some stuff about CEA that was simply wrong. You were wrong when you said something about "top percentage". Now you're trying to tell an economist what's a luxury and what's free, as though state schools grow on trees.

"It’s beyond me that people think that’s a bad thing."
Nobody has said education paid for by other people, which you're calling "free" is a bad thing. I don't think it's a bad thing.

"You’re clearly all out for yourself with no care for your fellow citizens based on that remark,"
That's just rude. You've no basis for that. I have great concern for state education for the selfish reason that I'm better off if other families' kids are educated, and the unselfish reason that I am very keen for all children to have opportunities.

I just want an education policy that's actually going to help, not harm, children, and this education tax isn't it. It's levelling-down, trashing families and trashing lives for a class-warfare agenda that only serves to distract from the much bigger issues affecting the entire sector.

£400m!

Plus many other unintended consequences. At ~10-15% migration, raises no money.

There has been a decrease of almost 3% this year alone. That’s before the VAT has been brought in.

Ha ha yes typo!

How did you calculate 400 million? It's £40 million.

8000 × 50000 = 400 million

Okay

But it’s disproving the point that ‘no country in the world levies a tax on education’.

And it’s cash positive for the NZ government.

The amount the NZ government pays to the private school is about 1/4 the per student funding of state schools.

Maybe the UK government giving £2k per student per year to private schools charging £15k a year will make a huge difference? A £400 saving on VAT per year?

It wouldn’t be a £400 saving. It would be more than that because schools could reduce their fees in line with the state credit.

Current position with proposed VAT
Average fees of £15k
VAT £3k
Total charge to parents £18k

Position with a state credit
Fees £15k
State credit -£2k
VAT on the £13k would be £2,600
Total charge to parents £15,600

So, with your suggestion parents would “only” be £600 a year worse off, not £3,000.

Arguably a state credit should be more than £2,000 on account of the fact that not using the state system is saving around £8,000 a year.

It's a £400 pound saving on VAT, not £600, as per my post (I think your maths has gone awry).

And I was using the NZ model of the state providing 1/4 of the state funding per pupil to the private school.

Edit: Apologies, I see how you've calculated the saving, by using the £2k state funding as a direct benefit to parents.

My example is comparing the overall cost to the parents using your example. Parents look at the bottom line cost to them.

Adding VAT to current fees will cost an average extra of £3k, taking the total cost to £18k. Adding VAT to current fees but allowing a £2k credit means that the fees would total £15,600, ie only £600 more than now.

ETA : I’ve just seen your update! Yes, I’m looking at the overall figure, not just the VAT

Yes I see that. And it relies on the full amount of the state funding being applied as a discount to fees.

Anyway, my main point was still that NZ charges GST on private education fees.

GST isn’t remotely comparable to the proposed VAT though, because it’s a lower % charge, and because the state partially subsidises the private sector which means fees are lower.