If labour win the election can they introduce VAT immediately?

[londonparent321]

(For school fees) Or do they need to go through the courts which could take years /never happen?

‘easily find savings of 5%’.

this has to be my favourite quote of the thread🤣🤣

At the moment private schools essentially get a tax break. The proposal is to remove that tax break.

No one is going to stop you from sending your kid to private school. They’re just going to treat that choice as neutral and therefore subject to the same taxes as other spending choices.

There is no wider public benefit to be gained from your kid going to private school, so you don’t get a tax break for doing it.

I expect to pay VAT on my spending. I’m not sure why people who spend their money on private schools think they shouldn’t.

@SaffronSpice ,

You are very good at spouting a lot of invective, but I haven’t seen a shred of evidence to support what you are saying, nor any understanding of how school budgets work.

There has been consolidation in private schools going on for years, especially primaries.

The SLT, administration and marketing costs in private schools work much better if schools have 500+ pupils. In addition, most 6th forms break even at best, especially if they try to timetable rare combinations abs subjects with few takers (Latin and art history, for instance, or even Physics at girls schools). You can make savings here for one.

So, the VAT rise may well force some smaller schools to close, but this is just hastening the inevitable, as the consolidation trend isn’t going to end.

Labour could only do this because we are out of the EU. It is illegal in the EU to tax education. Most countries don't tax education because education benefits the whole of society and some countries actually give a tax break for paying private school because it reduces the burden on the state.

How is the current situation giving a tax break to private fees payrds though? We still pay our tax (a lot at higher rates of tax) to fund state education.
It all depends whether you believe that education should be taxed. It will also mean that other providers such as tutors, private sports clubs, music teachers etc could end up being made to add VAT to their fees.

Europe would disagree with you there.
Spending money on a handbag isn’t the same as spending it on education.

Lets not forget private SEN students too, Labour has already announced they will not be exempt

How is it a tax break to the schools?

If anything, it is state schools that currently get a VAT tax break, as they are able to reclaim their input VAT. This is due to a special arrangement with HMRC, as normally a body providing education would not be able to reclaim VAT. Which seems to me to be a genuine "tax break" for state schools.

I am not saying I think this is wrong, by the way, I think it is excellent that state schools can do this - I'm just pointing out the facts.

Of course, if Labour make education a VATable supply, then private schools will also be able to reclaim their VAT.

If you mean it is private school parents that are enjoying a VAT tax break, then I would ask whether you consider that you are getting a tax break whenever you buy bread, milk, or printed books?

As a concept, adding VAT to education of any sort is just wrong, IMO.

If it happens (that's a big if) then it won't be until September 25.

Also the state have to find you a school but not necessarily going to be a school you'd want your dc to go to.

So how does the UK compare to the EU in terms of educational inequality? Do EU countries have as many children in the private sector as the UK, they don't as there is not a need for them, even where private schools are used, they are not organised in the same way and do not exist to simply leverage advantage over other children; for the ultimate aim of producing adults that inhabit the world of the super elite. Private schools in the UK are akin to the purchasing of a designer handbag as the parents and students are customers, they are purchasing a product based upon how it ranks against others to provide access to being a member of the elite rather than for receiving an education, a learning experience. If this wasn't the case why have fees been able to rise exponentially in contrast to the demise of public funding for state schools. Equally, the private schools using their branding to establish themselves abroad, it is a lucrative business first and foremost because these are names that give you access to that elite club, the education is secondary!

@Newbutoldfather - it's punitive because the intention of the policy is to damage a sector Labour are ideologically opposed to, not to improve Education.

That's the reason they haven't bothered to figure out how much it will actually raise: because they don't care. Raising money isn't what it's for.

It's blatantly obvious that most parents who are priced out of private won't spend the money on other Vat-able products. Most of them will reduce hours worked since the obvious way to cut costs if you can't afford fees with 2 parents working full time is state school + lots of extracurriculars: but that needs a part time parent for logistics (plus having a part time parent is much less stressful, so if you no longer need the income then you'd do it). Any left over likely to go into pension.

So it's not just the VAT not being paid, it's the income tax not being earned. In order to afford £20k fees, you need to earn £33k pre-tax income. £20k goes on fees and £13k to the tax man. So for each child whose parents decide to stay part-time and send them to state school, the government is £20k worse off pa. £13k in reduced income tax and £7k to educate the child. Or even worse: the government could be up to £32k worse off for a single child if the parent was earning around £125k (accounting for the 60% tax window) which is actually a pretty likely income level to be hit by this.

Doesn't balance too well against the VAT gained for each child staying. If you're right that schools will claim back 5% VAT and reduce fees by a further 5%, then assuming fees of 20k that the government nets £2.8k pa per child.

Add in the cost of administering it, and it's pretty unlikely to net any money at all. May even lose money.

It's all about attacking private schools for ideological reasons, and to get votes by stoking class hate. Despicable.

Putting it another way, if someone earns £125k per year, the government takes £48k, leaving them £77k. They pay £20k school fees, and have £57k left for everything else.

If they go part time 3 days a week and put their child in state school instead, their gross salary pro rates to £75k. The government takes £22k tax, no school fees, and they end up with an almost identical £53k.

But the government (ie everyone else in the country) are £33k poorer. That's £26k less income tax plus having to educate the child costs £7.5k.

Private education is definitely not a tax break!!!

@strawberrybubblegum ,

You are tying yourself in knots over this one! You could make the same argument over VAT on holidays. If we didn’t have VAT, i’d work harder to have more holidays and the total tax take would go up.

People are critiquing the IFS numbers, but they are actually expert economists and modellers. I don’t know why you think you can do better.

strawberrybubblegum that is exactly the situation I am and what I will do if we decide it is unaffordable!

But even the IFS have said there is not enough information on the policy to draw firm conclusions. ie they can’t stand by their numbers.

@owlsinthedaylight ,

‘But even the IFS have said there is not enough information on the policy to draw firm conclusions. ie they can’t stand by their numbers.’

They are just, like professionals, saying there is a lot of uncertainty. But that doesn’t alter their central projection.

I’ll just leave this here.

I think this will be a similar situation for DS’s school. Very small specialist school, with already low fees, 75% children with SEN and a lot of places funded by the local authority. We might just be able to scrape by with the increase, but I think there is a real risk of the school closing. In which case I will have to home educate - DS’s mental health hasn’t fully recovered from his time in mainstream, I would not put him through that again, and his autism isn’t severe enough for one of the very few state special schools in our area.

Many EU countries have higher proportion in private education than the UK.

as to your assertion that the only reason for choosing private is to ‘leverage advantage over other children’ and ‘inhabit the world of the super elite ‘ - what utter rubbish. Parents choose private in search of the best educational environment for their children, same as in other countries, and most with zero expectations of outcome other than hoping their children achieve their potential (whatever that looks like). From our school a significant number will end up in trades or working the family farm - hardly super elite circles.

you are right that it is structured differently in other EU countries - in France (one country with higher proportion in private) it is much more affordable because the state partially subsidises private schools. If the objective is to make uk private schools less elitist, a policy of state subsidy would be more effective than the proposed VAT policy.

Exactly this. I work more both because of fees as well as because access to excellent wrap around care and a longer school day make it easier to work.

@Newbutoldfather there aren’t many reasons I would increase my workload, but my children’s education is one. Similar story for many parents in our school, with lots returning to work or increasing working days. Conversely I know many in state who reduce workload in order to allow them to coordinate extracurriculars - the so called ‘state plus’ approach. Would be interesting to see labour participation rate for parents in private vs. State education.

Yeah, the IFS basically put that disclaimer on everything they publish. It's what economists do.

@Newbutoldfather - https://www.wildercoe.co.uk/complying-with-toms-and-travel-industry-vat/

There is still zero rated Vat on European holidays as far as I know. So that argument does not wash. So better put your cash in your pension, holiday in the EU than educate your children privately. And due to the ridiculous marginal tax rates there is no point working full time either as a successful professional.
The tax system incentivises us to move in catchment and then benefit from house price rises rather than work. What a great and aspirational system! Not!

@Newbutoldfather - I'm not trying myself in knots at all! To me, the maths is pretty obvious. But people often struggle to understand the implications if you keep it too abstract, so I thought a concrete example could help.

And yes, I absolutely think that I know better than the IFS about the likely behaviour of people in my own situation.

I generally don't trust that politicians etc know better than me unless they back up what they're saying with a credible, fact-based justification: because I'm pretty good at understanding complex concepts so it's basically never the case that I "just don't understand it".

But in this case, it's more than that. It's that I have knowledge they don't.

I see so many families at my level of income making exactly this decision: private + both parents work full time versus state (grammar or nice comp) + mum working part time and running kids round to lots of activities.

And where finances are good enough for private to be an option, it's the Mums who make the decision. Because it's them who will be more affected: even in equal families, it's almost always the Mum who plans and schedules the activities and juggles the logistics; mainly the Mum who has to re-schedule meetings to manage the times it doesn't work out (or else asks the Dad to if she can't - but it's still the Mum making sure it happens).

I'm one of the Mums who has switched to full time to afford private. And I know I couldn't juggle full time with state. Not without DD missing out hugely, which isn't a choice I'm going to make. I depend on the school having most activities on-site, great wrap-around, and lots of flexibility.

I've seen friends decide that the proposed VAT hike makes private too risky, and so go all-out for tutoring for grammar instead. And yes, it's the Mums who made that call and organised the tutoring.

And I can bet that neither the senior Labour party policy-makers nor the IFS include many working Mums in their number... and if they do they probably don't listen to them.

Actually whilst I say this, when push comes to shove, I probably won't go PT. I worked too hard for my career and frankly don't agree with PT working when I'm perfectly capable of working FT - as it sets a bad example for my daughters. However, I will load my pension as much as I can and we might buy another property in the catchment area of the excellent grammar to live in for 6 months then rent out...oh can you imagine!!!😉

I do not think U.K. is the place to just study hard and work the most anymore. You really have to try and navigate your way round “the system”.

I would go down to 4 days to manage the logistics, and put the rest in pension. I'm tired, and I'd love to retire earlier. I'd maybe keep just a bit for extra holidays! (zero rated flights and airbnb type accomodation)

But if I had chosen not to start the private journey (as some of my friends who initially planned to switch at secondary have now decided) I probably just wouldn't have increased my hours.