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

I have no clue what growing up deprived in the UK is except through work. The entirety of my time in the UK has been very privileged (probably defined as very wealthy by UK standards).

I have deep insights into poverty though - because my extended family (so second/third cousins and those in their community etc) are not wealthy at all and are poorer than whatever definition of poverty we have in the UK. And my early years where there.

I moved to the UK at 14 - so my formative years were there - so I see that as my background I.e. my context.

And I was pretty clear:

'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'

The whole reason I brought up my background (or father's background) is to highlight what educational opportunities did and can do - and how individual aspiration can make a difference.

YABU because you don't understand that VAT is a tax.
It doesn't go to the person charging & collecting the VAT but to the government

So the organisations are unpaid tax collectors, worse even, as they have to pay to have specialist software to send the VAT return to the government.

So it would make no difference to universities if VAT was charged on fees, in fact it woukd increase their administrative costs.

That’s right, but an agency staff member is an employee of the agency not the school.

If an independent school opens for 33 weeks of the year and employs agency staff, the school will only pay the daily rate that the agency charges. At the moment, the VAT makes that unaffordable for schools that can’t claim it back. But with no VAT, no on costs, no pension and no holidays to pay for, it will be cheaper to hire agency staff than to employ staff directly. The winners in this event will be the schools and the agencies.

Yes, that’s what I originally said, but someone pointed out that universities and some private school are charities and are therefore allowed to claim VAT back in the same way that state schools are. I wasn’t aware of this, but apparently it is the case.

I know the sector very well. Like many teachers, I have worked in both sectors during my career. Private schools are a drain on our whole society

I know the sector very well. Like many teachers, I have worked in both sectors during my career. Private schools are a drain on our whole society.

Mytuppenyworth why did you work in the private sector since you despise it so much? How odd to earn a living working for something you so disapprove of.

Wow did you tell the parents who were paying your wages how you felt when you were teaching in private?

That’s total nonsense, of course they can’t.

Universities:

Recover VAT on business activities (commercial research, letting out halls in summer etc)

Cannot recover VAT on anything else.

But universities see the extensive harm such a policy as this would do to their students and would not support it.

There are some inaccuracies on this threads.

Former polys were always higher up in the HE heirarchy than colleges of HE. Polys had a much wider scope for degrees and higher learning. HE colleges until 1992 were under the umbrella of LAs. They offered a few specialist degrees but not many. You went off to the poly for advanced courses. There were teachers training and all sorts of colleges that are now unis.

We see a variety of unis in the bottom third in reputable league tables. The Guardian is an odd one but ones like CUG are more reliable. They consider entry standards, research and employment outcomes. Certainly not just what a few students think. The bottom 1/3 should be reviewed to see what their status should be. Are they an expensive social service or do employers need them? As many students don’t get grad jobs, why are they being subsidised? Who benefits?

Also the loans are not repaid by these students. It’s now 40 years repayment duration so students need to think if it’s worth it. Often it’s difficult to navigate apprenticeship applications and it needs to be streamlined. I think if unis take degree students below CCC and have multiple courses in clearing, are they really needed as unis? I’m sure houses could be built on their sites. We know we need them.

It's very strange because the things you've written really suggest that you don't know much about it at all

They are wrong re the private school charity point. Private schools, whether they are charities are not, cannot claim back VAT at the moment. My DC’s private school is a charity and when the VAT policy on fees takes effect, they will be able to reclaim VAT. They have confirmed that AND the open letter from the headmistress to the Labour Party regarding this policy actually referred to the fact that they couldn’t reclaim VAT at the moment whilst state schools could. They are a relatively large school that takes tax advice from a large firm of accountants so I am confident that they have it right.

You learn quickly to ignore obviously goady responses.

' they are a drain on the economy by spoon feeding children to the extent that they get exams which over represent their ability and independence, meaning that recruiters and higher education institutes need to input so much more to bridge the gap'

Where is the link to the evidence for this? Such a joke. And I can provide evidence to the contrary in the legal and medical fields in the UK

Both sectors serve a need and provide choice. Choice is clearly a good thing for education - even the Sutton Trust documents agree there. Providing opportunity for all is what the UK landscape (and not just primary/secondary school) is not doing well at currently and private schools can be part of that solution

@User8646382 - Where do you think the agency gets the money to pay the on-costs? Magic it out of thin air?

The client doesn't just pay the amount that appears in the worker's salary, they pay the agency more money to cover annual leave, pension etc, which the agency administers. Plus of course the agency costs and profits.

You're clueless.

Translated - private schools are great for those who can afford them and prefer not to send their child to substandard state schools. Everyone else can suck it up. As long as people with resources and influence are benefiting from the current setup, nothing will change.

All you can do is have a moan and make statements that have no evidence to back them.

Misdirected energy. Everyone else should agitate for increased funding for state schools. The current £5k per head is paltry in 2024. Private school parents pay £20-30k (more if boarding) per child on top of paying their taxes and will pay more with VAT. 93% (93!!) of the entire student population use state schools and it seems most of the current government and parliament. It does not get more influential than that! Use that influence and collective action (which is more than the 7% have) to focus on solutions to improve state schools.

I remember a time in the mid-2010s when state primary experience were so good in London that our wealthy friends living in good areas felt no need to send their kids to state schools. Post-COVID, that all seems to have come undone.

Private school parents are not coming to save you - even if they were in state schools, they may simply utilise their resources to support their own children outside of school, or congregate in small enclaves that would make the local primary school feel private in all but name.

It is up to you (the collective you!) to agitate for change in state schools and we have a government that appears to be on the same page. So do that instead of wasting energy trying (and failing) to destroy private schools

Some inaccuracies here...

State universities in the US do not offer full rides to international students unless they receive NCAA (sport) scholarships.
Ivy League schools do not offer NCAA scholarships.

Some state universities offer academic merit scholarships. They do not offer financial aid (basically a waiver of varying proportions of the cost of attendance), and international students are not eligible for federally funded loans or grants.

U Iowa, for example, offers a limited number of merit scholarships to international students, valued between $2k to $15k pa. The maximum award at Iowa would only cover a fraction of the international cost of attendance, which ranges from approximately $50k to $54k depending on school.

The University of Idaho offers two scholarships worth half the cost of tuition (not cost of attendance) to international students annually.

There are a select few extremely selective private universities and liberal arts colleges that offer need blind admission and will cover the full demonstrated financial need of international students.

Getting back to OPs question:
Many universities especially those that do not receive private sector research funding are financially struggling.
The choices are they get more money or cut back their costs significantly (difficult) or go bust.
Getting more money can come directly from the government (difficult given current Government finances and difficult to justify) or the students themselves.
To raise money from the students this can come in the form of higher tuition fees (which is difficult politically) or by adding VAT (which achieves the same thing in a less efficient and indirect manner but politically looks better if you tie it in with the VAT move on Private Schools).

So in summary VAT on university tuition fees does look like the best solution to the current university funding situation.

Thank you for the clarification; that’s very interesting. I own a nursery and it’s exactly the same - I have to pay 20% extra for everything. Of course, most people wouldn’t see it as an extra 20%, but a normal business that charges VAT and a state nursery would not have to pay it, so in effect it is.

You are wrong. Again - there are multiple scholarships and funds that are available to international students.

Using the University of Iowa as an example - max university scholarship is $15k for international students. There are additional scholarships available depending on actually major - some up to $11k. In addition - as explained earlier, there are third party organisations that offer scholarships/grants. International tuition fees are circa $30k at UoI. Do your research

When I went to school in the UK - as an international student in med school - I paid my fees. However, I also accessed scholarships and funds from third parties because I researched it. My entire 3rd year was funded by a scholarship that involved writing a winning essay. I won 2 others that secured £1k and £2k separately.

I actually take pride in raising funds for education - not just for the money raised but the feeling of achievement they provide. It makes a young person feel they can do anything and their ideas are worth something in the world

This is not entirely correct. The first batch of sales were to a private company, but the second batch (where the programme is halted) was selling the cash flows form the loans in a securitisation structure, but government own the loans still. If the cash flows are lower than modelled then investors get less than they expected and vice versa. The loans are not worth as much as they look on paper because of the RAB charge (ie how much isn’t actually paid back). Government accounting on this is tricky for various reasons.

It doesn't.

And the scholarship I applied for, that paid for my entire 3rd year - none of my home student peers applied - at least from my uni. They had loans you see. I knew I was saving my parents £30k so it was very much worth it to me

And you’re very rude. Obviously a teacher.

I own a nursery so deal with agencies and agency staff all the time. The nursery or the school (the client if you prefer) does not pay holiday pay, etc. It certainly pays inflated rates to the greedy, grasping agencies who are mainly to blame for the recruitment crisis in the sector, but I digress.

I also think a DC who only aspires to a nearby uni or similar northern uni, isn’t going
to look at the USA. Simply not on their radar and they won’t meet anyone else who goes either. The ones who go to US unis are often the rich who don’t need a scholarship
or money, those with US parents, or those on sports scholarships. The incidents of deprived dc going is, I suspect, very low. Just not on the radar. Neither would they go to Europe where our loans system doesn’t apply and there’s no discernible advantage.