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?

Not even that but with waiting lists for NHS treatment or even GP appointments at an all time high along with cost of living etc, VAT on private schools affecting 5% of the population (and even less than that if you exclude international parents) appears to be the leading policy and news item reported. I must have seen 10 articles on this and almost zero on policies that affect the whole of the UK……Make it make sense…

Education does affect the whole of the uk!! It is paid for by general taxation. Any change to education policy overall will affect tax payers because it’s likely more school places will be needed. Who will pay for them? There won’t be sufficient funds from the vat hike. Most financial commentators say that.

I listened to the Head of Cranbrook school on the radio today. It’s a state grammar but the head has worked in the private sector. He predicted amalgamations and closures of private schools because insufficient parents had enough money and the schools could not trim costs any further. So it’s bleak for them.

I’d like to listen back. Was it a BBC radio show?

Radio 4. I think it was Evan Williams PM in Kent from 5pm . They were talking to Kent parents who only have the grammar in their town and then interviewed the Head. I don’t know exactly where it was during the hour. Maybe after half way.

Depressing

I listened to something on Radio 4 about this and the guy was surprised there was no really coherent leadership of private schools that could have been lobbying Labour for years on this policy when it became evident they were likely to win. Enedvy, banks, transport are all in danger of taxation when Labour is rising but have the lobbying ability to contact the party and create deals to water down aedent left wing policy. Possibly independent schools didn't lobby hard enough months or years ago.

Powerful arguments are being made now when perhaps they should have been highlighted earlier.

I still have hope Labour drop this as their won't be huge electoral damage of they do and it makes perfect economical sense that they do.

I think they tried but the public are for something that gets the rich, sounds like they’ll have more funding without paying themselves

Gets other people’s children

The emotional pull is too strong and overrides economic and educational sense. Politicians get an easy win

The emotional pull is too strong and overrides economic and educational sense. Politicians get an easy win.

This. However I will be interested to see what legal objections, if any, are put forward when Labour introduce VAT.

@mids2019

There is an issue in that Labour love a policy that appeals to their “base”. In other words kick the perceived rich where it hurts. I don’t think they will drop
it as it’s part of their appeal to some people. It’s a bit like Brexit though. Sounds appealing (to some!) but the devil is in the detail. How are LAs meant to plan? Many of them Labour now.

Not on topic - water supplies are 0 rated for VAT. Impose vat and clean up rivers?

Not only that, think labour has a problem with marginal tax traps on income tax, this is effectively another tax that reduces people’s desire to contribute, but the long run effects will take time to shake out.

who doesn’t love a tax that only affects rich people and their children and pretends to benefit everyone else?

https://inews.co.uk/news/politics/experts-reject-claim-labour-private-school-tax-224k-more-state-pupils-3088681

Just in

Consistency is not what they’re going to achieve here. This makes it more than obvious it’s just ideological.

So if the one provider provides a service - boarding- that is actually paid for in a commercial transaction, it is free of VAT, but another is subject to VAT. I wonder if there are legal implications here.

There's an EU VAT law that applying/exempting VAT on the business activities of public services (which I'd expect state boarding fees to count as) should be applied only "provided that this exemption is not likely to cause distortion of competition"

So exempting state boarding school fees from VAT whilst applying it to private school boarding would seem to violate that. If we were still required to follow EU laws this would certainly be open to legal challenge.

However if we were still required to follow EU laws, VAT could not be charged on Education anyway.

What's one more broken EU law?

(unless you think that the EU probably designed these laws with good reason, and that trampling all over them might have some negative consequences in the UK too)

This highlights why it is ideological rather than anything else.

An avenue that will definitely be explored over the coming months

Thanks for mentioning this - I will have a listen. He was head of my son’s school before moving to Cranbrook. He’s very well respected and was a brilliant head.

I am so utterly sick of the vitriol, spite and glee being peddled on so many other threads. We are not typical private school parents and the school my son is at certainly isn’t Eton and doesn’t have an “old boys’ club”. We are not remotely ‘rich’. And yet somehow I am a terrible parent for having a child in private education. (My other child is too, but the local authority pays for him…. does that count? 🙄) Bravo Labour for making education even less equal than it is currently by squeezing out families like mine from the private sector and leaving the truly wealthy people to carry on with their old boys’ clubs and brilliant connections.

The other area that might suffer more tax is pension pots. Or the tax on the payments made. This would hammer the perceived rich too. The top 10% of tax payers pay 60% of all income tax. The top 1% of earners pay 29% of all income tax. Figures from IFS. If high earners are punished excessively they will find ways around the tax system. We actually need many of these people to drive the economy. Those who are ok with a bit more tax quite often don’t pay it. They often want others to do it for them. A better model is to increase the workforce and get more paying tax. Punishing people who are successful rarely works - history shows us that. This is why Labour cannot be honest about taxation.

Well the IFS and Dan Neidle are very clear that if we want European style services, lower and middle earners will need to pay more income tax. Labour definitely want to hide that!

Much as I wish this were true, apparently it’s not and wriggle room applies to education. That’s how Greece was able to implement it a few years ago (though that was disastrous)

There’s not a much wriggle room as people think, and certainly not enough to enable Labour to introduce this policy without them diverging from EU law, which they’ve said they won’t do.

Greece was told by the Commission that VAT on education was against EU law very soon after they implemented it. Just this year, Germany were warned that their implementation of the exemption of VAT on education breached EU law.

https://www.avalara.com/blog/en/europe/2015/08/eu-tells-greece-to-cut-vat-on-private-schools.html

https://blogs.pwc.de/de/german-tax-and-legal-news/article/241820/commission-calls-on-germany-to-comply-with-eu-vat-rules-regarding-private-tuition-services/

Starmer has said he has no desire to diverge from EU law. This proposed policy does exactly that.

Except the LDs want to abolish private schools so they’re hardly going to stop it