Is anyone else worried about the effect of rising private school fees on state schools?

[BabyIcecream]

Where I live there already aren't enough school places. Three big state secondary's, one is catholic, they are all over subscribed and bursting at the seams using old buildings with not enough funding.

Ive seen reports that at some private schools upto a third of pupils might leave if the fees go up due to VAT.

I'm worried about all these extra pupils needing places, DS already finds his school overcrowded and whilst I don't agree with private education putting extra pupils into the state system is just going to further disadvantage our children.

Unless money raised by increasing private schools costs is going to be used to fund state education? Does anyone know?

Seems he’s finally taken the advice of a lawyer that knows what they are talking about!

twistyizzy · Today 08:39

@Barbadossunset because as with the VAT, it was a good soundbite to persuade gullible people that Labour are left wing and that they care about equality of opportunity for all. Which they blatantly don't.

Yes.
However since he’s supposed to be this hot shot lawyer you’d have thought he’d have known about the consequences and maybe phrased it more ambiguously - “charitable status on private school is wholly unacceptable and the Labour Party will be looking into ways to remove this appalling stain on the nation”. (Whispers to aids “that’ll put the fear of God into those poshos, tee hee”.

How long before they admit they somehow need to make an exemption for no VAT on education just for private school fees but allow nursery/wraparound/activity fees to remain VAT free and this is not as simple as they have been publicising.

2024/5 academic year is very very unlikely…

Labour drops plan to strip public schools of charitable status - BBC News

Labour drops plan to strip public schools of charitable status

Looks like they have backtracked now and it won't be happening. The right decision I feel. They were not going to generate the extra tax revenue they originally publicised.

@Mia85

"
They were never going to remove charitable status, it was too complicated and would have been a legal nightmare. They either knew this and cynically used the line because it plays well in public, or they hadn’t thought this major policy through. Neither looks good, especially when the education of thousands of children is at stake"

++++

This is rather concerning. If Keir Starmer and the Labour Party can't figure this shit out in the 12 months before making an announcement yet a bunch of mums in their "spare" time between holding down a job and crowd controlling their DC can figure it out in under a day then that is not exactly a vote of confidence in either Starmer or the Labour Party's ability to govern the country successfully.

Ahh who to vote for incompetent Conservatives or incompetent Labour. Either way we are screwed.

It doesn’t surprise me. Anyone with sense can see their policies have holes.

Empty promises - they just want the votes and will say anything to get attention, even if they have no intention of following through.

Labour have made all sorts of pledges against private school parents in the past and amounted to nothing. I have strong suspicions this will be the case here - adding VAT to other aspects of education will cause far too much backlash. The furthest this is likely to go is dropping the relief on business rates

@EasternStandard

"It doesn’t surprise me. Anyone with sense can see their policies have holes."

+++

Seriously though how can a bunch of mums of varying backgrounds figure this out in under a day but Labour and Starmer can't.

It is really scary that this level of inability and incompetence will be governing the country in less than 18 months. And I don't think the Tories would be any better.

I am starting to question the point of democracy itself.

Removing charitable status was not going to work, nor was it ever going to make HMRC proper money anyway and it was going to lead to private schools that are charities not offering pools/bursaries etc. And it was going to have some strange consequences with where any wound up money on real estate was going to end up with all sorts of delays etc.

However, if they are going to go ahead with VAT and try and do that bit - ask yourself why a private school would want to remain a charity? Why would they want to have to charge parents extra and still provide all of the above? So the buck is passed back to the schools to voluntarily deal with their charitable status rather than it being removed by government. Some schools have already said they are going to give it up if the government charges VAT. The two are not as separate as people may think. Some of the schools probably want to become businesses if they are going to be charged “unfairly”.

Charging 20 per cent VAT on Education is illegal in the EU and no other country worldwide does it at that huge level. So let’s see what happens. So that is where the ‘unfair’ is coming from. There is simply no precedent for this kind of thing in any country, let alone a country famous worldwide for its Education system.

Some schools have already said they are going to give it up if the government charges VAT. The two are not as separate as people may think.

Could you explain this bit please Araminta?

I guess everyone would like the state schools to be as good as private schools but that would mean a lot of extra funding for state schools. Currently in the UK we spend £57bn on the state education system, per pupil that works out at about £6.5k / year. The annual fees for a child in private school vary a lot (in London it can easily be 25k a year) but it averages out across the country to roughly twice what it is in the state sector. To match that we would obviously need to double the funding of the state education system; ie. raise an extra £57bn from general taxation. That would equate to a 7% rise in the total tax take, which wouldn't be easy to find without upsetting a lot of people!

I am not sure if your merit comment related particularly to Private Schools but you could argue that private schools are the exact opposite of a merit based system - whilst some have entrance exams they are typically not onerous (except for perhaps in a few very prestigious organisations). Access depends entirely on their parents ability to pay, no merit required from the kids at all!

“Some schools have already said they are going to give it up if the government charges VAT. The two are not as separate as people may think.”
@Mia85 - Some head masters have been telling parents this, according to some of my colleagues who use private education. So it is anecdotal. They might just be blustering legally unqualified marketing idiots too though! Because my colleagues being lawyers were also ruminating how exactly it would work in practice and at what cost and what the trustees would have to say to this (the ones in the big schools are well known connected names with their fingers in politics too).

Thanks Araminta! I just hope that there's a proper evidence-based review of this policy before they do anything. If they just try to change the VAT regs to 'do something bold' when (if) they get in they are going to create a huge mess.

“If they just try to change the VAT regs to 'do something bold' when (if) they get in they are going to create a huge mess.”

Well precisely - what usually happens is all the small businesses providing extra curricular to state school DCs end up getting shafted somehow if their turnover is above the VAT threshold.
A bit like a whole lot of swim schools massively struggling during Covid because they still had to pay back VAT for the year before, got no help etc from Government. And all in a country with a sea, where every child should really be getting high quality swimming lessons for free from the state!!!

I’m not sure it’s that easy to remove business rate relief. The business rate relief is given to charities, and some schools will continue to be charities. It’ll be another thing which the Labour Party will realise won’t work in practice.

I don’t think charging VAT on school fees is quite as simple as they think it is. What about nurseries which are part of private schools? Will they charge VAT on those fees but exempt other private nurseries? What about university fees? Music fees? Will private schools have to charge VAT on music lessons, but everyone else would be VAT exempt? What’s to stop private schools employing certain teachers and tutors in a way that means that they’d remain VAT exempt?

Would clubs offered outside the normal school day still fall within the “welfare services” exemption? How would they charge VAT on those services provided by private schools, but exempt all other providers? What about boarding fees? They would also arguably fall under the same exemption.

Sometimes it helps focus your attention if you have skin in the game. It seems that the poor folks living inside Grenfell Tower had a better understanding of the safety risks than the bureaucrats sitting in their offices at the KCTMO.

I wholeheartedly agree with your last sentence.

Politicians aren't the brightest really. Gordon Brown triumphed a lower 10% tax rate and then a 0% starting rate for small businesses, but didn't appear to notice that it was only for limited companies and most small businesses weren't limited companies. Then he was apparently shocked that hoards of small sole trader businesses converted themselves into limited companies "just to save tax". Well, who'd have thought it? Obviously not Brown, nor his Paymaster General Dawn Primarolo who is on record in Hansard saying she didn't think small businesses would incorporate as limited companies "just to save tax". Funny how top civil servants and politicians didn't realise sole traders etc would incorporate as limited companies to save tax, but "uneducated" people like window cleaners, gardeners, etc worked it out pretty quickly!

Politicians and senior civil servant advisors are often incompetent fools. So it's no surprise that they seem to have been unaware of there not being a fixed link between charitable status and VAT!

If only the labour leadership had access to a competent lawyer, who could’ve pointed out the risk of unintended consequences of piecemeal amendments, however well intentioned, to long established charity laws, prior to making big policy statements.

They surely have sought appropriate legal advice on how how their revised plans to focus on only on amending VAT for one specific area of children’s education could be implemented, given education is VAT exempt, without unintentionally dragging third level education, tutoring, music lessons, sports coaching etc. into the reach of the VAT man.

They surely would not make the same error of judgement twice. Would they?

In theory, they could make a decision on all these items and craft a law which addresses them precisely. Charging differently shouldn't be a problem; when you go to a grocery store some items are VATable and some are not.

In practice... see my previous post. I think we'll be in for years of biscuit vs cakes lawsuits.

Exactly, they've not thought it through. The entire VAT system is based around the nature of the goods and services are, not based on who provides them. They're going to have to do some pretty significant re-writing of VAT laws to make it so that education provided by a private school is VATable but education provided by a state school/academy school, or music lessons, gym lessons, dancing lessons, etc remains exempt.

But that's because of the different natures of different types of food. A Mars Bar is VATable whether it's sold by Spar or Aldi, an orange is zero rated whether it's sold by Londis or Tesco.

So, "education" should be either exempt or VATable according to the nature of the education, not who provides it. They'll need to do some pretty major drafting changes to find ways of saying GCSE Maths tuition is standard rated if provided by a private school but exempt if provided by a state school or academy (after all, academies are effectively independent/private schools).

I think it’s more complicated than the biscuits v cake argument, which I understand. The difference there is that all providers have to charge VAT on a cake. I’m not sure how they could say, as an example, that after school care is chargeable to VAT only if it’s provided by certain organisations.

If Eton incorporates Indoor Football Ltd for Year 9 House 1 of 25, Outdoor Football Ltd for Year 9 House 1 of 25 and the services provided are below the VAT threshold, then will they have to charge VAT on those football services if itemised specifically to parents? It is very cheap and easy to incorporate a Ltd company and set up service contracts.

Many parts of a private education could be separated out.

You have to laugh really. I would have thought that any competent politician would have taken at least basic legal and tax advice before announcing such a major policy, but they clearly didn’t. Only now are they realising that the policy wouldn’t have the consequences they thought it would.

Parents on Mumsnet have been pointing out for ages that the charity and VAT positions are separate, but yet the potential future leaders of our country seem to have only just realised this.