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?

Why don’t we worry about things that are actually happening than deal in hypotheticals that no one has suggested.

Or are you trying to panic people beyond the private school parents by suggesting uni VAT is next? Could it be that you have realised only the 7% of parents whose children who attend private school (so 3% of the overall population ?) care about this policy (and many support it). So now you are trying to fearmonger and draw in a wider audience?

‘When’ VAT is proposed on uni fees I will look at the arguments for and against and then decide. There are too many other issues facing the UK to panic about maybes as yet.

If one of you NZ fans wants to lobby Bridget Phillipson and say "do it like New Zealand", I'll take it.

• VAT on fees
• A per-pupil subsidy that effectively cancels out the VAT at a level around £18k-20k fees
• Private schools can apply for capital expenditure subsidy given they serve diverse needs and save the state sector money.

As a mechanism this would treat the relatively affordable bit of the independent sector (charging ~1.5x state school expense to taxpayers) more fairly and would (unlike Labour's proposal) be better targeted at the stereotype wealthy schools. It would raise a miniscule sum of money because, despite the column inches, there are so few of the latter type of schools.

I don't think that's what any of you want, however I agree we can be more precise and say "no country taxes education except one, and that one country offsets the tax with a strong subsidy; no country has the taxation mechanism Labour proposes". It's a bit of a mouthful.

The policy is being presented as a "fair" tax. A tax on university has much in common; in fact it's a much fairer proposition given the government subsidises university so strongly via 42% losses on student loans, while independent schools don't receive a bean.

There's more to tax policy that "tax a minority because the majority wants it".

Except there is a free at point of access state school system that private school parents choose to opt out of and pay for something better instead. There is a single university system for all . Doesn't sound like the two have much in common to me.

They are both covered by the same part of the VAT legislation, so obviously the law makers viewed them very much in the same way.

But no one has suggested this. It’s just a red herring.

As for tax policy shouldn’t be ‘tax a minority because the majority wants it’ I think you’ll find the outcry against non doms, super rich tax avoidance, multi national corporations who avoid tax all suggest that many people would welcome more scrutiny around this. Many people feel that tax policy should do what the majority want and that the ‘minority’ shouldn’t be subsidised by things like the freeze in the tax threshold which disproportionately affects the lowest earners. Now that’s something that IS worth getting angry about.

I don't believe a Labour government would apply VAT to UK university fees. I think this is just scaremongering. VAT on private school fees affects a minority and a minority of that minority wants to escalate their cause to the wider public and make them think it is the start of something bigger. It isn't.

My reply was to your comment about them not having much in common. I am merely pointing out that the legislation suggests otherwise. It’s a slippery slope when one element of education is taxed. We know that universities are facing a funding crisis; how is that going to be addressed? Higher tuition fees? VAT on fees? Increased taxes elsewhere?

It's misleading calling it an education tax, as it only applies a small percentage of the sector and that label makes it sound much larger scale than it merits. It is much more accurate to call it "VAT on private school fees" as that is exactly what it is.

Private schools provide an education. That’s not debatable. Taxing fees which are funding that education is very much a tax on education/an education tax.

I can help you with that. We're talking about 3 things: (A) independent school, (B) state school and (C) university:

Benefits are economically the same
Both deliver education, which is a merit good. There is both social and private benefit when people get educated, regardless of who pays.

Costs fall differently

• (A) gets no taxpayer funding, so there is particular social benefit in independent schools because as you say parents opted out of making others / taxpayers pay for their education. That's a good thing and indicates a subsidy is due, not a tax.
• (B) gets full taxpayer funding. Nobody contributes a penny towards the private benefit they receive.
• (C) gets partial taxpayer funding via loss-making student loans (as well as other sources of income). The majority pay something; only a minority never repay.

The argument to tax university is stronger than the argument to tax independent education.

Yes, an education tax.

Acting in accordance with the mob's wishes certainly gets you off the hook of considering "is this a good idea / where does this get us?".

Call me old-fashioned, but I'd rather tax policy that delivers a better and less-divided society, where we try to act on reason and principle.

How do you know they won't come for you with pitchforks next? Are you a homeowner? Will it be ok when "the majority" want to nationalise your house? Do you have a private pension? Is that up for grabs too?

Gosh ‘the mob’! We’re not even fellow citizens now who might have opinions ~ we’re a mob because we don’t agree with you. Need to get that pitchfork sharpened up.

Let’s not facts get in the way of a good argument but the point was what the majority might see as fair. As more than 70% of Brits have a private pension ( and now they have to be offered I imagine this will increase) and more than 65% of the population are housebuyers (some 35% own outright) I don’t see the government easily coming after these constituencies and they certainly don’t form a minority like the super rich tax avoiders or private school fee payers.

And actually I do agree with property taxes as a way of funding. Matthew Syed wrote an interesting piece in The Sunday Times a couple of weeks ago about the need to replace income tax with property taxes. I’m all for looking at the benefits of the tax regime and I understand it might not always go my way. That’s life.

It's only a niche of the whole education sector though, isn't it?

Exactly. "what the majority might see as fair". Never mind costs/benefits/family/choice/incentives/quality/innovation/unintended consequences. The sole arbiter is " most people say X, therefore X".

It doesn't make for a great future for any of us.

When you decided to send your own DC to a private school you were obviously thinking about what was best for your own little family. Now, because you don't like VAT, it's all about a better and less divided society. By its very nature, buying into private education actually promotes division in society. You are dusting off supposed principles and bringing them out when it suits your narrative. It's all so very obvious.

"The mob" Pitchforks?!! All this extreme exaggeration is starting to sound positively batshit.

It's simple - you pay the VAT or you send your DC to state school like most people in the country do. No need for any hysterics.

This.

I'm afraid you're quite wrong about me, and also about the way the economy works. It's possible for something to be good for me and also good for others.

Yes, independent school is good for my family. Also, it's good for you and I'm glad of that because, and I know I'm repeating myself, independent education is a double positive externality.

Where we start from: some people A get school paid-for by others and some other people B don't. But B still contribute - heavily - to A. Nobody's complaining about existing taxes, just saying if you want to understand the effect of this new education tax, you have to understand the economics.

If and when the education tax harms independent education, it's not good for people like me, nor is it good for people like you.

Universities a necessity? How do all those non-grads survive?

if it’s all about the big society, how do we get doctors if we don’t consider University a necessity? Private schools are dispensable, Universities are not.

‘The policy is being presented as a "fair" tax’

yup, and LONG overdue. But the great thing is - it’s optional!
Send your child to a normal school and save on fees, the random % rise schools add on anyway, and all the other expenses private schools add on.

And where is the state going to pay for all the private kids? Every kid who leaves private school costs the state 8K per year.
I have already said that if 7-10% of current private school children leave into state sector it will cost the state £400 million.
Plus the loss of VAT revenue.
The figures just don't add up.
Every child that stays in private school saves the state money.

I know a fair few people who have decided not to start their children at private school because of the potential VAT. Particularly at year 7 when a lot of children move across.
I doubt many will move their children out of private school currently there until they reach certain transition points (year 7, sixth form). Which the state will then have to pay for whereas previously they didn’t.

You don’t know how many will leave so the impact is an unknown quantity. . There is an agenda of trumping up the predictions of numbers leaving to make the figures fit the propaganda. When people start quoting ASI, it’s pretty clear that there is a lot of distortion and a distinct lack of credibility.