If you have kids in private education, what is your school planning to do re VAT?

[Ladychaise]

I have two kids at a London independent school and currently just about scrape the cost of fees. Labour’s intention to add 20percent on the fees would make it impossible to keep them there, if all that cost goes to us - it is a worrying time.

The school’s bursar is being lovely but it’s very much a ‘let’s cross that bridge when we come to it’ take on it! I get that we don’t know for certain if Labour will get in or how fast they will implement this - but surely schools should be planning for this and working out how much of the VAT, if any, will be ‘covered’ by the school?

Aware there is a lot of uncertainty but does anyone else’s school have a plan in place? Thanks so much

A lot of those who see private education as a “luxury” are those that have an excellent state option. A huge proportion of parents don’t have that option. If the state could provide my children with an equivalent excellent state school, I’d happily use it and save us the school fees. I’d probably see private education as unnecessary if I had the London Oratory on my doorstep.

Agreed on reclaiming input VAT.

If they make "savings", has anyone accounted* for the impact on teachers and support staff, payroll taxes and impact on the broader economy, and what those contractions and risk of unemployment mean for public finances?

*no, neither the IFS nor the Labour Party has given them a mention, although NASUWT has expressed significant concern.

How funny that that is what you thought my comment meant.

All I said was that the only way a school could "cover the VAT" is by reducing their fees - and that those are the ways that a school could potentially manage to do that.

I did not say that most schools would be able to make savings; I am fully aware that a lot of indie schools are small and running to very tight margins already. Some, however, will make savings. Mine is one that has said that is what they will do.

And any school that has to register for VAT, however tight their margins, will make some savings by being able to reclaim their input VAT (assuming that Labour don't do something really stupid with the fundamental principles of VAT, of course...) Not a huge amount, as wages and salaries are not subject to VAT, but some. Which could then be used to reduce fees slightly to partially "cover the VAT".

Well exactly @MisterChips. Staff cuts, or cutting back on capital projects.

Of course, the argument will be that the teachers can go and work in a state school instead. Except that (a) they might not want to (b) I know at least one state head who says they never hire ex-private teachers because they always struggle with the move to state and (c) private schools aren't going to be cutting core subject staff, are they - far more likely to stop offering subjects like Latin or Ancient Greek, neither of which there is a huge demand for in the state sector.

It is the one big policy Labour has that I struggle with, obviously because it affects me but also because what they are "saving" is a drop in the ocean and no one has told us how it would be spent to better the state sector. I think it is having an adverse affect in that it targets MC people with kids with SEN, who actually want to vote Labour, but because of this may have to reconsider employment, moving for schooling and taking away much of the support they pay for with private. Surely they don't want more kids bunking off school with SEN being causal and parents out of work having to home school because of it? It really is a policy for the super rich and against MC, which is an odd direction to go for Labour in a CoL crisis.

I do realise it isn't something super rich would vote for, I mean they will not be particularly bothered by these taxes and the schools like Eton/Winchester etc are not in danger of closing down. It helps their brand because it increases their selectivity.

Indeed, actually I'm going further with this one. Job losses will be material, they won't be re-hired, and that will hit the public finances hard. To explain:

It's not reasonable to assume full rehiring and replacement of tax revenues paid by redundant staff as schools contract, or close:

1. It would be odd for a start to assume full re-hiring in face of a government-induced sector contraction
2. ....especially if the redundancies are in the heavily-resourced sector and you're depending on the less-resourced sector to re-hire; staff-pupil ratios are about half (per IFS) so at best you'll re-hire half the teachers as pupils migrate across
3. Can't assume motivation, location, subject (Latin, as you say?), capability or qualifications; observe hiring problems and hard-to-fill vacancies are at "certain" state schools that are MOST different from private school environment.
4. Most likely re-hire is in expansion of tutoring...which is already happening and well-advertised...a sector that doesn't charge VAT (for now) and is well-placed to underpay tax by taking cash-in-hand or payment-in-kind
5. If support and extra-curricular staff are redundant, far less opportunity for re-hiring in state schools
6. Rural schools are prominent, even dominant, local employers. If they contract or close there is literally no other employment.
7. State schools generally pay less so even if somebody is re-hired, they'll pay less tax
8. The tax "upside" from re-hiring can easily be outweighed by anyone going on lower income tax credits or benefits. Teachers aren't obvious benefit claimants...but what does anyone think that 51-year-old Latin teacher is actually going to do?

Finally, as a point of pure humour, the Labour Shadow Chief Secretary to the Treasury told us all about terrible unemployment consequences due to public sector job cuts 2010-2015. It was never a "thing" to assume the private sector would pick up the slack. That was a certain Rachel Reeves who, being a Keynesian, would be very wary of expecting re-employment as demand contracts.

The irony, it's worse than you say.

The tiny number of private school families that actually DO want what everyone tars us all with...a snobbish and exclusive experience for spoilt darlings....will get exactly that as us MC oiks get weeded out.

What other part of the story is there that would inhibit a tutor from India teaching student online to pass maths GCSE or A-level? Past papers and the curriculum is the entire story in my mind.

This is exactly my situation. Moving DS to private school this year due to dyslexia diagnosis that has been completely missed in his state school. We're not wealthy but can afford his fees by making compromises. He has a younger sister who we would like to send for secondary in 5 years time but VAT will probably make that out of reach for us. So we're going into this knowing that which is hard. I will never vote Tory (Scottish) and now feeling a bit unsure how to vote.

Indian parents in our superselective grammar have been using tutors for years. It is not new. Why else does everyone think all the London superselectives are full of Indian children? It is in their culture to tutor either themselves or use local tutors or tutors from back home online now. Many grew up having tutors themselves. It is nothing new for this group but may be expanded more widely as it would be a great business opportunity.
Seneca/Atom etc all the websites now also have tutor functions where you can book your own tutor. The tutoring industry is massive and growing and so is the online learning platforms etc.
Going for private schools is so last century. Typical politicians. Bit like the Tories reinvigorating their old EU hatred and where did that lead us?

It is correct that private schools employ loads of people who pay taxes and those that are charities reinvest their profits into employees or buildings (aka builders, maintenance staff etc). So they do contribute to the economy and do create a social good. The biggest lie of all is painting education as luxury when it is a social good. It makes a blind bit of difference if you tutor your children yourselves as a highly educated person or send them to private school or hire an external tutor. These are all good things where parents are making sacrifices of time and money to further their children’s education.

Yes all education is a social good - whether it be education for prisoners or educating children of the very rich. That has been English law back to the 1600s

"The first definition of a "charitable purpose" was found in the preamble to the Charitable Uses Act 1601. The standard categorisation (since all previous attempts to put it on the statute books were "unduly cumbersome") was set out by Lord Macnaghten in IRC v Pemsel,[9] where he said that "Charity in its legal sense comprises four principal divisions: Trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community". "

I remember studying it at university and cases about things like if a particular order of nuns retreat and just pray and if that had been held to be charitable or if they had to go out and help the poor or teach to be charitable.

On the subject of teacher redundancies. There are 76000 teachers in the private sector. The IFS study assumed something like 5000 would be made redundant, but they also assumed only 3-7% fall in pupil numbers. Other studies (and common sense) predict much larger falls in pupil numbers of up to 25%. That would translate to more like 15000 teachers being made redundant.
It seems likely that preps will be hit disproportionately hard - people will go to extreme lengths to keep kids who are already Y10 or above in school, and the end will be in sight for them. That suggests that school closures and redundancies will mainly affect non-specialist primary teachers.
The other issue that will affect how this pans out is a falling birth rate and contracting school cohorts. Numbers in state schools are predicted to fall. In practice, this may mean that there will be some room (though not necessarily in the right areas) to mop up the kids displaced from the private sector. But that just means that state schools will be able to retain their existing staff. They won't be looking to hire any of those made redundant from closing private schools.
So in practice the likely consequences are:

1. a large number of displaced children ending up in state schools that may not be close to them, necessitating long commutes (and some parents may have to give up work just to get their kids to school and back)
2. a large number of long-term unemployed teachers (something like 10000).
3. some of the kids/families opting for home/online education, and some of the teachers made redundant gaining employment in online schools/tutoring. So in effect you'll end up with some of the same teachers teaching some of the same kids, but all with a huge amount of unnecessary upheaval.

There’s a huge shortage of teachers in state education at the moment.

Not in Scotland

The IFS study also made the bizarre assumption that parents who couldn’t afford VAT on school fees and put their children to state school would then spend the same amount of money (that they didn’t have) on other VAT items. Because parents are bound to decide it is worth making additional cut backs/spend savings/remortgage the house to pay for luxury goods but not for their children’s education… More likely they will spend the (VAT-exempt) value of school fees pushing up house prices on good state catchments, or cut back on work to give themselves a better quality of life.

I still have 2 children in private schools - different ones. We have just been notified one set of fees going up from September by just under 5% and the other buy just under 9%!

With VAT increase looming I do wonder how many schools will be able to survive as goodness knows who will be able to pay the fees in 5 years time.

There are a lot of false assumptions in the IFS report which is very short form. I fear politicians are using it to cover their own back side and the IFS must surely know by now that the report is not that accurate and being used incorrectly and too much reliance is placed on it? In particular, people are stating that the fees increases in the last 2 years post inflation and cost of living and teacher pensions are so significant that it changes the whole analysis?

Moreover, politically I do not understand how a party that is presenting itself overall as a slightly left/moderate party is going for such a far left and illogical policy? It is far left as has been shown by Greece and as no other country worldwide taxes education at 20 per cent VAT it is a complete anomaly and a bit crazy.

I cannot remember so many threads last time when Corbyn stood and wanted to close all private schools down. People simply did not take him seriously. The situation is different this time because it is a near certainty that Labour will win.
But why are they going for such a far left policy that will harm education and teachers? I just do not understand the rationale behind it.
Have they even thought about how the foreign press would react if it does end up leading to mass closures of private schools? What if foreign students read about it and fear VAT on uni fees and stop coming? Logically speaking it just cannot be worth the numerous conceivable risks given how little cash it is predicted to generate on the basis of even the false assumptions in the IFS report.

I think if we had not experienced Brexit I would have dismissed this as never going to happen because it does not stack up on so many levels. However, because we have had such recent and crazy politics I just do not trust any of them to follow through with rationale and moderate governing?

I fear it is red meat to the left because they are going to be so disappointed in other areas because labour won't be able to afford what they want. Same reason even drag hunting is being banned.

Well this type of culture war politics is really dangerous. It undermines democracy and leads to most sensible people disengaging more and more with politics and their own country/community. If Starmer is sensible he needs to control the loonies in his own party. The job of politicians is to put what is in the best interests of the country and its people first, not the party as a whole and to just win based on lies. They are going to win anyway so don’t need to follow irrational policies.
It is still some time to go until the election so we can only hope the leadership grows a backbone.

The IFS didn't mention the impact on teachers. Effectively they assumed, by omission, that schools losing 3-7pc of pupils and thus revenue (which they acknowledge won't be evenly distributed) won't cut expenditure by as much as 1p. The Adam Smith paper assumes every fall in pupils brings a proportionate cut in headcount, which seems more reasonable.

We have been through the several reasons why private school teachers can't be assumed to be hired into state schools. Some will. Some won't want to. Most won't match vacancies for location, subject, aptitude. Private schools will ditch the less in-demand subjects and the least effective teachers. Etc.

Very likely they will do tutoring for ex-private school kids, and very unlikely 100pc of that pays income tax.

Worse, some support staff will end up on benefits; school closures in rural areas will decimate local employment.

Our prep and senior schools have told us that they think the fee increase is likely to come in near immediately on Labour’s election and that labour won’t wait for the new academic year. The schools have also confirmed that they will need to pass the VAT to us and will try and not add any other fee increase next year.

We will spend less on clothes, cars and every other expense to cover it. If it comes to the point that we can’t afford it, we will take reduced hours or lower paid jobs to make the time to organise tutors and extra curricular activities currently managed by school and may even home school over state as our children are bright and quiet and very likely to be bullied.

If we leave our very well paying jobs for this our roles will be absorbed to save money. Between us, we pay a significant amount a year in income tax - supporting an education and healthcare system we don’t use. Clearly labour would prefer us to be reliant and a burden on the state.

We will spend less on clothes, cars and every other expense to cover it.

All things which are subject to VAT at 20% which the state now won’t benefit from.

we will take reduced hours or lower paid jobs

Thus reducing the amount of tax you pay even further.

Clearly labour would prefer us to be reliant and a burden on the state.

Yes, because having high tax payers who don’t use state education and barely use state medical care (who are net contributors) is “unfair” and “elitist”.

The policy is a shortsighted one.

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We are hard working tax payers with no inheritance and this will affect us disproportionately compared to wealthy folks.
https://www.change.org/p/stop-labour-from-adding-20-vat-to-private-school-fees-and-forcing-kids-to-change-schools

It isn't on their latest priorities manifesto, so I still think there will be time for them to realise it isn't a vote winner.

I also think enough of a fuss can be created about the elite grammar schools so many of their own party use - private without the pricetag. Fairly sure the comps in rougher areas don't get the same equipment and opportunities their kids do in the central London grammars and that is state funded with almost zero FSM pupils after selection.