Will VAT on private school fees lead to a partial collapse of the sector?

[mids2019]

Will VAT on school fees coupled with cost of living drive a lot of parents from the private sector or will the majority absorb the cost? Are the numbers that potentially end up in the public sector going to offset any gains to the treasury through VAT?

Labour are working at about 4-5% transfer rate to the public sector but is this an underestimate?

That’s simply not true. Everyone has a price they are prepared or able to pay.

The notion that all prospective PS parents have spare cash sloshing around is nonsense.

I'd say a lot if smaller private school would be in danger of closing. Most of the parents in my kids school do not have spare cash to absorb VAT on top of the annual increase in fees. My DD's Sixth Form - there the people were if a much higher net worth and probably could.
I think there will be higher transfer rate straining an already suffering system.

The notion that all prospective PS parents have spare cash sloshing around is nonsense.

Surely they need to have some in the first place to pay the fees? Unless gps are paying.

Some schools are giving the option to parents to pay in advance to get around the increases.

I wonder how likely it is that it will actually happen. It doesn't seem well thought out at all.

We are parents that genuinely scrimp to send our child with SEN to a small independent school. I literally work to pay the fees. It will hit us hard

Aren’t most private schools over subscribed and use selection? Surely it will just mean that will be slightly easier to get in?

My kids are at a large wealthy private school: our fees won’t be going up by 20% because the school can absorb part of the extra cost and can offset some of the VAT they spend on constructing shiny new facilities etc.

The schools that will have to put their fees up by 20 % are the small schools, the type that maybe have a couple of hundred pupils in tiny class sizes in an old Victorian house. Those places run on a shoestring anyway.

Many (if not most) of the pupils at those small private schools are there because they are neurodivergent and couldn’t cope with mainstream school in classes of 30.

Those schools will close, dumping lots of extra SEN kids in the state system. Don’t know who that helps tbh.

Many state primaries which used to be oversubscribed have such low intake numbers now. They will gladly take extra kids! They need the money.
Weve got a few in our area with 60 intake and only have about 35-40 for September. Schools where you used to have to live across the road from to get into, now have spaces.
My daughters class should have 30 in but only has low 20s. It’s actually quite scary how much the birth rate has dropped in the last ten years.

VAT has always been added to 'luxury goods'. For example, it was applied on sanitary wear.

Is private schooling not a luxury??

It’s actually quite scary how much the birth rate has dropped in the last ten years.

it is & economically we should be hugely concerned by it.

I wonder if this is a policy of class war or is there a real benefit to the state system? I think the £1.6 billion maybe diverted to the NHS and there will be a huge pressure for that money to be used to increase SEND provision in schooling as a priority.

Or the politics of trying to reduce the advantages the wealthy have and make things more equal.

It isn’t all about rich parents at expensive schools though is it. Sometimes it’s desperate parents paying with their mortgage money etc. I know several parents who have sent their kids with SEN to private schools because their kids need smaller class sizes and smaller schools overall. so not only are parents in this position not using the state SEN provision and paying themselves for education thereby not costing the state any extra money-they will be made to be adding more tax on top of that.

VAT isn’t on school fees because education doesn’t have VAT added, or is ‘exempt’. Until now - if Labour get in. This means that any educational service could then have VAT added, the rules will have been changed by Labour.

‘Under VAT law in the UK, the provision of education by an “eligible body” (which includes a registered independent school) is an “exempt” supply for VAT purposes. Goods and services that are closely related to education are also exempt from VAT eg catering, transport, school trips and boarding accommodation’

’Theoretically, a new Labour government could pass a law at a time of its own choosing to change the definition of “eligible body” to omit independent schools. This might be part of a new government’s budget, or it could be introduced independently of that. As the matter would relate to taxation (a so-called “money bill”) the House of Commons would have “financial privilege”, meaning that, provided certain conditions are met, the House of Lords would have no ability to oppose it’.

I would imagine some private schools will close their doors, but many will be fine and parents will complain, but most will continue to pay the fees.

Lots of state schools near us are really struggling to fill places so they will be very glad of the numbers-the more bums on seats they can get in, the more money they get and the more likelihood they will have of hiring TAs and buying h books.

Even if there are loads of state places that ignores the wider economic impact.

If I decided I wasn’t going to send DS to private school I would need around 225k less cash or 270k after VAT. That means that I could reduce my lifetime income by about 510k and still be in exactly the same financial position. The Treasury would lose out on 240k tax from me. They would also have to find 100k+ for a state school place for 14 years.

The net impact is a 340k cost to the Treasury and taxpayers. That is for one child. It doesn’t take many in a similar situation to make this a net cost to the tax payer. Of course Labour hasn’t modelled this because they know the outcome would be difficult to defend.

There is never, ever pressure to increase SEND provision. People simply do not care.

I may send dc to private secondary school. If I don’t I will still work.

From a pp

In the Times article below. So forecast estimates have ranged between 5pc and 25pc.

Now this is 2.7pc OBSERVED behaviour. This is before the election and before any announcement. If this is pre-policy behaviour then that goes against the lower end of IFS 3-7pc rangeand is more consistent with >10pc.
The Adam Smith paper indicated >10pc makes zero revenue. So, once more than 10% of parents pull their DC out, or choose state (most likely grammar where possible) instead of private the net revenue will be close to £0.

That is incorrect because bread etc has VAT. It has nothing to do with being a luxury.
The reason education hasn't been taxed previously is down to EU law ie it is illegal to tax education in the EU.

I would but I’d also work less. No point paying marginal tax rates of up to 62% of I don’t really need the additional money.

I would also inevitably retire earlier as again I’d be in a position to do so significantly earlier in life if I don’t have school fees to pay.

I love my job & am already p/t. I don’t plan on working past 62 regardless if my dc go to private school or not. DH wouldn’t reduce his hours either.

Yes. The state schools with places and seats to fill, are the poorly rated schools, Ofsted ratings low.

Highly rated state schools are all always always full and places are very competitive.

The private school parents takings kids out of private can easily spend their extra cash on tutors and / or housing near the best schools. It’s not rocket science. So kids who now miss out will go to the crap schools.

But a large proportion of potential fees have already been set aside so I don’t see it as coming out of income if that makes sense.