Michael Gove proposes imposing VAT on private school fees

[OCSockOrphanage]

In an Op Ed piece for The Times today (Fri 24 Feb), teaching's Nemesis suggests that school fees should be subject to VAT at 20% so the revenue can be ploughed into improving state provision.

Link

Opinions? I reckon there will be a few?

Omg that photo. He's such a smug self satisfied twat.
I'm not sure what the answer is but state education desperately needs more money. Personally I don't think adding VAT on private school fees is the way to raise funds.

i wonder how many private school pupils would have to go to the state sector to cancel out any money gained from a 20% VAT charge on school fees?

This is the school Michael Gove attended.

It wasn't free.

"@scaevola - I'm not saying that vat is a luxury tax. I am saying that private education is not a necessity and so there is no moral argument for it to be exempt from vat"

Again, this is confusing the point of VAT. It is a general tax on consumption - 'necessity' (though many would argue that education is a human right) or type of provider simply doesn't come in to it.

Education is exempt from VAT across Europe. (Note a exempt, not falling within the regime but zero rated)

Now, whatever the successor regime to VAT is, then perhaps education could be taxed. But we don't have leverage in the EU to effect a change to the VAT regime.

Could someone who has access to the full article answer the question from AnotherNewt?

Does he actually mention VAT on fees? Or is he talking throughout about the ending of charitable status?

They are very different issues.

Molly

It's been well publicised that he was on a free place (scholarship/bursary). The cost of the school is irrelevant to those thi receive free/discounted places.

Presumably c.20% of current private school pupils, and if the classes I have taught are anything to go by there would likely be more than 20% of pupils affected.

Even elite schools are not chock-full of the super rich. They are remarkably economically diverse places. I have known kids be best friends when one has a Dad who is a Central Asian oil tycoon and the other has a Dad with a local job who also works every evening and weekend as a taxi driver to cover the fees. Kids have far fewer chips on their shoulders about wealth and class than adults.

The anti-private school argument is logically floored. People have a right to educate their children where they want to and you can't force them to use the state system. You can only attract them to it by making it more desirable. Seeing all good quality education as desirable and aiming to make sure it is accessible to all British tax payers, without them having to go cap in hand for a bursary and experience what some consider the humiliation of having their finances scrutinised, has got to be the way forward. A local prep school headmaster told me that his school archives show that the village postman sent his child to the school 60 years ago. Boarding fees per child are now considerably higher than a significant number of professional salaries net of tax - doctors, lawyers, accountants... The fight isn't to force these people to make difficult choices like re-mortgaging their homes and working two full-time jobs to scrape the fees together, then shaft them with a 20% increase.

The fight is to remind these schools that they were not created for a global elite and it is time they focussed on their core local clientele and their raison d'être by being more affordable. School fees are probably the only cost to have outstripped property price increases during the last decade. They often have better facilities than universities. They can be truly extraordinary places, but at the expense of families who have been priced out of having the choice of an independent education.

Gove is a walker... hate the man!

Let's face it the anti private ed brigade on here are not aiming their vitriol and Mr and Mrs MC who sacrifice things, downsize their homes to send their two kids to a good solid private day school because they're disappointed with the state school they were offered.

Hmm, not sure that I agree with you there, Happy. There are a few of the anti private ed on this forum who have a deep loathing of all private school parents whatever their financial position

I have the article at home:

Charitable status, and the tax exemptions it offers, is very far from the only way the state subsidises private education...'.Private schools are VAT-exempt. That tax advantage allows the wealthiest in the globe, to buy a prestige service that secures their children a permanent positional edge in society at an effective 20 per cent discount.

Sorry, have to insert "fees" after Private schools.

You can not hold anyone, even Michael Gove, responsible for their parents' decision to send them to a private or independent school. You can however hold them to account for where they send their own children. In Michael Gove's case they are state educated.

Thanks noblegiraffe I hadnMt spotted your link.

It's broadly correct that the £150m is the estimated lost VAT on charitable status from the non-educational activities ie nothing to do with fees) is outweighed by the estimated spend of £350m on benevolent activities (in addition to the actual provision of education which is a charitable aim in British law - I think in every home nation as it predates devolution). So that's £200m output lost.

There is no proposal on what a new law would look like. Is he just saying close them (ie stop them being charities in the only way the current law permits)? If there is to be a new law, what would its general thrust be? And would it alter the definitions of what counts as a charitable aim? Because if so, then other charities need to have a chance to express a view (on both the general concept and idc the specific proposals) as it could have an impact on what they do.

Workingmum, blimey I would give my right leg for that many TA's to support my EAL pupils, although the classroom would be a tad full
Just more nonsense from the has been Gove.

" All schools and universities across Europe are VAT-exempt. That tax advantage allows the wealthiest in the globe, to buy a prestige service that secures their children their education regardless of how educational services are organised in each country "

Fixed that for him.

At the moment these schools get a reduction in vat because of their dubious charitable status. This is subsidised by taxpayers so that the 7% of students that attend can benefit from the private school social networks and cachet that others can't. It is morally unjustifiable and has led to a society where you are often financially better off thick and rich than clever and poor. The least that should be done is that these institutions should pay their way as a proper business.

His suggestion doesn't stack up. Smaller schools would close as parents would be unable to pay 20% more. Thus more pressure on an already stressed state school system. The internationally mobile oligarchs he refers to may choose to send their children to school in other countries. It reminds me of the promise of cash for the NHS on Brexit

How much does the government spend on state schools per child?

The cheapest private school near me has fees of about £11,000 per year for secondary school age pupils (cheaper for primary age). 20% VAT on that is £2,200.
I'm wondering if it's cheaper for the government to subsidise these children's education (if we call not charging VAT a subsidy) or if it would be cheaper for the government if these children were in state school and getting their education state funded.

How much do private school fees have to be for the VAT "subsidy" to outweigh the cost to the government of a state school education?

If this were to happen, then the private schools could always absorb the costs themselves and not pass it onto the parents.

State schools are already having to make cuts that render them unable to deliver an effective education so private schools could hardly argue that the government's actions should protect them from this scenario.

Less than half that. What you are talking about is like the assisted places scheme that was scrapped for new entrants in 1997. It kept quite a few small private schools afloat, but was a political hot potato because some people are anti independent education as a matter of principle.

"Even elite schools are not chock-full of the super rich"
Genevivia have you ever been to the likes of Eton met the parents? Although a significant number are now on bursaries the vast majority are paying at least £36K+ a year in fees and as I said above most will have 2 or 3 children either at Eton or similar. You don't earn £108K+ (if you have three children and its not uncommon), and thats before extras, and pay that sort of money out of your after tax income by working evenings/weekends as taxi driver.

Yes - I know and have known many over the years, both professionally and socially. And there is a huge diversity. The international super rich, the London exceptionally rich, the parents who run their own businesses successfully, but also the highly educated doctors and lawyers who have remortgaged their homes and are getting help with the fees from their own parents, but know they will not be in a position to offer the same help to their grandchildren. It is not uncommon to hear parents say 'our children will probably be the last generation to attend an independent school'. There are plenty of parents who present themselves in a way that means they don't stand out, but who make huge sacrifices to send their children to schools including Eton.

I'm not disputing there's some degree of diversity at schools like Eton (in terms of wealth) but the vast majority are wealthy by most people standards. Lets be realistic here "highly educated" lawyers/doctors are not working as taxi driver at the weekends to pay Eton's fees.

Wouldn't a lot of parents with VAT registered businesses claim back the VAT?

Businesses can only reclaim VAT on business expenses. Private school fees aren't business expenses, so no, they wouldn't be able to.

Has Gove thought about all the input VAT that the private schools would then be able to reclaim on their costs? When the school is exempt from VAT it can't reclaim it's VAT on costs - if they standard rate it, the schools can then reclaim the VAT. A lot of schools would actually be able to start reclaiming VAT if they had expensive buildings to maintain or new buildings being constructed.