Vat Question????????

[Anoth]

Can I ask a silly question??
We have been given our school fees for 24/25 academic year now for the school my daughter attends.
My question is if labours policy comes in half way through an academic year will the schools be allowed to put the fees up for the remainder of that academic year? Eg if we start paying X amount on September and then labour get in and introduce the added vat in October. Will the fees go up in Jan of that academic year? Normally fees remain un changed for the whole of the academic year once fees have been published but I understand this is a strange situation!
Just wanted to know if I need to prepare to save more for 24/25 fees just in case or will these that are now published still remain until the end of July 25??.
Thanks!

But virtually all businesses provide employment and charge vat on their sales, it’s not a reason for not charging vat like a business is doing some sort of charitable deed by employing someone. Businesses employ people as they need them to be able to operate. I’m not actually in favour of adding vat to schools fees for other reasons but I don’t think the “schools provide employment” is a reason not to.

No one can say definitely what will happen will any 100% certainty, only what is likely to unlikely. If you are able to save more maybe do that just in case it can’t do any harm

Nearly all businesses have significantly higher levels of purchase on which they pay VAT that they offset against VAT payable.

In what world do you think the cost of resources, teachers’ salaries, building, utilities, insurance, exam board fees, maintenance, depreciation, administration, etc to be zero so their fees are entirely profit?

School accounts work like this: they charge £1000; as non-profit making organisations their costs are £1000 so they make £0 profit. The government charges 20% VAT so the total parents pay is £1200. If they charge £833 they have to make access the board cuts of 17% to avoid making a loss. How many business do you know that are capable of making 17% cuts and still continue to provide the same or similar offering?

Exactly that, Saffron.

VAT is added to revenue @Morph22010 . Corporation tax is what companies pay on profits, if they have any, after all operating expenses.

Unfortunately a lot of people in favour of this policy do not understand even simple, basic, economics let alone the various complexities of this proposed policy. If people don’t even understand the difference between turnover and profit, I’m not sure how they claim to fully understand the VAT proposals…….

Whilst this is broadly true, a healthy balance sheet even for a not-for-profit organisation should hopefully show an operational surplus after all basic costs are paid leaving ideally about 10% of revenue available for development and innovation investments. Any school that has this kind of balance sheet could theoretically drip the fee increase through to fee payers at a slower rate by slamming the brakes on any such expenditure and instead using that surplus to fill the gap.

But I agree the majority of people who support the VAT policy don't understand it.

@YireosDodeAver well, possibly. But with the increased TPS costs for private schools, staff costs are also increasing, which would eat into any operating surplus too.

In theory a business can withhold reinvestment as you suggest. This would have the benefit, to current parents, of phasing in the impact of the VAT-driven fee increase. The longer-term / steady-state remains the same i.e., either the school has to absorb the education tax by permanently cutting costs, or the families have to absorb the education tax by permanently paying more, or the school has to close.

The "phasing in" also isn't cost-free. It's not usually considered wise to delay the continuous program of building maintenance - hence sayings about "fixing the roof while the sun's shining" and "a stitch in time" etc.

But the greatest headache for the "just make savings" argument is the headcount. You need c.15% of savings in an industry where 71pc of expenditure is on headcount? good luck finding that in the remaining 29pc, or finding any of it in payroll, without hitting other tax revenues.

“Unfortunately a lot of people in favour of this policy do not understand even simple, basic, economics let alone the various complexities of this proposed policy.“

We know the general public do not understand. What is more worrying is that the POLITICIANS meant to run our country do not understand either. That is the most worrying part. Or they are LYING and understand full well. I do not know which one is more troubling….

I am sure I will get accused of hyperbole again by some although soft power through Education is extensively written about by some quite revered academics.

My issue with modern day 21st British politics is that almost every single one of them seems to want their own “Iraq” moment, some massive crazy shit that makes zero sense that they personally will be remembered for. Perhaps for Starmer it will be VAT on private schools and a ton of teachers losing their jobs. It almost seems like they set out with something like this. Cameron and his referendum. Boris with his Brexit/Covid nonsense, Truss etc. Sunak and Rwanda. Somehow somewhere it has all gone horribly wrong if these people are simply attention seeking to this level with crazy stuff that makes zero sense rationally speaking.

Cool story bro. So they provide employment the way that ANY school does then? Or are you under the illusion that state schools don’t have cleaners, teachers, tutors, groundspeople etc? I mean, local private school recently advertised for a part-time harp tutor, so I suppose the harp teachers of the world might have to find other revenue streams… as far as I know our school orchestra doesn’t include a harp.

@YireosDodeAver well, possibly. But with the increased TPS costs for private schools, staff costs are also increasing, which would eat into any operating surplus too.

Nah, they have you to do all the tedious harping.

The complaints: "It's not fair private schools are so over-resourced. The teacher:pupil ratio is better than at state schools and they have lots of extra-curricular and support staff that state schools don't employ at all and they pay higher wages and attract more people through better employment conditions".

...aren't really consistent with your comment.

If you take revenue and customers from the well-resourced sector and divert the latter to the less-resourced sector, you're going to get less employment of resources.

taxing education will lead to job losses, tax losses from those jobs, unemployment and benefits claims for many.

The fact that other organisations employ people is irrelevant. There are lots of companies having to lay off staff at the moment (high street stores, banks, steel industry etc). No one thinks that is a positive thing just because there are other employers.

Also, the employment in the state sector is funded by the taxpayer and comes out of tax receipts. The private sector (schools or otherwise) doesn’t have state funding for their employees. Private school teachers are funded from fees, often paid for with parental net income which has already been taxed. It’s not really comparable.

In fact, one could argue that state schools offer more employment… bigger, more staff…

You’re missing the point. It still doesn’t mean that people being made redundant from the private sector would be a good thing. Would you argue that about a high street chain of stores making people redundant? “Oh it’s ok you’ve all lost your jobs because there are other organisations with more employees”.

You’re also missing the point that employees in the state sector are funded by the taxpayer. Private school employees don’t cost the taxpayer anything.

I think there’s something in this. Labour doesn’t like independent education partly because they want state control of education. And in general the left doesn’t particularly value parental choice or the benefits of competition in a market but values equality of provision and a top-down approach.

And the policy is very obviously entirely ideological / political and nothing to do with tax take. It’s why they started off with the removal of charitable status policy. If you only wanted higher tax take there are about a million easier and more reliable ways to achieve it. Decreasing the nil rate band for IHT would likely raise far more and be in line with Labour’s ideology of preventing a class and wealth divide being entrenched over generations, for example.

Labour actually has some sensible tax policies such as increasing resource to HMRC so that it can actually enforce the existing law. However this isn’t very sexy so not going to be a major part of their election campaign. Private schools however seem to be a scapegoat for everything wrong with society and the VAT policy has a robin-hood justice to it which is appealing as a campaign point.

Dds private school had 12 groundsmen, 20 catering staff, 10 cleaners, 2 x nurses etc. It is a rural school (as are many boarding scholls) so the job market is tight. If the school had to trim costs then these would be the first staff to go so that would be potentially 15 local employees out of work with very limited alternate job opportunities.
24% of kids are on bursaries and 18 are on scholarships.
You have zero idea of private schools, how they run or the extent to which they prop up the local job market.

Except they don't because of having to constantly cut budgets. You are telling me that your local state school employs 12 groundsmen? Of course not because many state school playing fields were sold off

"If you take revenue and customers from the well-resourced sector and divert the latter to the less-resourced sector, you're going to get less employment of resources." Above, today at 11:13.

I'm pretty confident about this. Are you going to tell us why you disagree, or just keep contradicting me?

"the VAT policy has a robin-hood justice to it which is appealing as a campaign point." @Circe7 it's a red-herring, but of course Robin Hood's justice was taking away from the extractive state (in the form of the tax-collecting Sheriff) and distributing it back to the self-sufficient hard-working people.

An article my the head of the school my son will be attending said they are likely to reduce their charity work / bursaries etc, which will help to absorb some of the increase of VAT is added.

But yes that's true I'm sure some schools are running close to the bone already so won't be able to do so.

Private schools face mass redundancies to cover Labour tax bill (telegraph.co.uk)

"She said: “Our clients [independent schools] are already seeing a decline in student numbers, particularly in areas populated with grammar schools, in anticipation of the likely tax. Parents are expecting it to be passed down the line.
As a result, we’re seeing schools being forced to consider restructuring and even redundancy

As others have said, big private schools don't just employ a few more staff than state schools, they employ masses more. In rural areas, they can easily be the most significant local employer. There is absolutely no way that all of those people would get jobs in state schools if their school closed.

And the sneery comment about harp teachers just reeks of inverse snobbery. Perhaps you don't care about the jobs of low earning peripatetic music teachers, but some of us do. Highly skilled people choosing to follow their passion and pass it on to the next generation, and contributing to the cultural enrichment of society - that's a good thing, no? If the VAT plans do have a big impact on private schools, and lots close, then that could have a pretty devastating effect on classical music in this country. But hey, no matter, as long as we give the rich a bit of a kicking.