UK universities in trouble - why not add VAT to tuition?

[80smonster]

UK universities are in trouble, apparently many could close, why not charge VAT on tuition fees (for those that are financially viable)? Bridget Phillipson says they are autonomous institutions and won’t be given a public bail out - they should rely on their own resources:
https://www.theguardian.com/education/article/2024/aug/09/english-universities-face-autumn-tipping-point-as-financial-crisis-looms

YABU - don’t add the VAT
YANBU - add the VAT

You still don't get it do you? The overwhelming majority of their costs are staffing, which are outside the scope of VAT.

For the avoidance of doubt, I have worked in finance since 1979 and have been doing statutory accounts, VAT returns and keeping up with HMRC legislation for well over 30 years.

True, but the harm is to graduates starting their lives in huge debt, and non graduates being put off going to university because they didn't want to incur debt.

Once the costs are high enough to be a deterrent however, there's no compelling reason not to raise them still higher. The damage is already done, and many non-elite universities may have already priced themselves out of the market, given COL pressures. The smart kids are going abroad to study.

Yes, I understand that the staff costs are outside the scope of VAT. I wrote this further up the thread.

I also pointed out that they could use agency staff, which would enable them to claim back the VAT. Of course, they would have to pay the agency fee. On the other hand, there would be no on costs, which would even things out.

I expect private schools will predominantly use agency staff when they can claim back the 20% VAT. Of course, the cost per day will be higher, but they won’t have to fork out for on costs or holiday pay, so it will be cheaper overall.

The "ex polys" have and always did a lot of the practical vocational training that people are so keen on. Just because they have been renamed as universities it doesn't mean they are now expendable. Same for Colleges of Higher Education.
What percentage of 18 year olds from state schools do you think are going abroad to study? What countries do they go to and how do they obtain funding to do that.

My use of italics - to indicate that they are not - clearly a bit too subtle @ImpossibleTh1ng 😁

The smart kids are going abroad to study.

Not in huge numbers they aren't.
And those from low socio-economic backgrounds certainly aren't, no matter how smart they are.

No private school can claim VAT back at the moment. It has nothing to do with being a charity. State schools are allowed to claim VAT back because there are specific rules that allow them to do it. Presumably the same applies to universities, although I wasn’t aware of that. That’s why the private school “tax break” argument coming from Labour is a load of crap. It’s state schools that have a tax break because they can reclaim VAT charging VAT.

There are no owners/shareholders of private schools that are run as charities (i.e. about half of them). The money is all reinvested in the schools.

*reclaim VAT without charging VAT.

This is nothing to do with private schools. It’s about the statement Phillipson made, referenced very clearly in the link I posted to a Guardian feature, which suggests no public bail out is possible for universities. So either tuition rises to cover the costs, or another plan sought to plug the deficit. I have not discussed private schools within this thread, this thread isn’t about private school VAT.

I've seen quite a few people on here say their DC are studying where it's cheaper, though I've never asked them to prove their WC credentials. Mine are about to start university in France, where it's free for French residents. Similar to Scotland, I guess - free to residents, but with a minimum period of residence IIRC. Like anything one does to save money, there's quite a bit of planning involved - it's not impossible for working class kids and parents, but it's obviously easier when you have funds already.

Regarding polys, there's a big difference between traditional vocational courses (which I doubt anyone has a problem with) and low-ranking universities selling ripoff degrees which are neither academically rigorous nor necessary for any particular professional career. In my old university town there's a big problem with a Johnny-come-lately crapoversity passing itself off as the neighbouring world class institution, and crowding out genuine students with its contant incursions into the small mediaeval town - basically cuckooing on a grand scale. And all cheered on by successive governments keen to show how anti-elitist they are, while not caring if those studying for genuine degrees are priced out of higher education or accommodation.

Absolutely. I gave an example upthread of a UK family where the son got a full ride to George Washington University by obtaining third party scholarships. Took a lot of planning (from age 14 - largely pushed by the boy himself. His parents initially discounted it as a pipe dream!). His parents are economic immigrants to the UK - typically, that means you are aufait with researching opportunities to death and anywhere in the world where those opportunities may reside is fair game. The boy clearly imbibed their values.

University of Iowa, Idaho etc have scholarships open to international candidates that cover 100% tuition and financial aid towards board (board and spends estimated at $15k per year, with financial aid available for up to $9k of that). Depending on dollar to pound conversion - that brings the affordability into the realms of possibility for a lot of people. And that is just on the surface.

These options will become more available as the kids themselves explore what is out there - even if their parents are unable to see beyond their backyard....

So you are resident in France and are just going on what people on here say about their children in the UK going to overseas universities? I don't think it is something students in the UK are doing unless they already have links overseas. I don't think they would get funding anyway so unless parents are well off and they don't need tuition or maintenance loan it's not an option.

There isn't actually a big difference between the ex polys, colleges of higher education and "lower ranking universities". They are usually the same but renamed. I don't agree that the degrees are all "rip off" either. Not sure what the "low-ranking" university is in your old town (York St John University?) but I bet it has been there for a long time under a different name.

I wouldn’t take so much notice of “ranking” anyway because a lot of it goes on the National Student Survey which I think is pretty worthless. How can students rate their current university when they have nothing to compare it with? Often a university will get a bad result just because a student is unhappy with their degree results. Conversely, sometimes universities get a high mark because the students perceive (probably correctly) that if they give it a good mark it will go up in the ranks and they will look better to employers

Well it is impossible for the majority as inability to access student loans when studying abroad kind of impacts on living and paying fees. It’s an insane amount of money.

And why are obscure unis in the far reaches of Europe better than the unis MN are sneering at here?

Why do you think there are no on-costs for agency staff?

You need to read up on the Agency Worker Regulations. After 12 weeks of employment the worker has to be treated equally as a staff member in the same job: eg pay, holiday pay (that matches what applies to staff, not just the statutory minimum). There are pension costs too.

www.gov.uk/agency-workers-your-rights

I agree with most of what you have written here. Although I'm not sure it's generally the case, there is certainly something in what you say.
Terms like 'wealth creator' and 'thought leader' are pretty off putting to me; often they are just language that very wealthy people use to excuse themselves from paying tax. To suggest that foreigners or wealthy people are more motivated to increase a country's wealth, rather than their own, is simply not true. The great majority of humans are motivated to improve their own situation. Trickle down economics is nonsense.
I also think that you are very over optimistic about many people's ability to take advantage of these US scholarships that you have mentioned and other opportunities. It's one thing if you come from a wealthy, aspirational family such as your own and are privileged enough to have a great education but it's a totally different prospect if you come from a poor family in a deprived part of the UK. Parental education, wealth and aspiration are huge factors in how well offspring do nowadays. Great as these US scholarship opportunities are, they are much more likely to be awarded to children already in private schools or to those with motivated, middle class parents. They are not vehicles of social mobility.

'Once the costs are high enough to be a deterrent however, there's no compelling reason not to raise them still higher.'
I'm not sure what you mean by this statement. Are you suggesting that it is a positive thing to put more UK students off studying for a degree or that, once one is in debt, the amount is irrelevant? Are you simply pro some Universities closing altogether and courses on offer become more streamlined but stating this in a strange way?

'The smart kids are going abroad to study.'
This, however, is a very foolish, off hand statement. You mean the wealthy kids with the motivated parents with good education and spare funds, probably those with foreign links and jobs which can be moved to whichever country is offering the free education. It's pretty insulting to smart kids from less fortunate backgrounds, of which there are many.

Not saying they are. What I am saying is subtly different.

I come from a very poor background - in that my dad grew up in the village walking many kilometers to school with no shoes. So not UK poor - much more poorer than that. How he ended up wealthy is via education. Specifically an African-government funded academic scholarship to a London university. Changed the course for our family

The scholarships I speak about to the US are very competitive - so not available enmasse. However, they are academic or other - so meritocratic. And yes, it tends to be those with means that are aware of these things especially in the UK. Where my family is from - it is the opposite. The lower middle classes and educated poor are the ones that research and look for these opportunities, especially since the Internet. They are indeed vehicles of social mobility for the individual but not the strategy for the country.

I hope you don't take this personally, but there seems to be an aversion to business terms by Brits. It seems to imply some sort of motivational speaker vibe, as opposed to what the words mean at face value. I am in healthcare, so not a financier/business person. Ultimately- I believe our young people can deliver growth to the economy, that people are paid too little in general in the UK, that aspiration is low. And I see many threads on here where people are told they don't need more, not to go for that promotion, one life to live etc. It seems pervasive. Someone needs to be pushing the reality that the more senior you are, the more control over your time and your life and the more choices you have. Hence why I am bullish about changing the culture, expanding minds and horizons. Even if I sound like an American motivational speaker on the take!

@wombat15

Private schools are businesses that aim to make money for the owners/shareholders.

Which schools are these?

Yes most of them.

Hmm. Then I think it would be more accurate to say that your father came from a very poor background but that your own background was wealthy as a result of his educational opportunity. It's not dissimilar from my own father's background in some ways (very bright, poor background and progressed via educational opportunity). I appreciate what you are saying about your own African country but, as you know that is not the case in the UK and these things take a long time to change as the change in society has also happened over a couple of generations at least. There was opportunity, in my father's time, for smart/ talented kids from poor background to be fully funded and 'better themselves' (also hate that term!). It is extremely limited now, hence many people have given up and they have been generally dumbed down and had their means reduced over the past 40+ years. I'm not saying that you are wrong that things could improve in this regard but which politician is motivated to make these changes? The previous government of 14 years did the opposite.
It's not that I have an aversion to business terms. It's what I already explained about the context in which they are often used.
The growth discussion is a different one and I don't think this is the right place for me to expand on my thoughts.

Yes indeed - that is the factual stance - I grew up wealthy as a consequence of my dad's educational opportunity. I still see it as my background because of my proximity to it and our community.

I think the last lot talked a good game - levelling up etc but their policies didn't have teeth and didn't go far enough. I am cautiously optimistic about Labour

But in the mean time, my aim of even engaging in this thread was simply to flag opportunities that exist (however competitive) to those that are completely oblivious of them. Sometimes, 1 person with an opportunity can change a whole community.

When I see people on many threads saying - 'don't worry, they will never pay the loan back' - I bristle because it presumes this young person will go to uni and incur >90k or whatever of debt and never make more than 40k or whatever the threshold is to pay it back. We are not hoping for much for them at all, are we?? Wealthy people have the luxury of not striving to create value for society because they have generational wealth. I don't have that luxury, 1 generation away from stark poverty!

And creating value for society is the term I use because that is how money flows - it isn't purely altruistic. People pay for what they think they need

I don't think many people would say that they came from a poor background just because their father did if they actually grew up in relatively privileged environment themselves. My father and DH grew up in deprived households (by UK standards) but I and my children would never say that means we also did. It doesn't really give you any insight into what it is like to be socioeconomically deprived in the UK today.