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?

The beauty of a quote is that it’s a quote @TheRainItRaineth

The beauty of not deliberately lying is that people might believe you next time (I think the Tory party are falling foul of this right now).

Many will, but many won’t. It’s the ones the won’t that matter.

Our son is a day pupil at a very small private school deep in Kent and we can just about afford it but no fancy holidays, house is needing work, don’t smoke, don’t go out and he doesn’t have luxury of the school trips either. My salary pays his fees and hubby’s pays the bills. We chose this as our son struggled with dyspraxia and confidence at primary school. VAT is going to hit us hard so we are now thinking of taking him out and I cut back to working 2-3 days a week, I’m creeping closer to retirement age so cutting days back will be beneficial health wise. Currently, the government didn’t have to pay for our son’s education and got more income tax from me working. So they will get an extra burden from him going back into state education and losing income tax from my earnings.

Not all families in private education are rich.

<Edit> To answer the title question

If even some of the proposed tax increases (council tax, inheritance and CGT) are implemented then I think a lot of people will struggle to pay the ever increasing fees, before VAT is even added.
The fear and uncertainty, with maybe a belief that state schools under Labour, might get better, is what will implode some less popular schools.
People may not choose to leave the private sector but if the lower years don’t get the numbers the school will have to close. Some will therefore jump ship to another private school, that will now have space or will increase class size as an insurance of some children leaving (seeing many privates going coed and also adding an extra reception/year 7 class in anticipation of a % of pupils leaving).
I don’t think private schools are going anywhere but there will be less choice.

We have no qualms asking foreign customers to pay VAT on other luxury items we 'export' to them. Bearing in mind there has been such a huge increase in demand from Russian and Chinese customers for these school places, I think charging VAT on school places like we do on Burberry or other brands that foreigners buy in this country, we should feel happy that one of our good quality exports, private education, is also subject to VAT to those who send their children here specifically for that prestige purchase. And then we can use this money for UK children in state schools.

Not really. Private schools close all the time and most would try and do it at the end of the school year to cause least disruption.

These schools are simply unviable. If they were viable private equity would buy them and add them to one of the many global education trusts, that gobbling up UK indies.
It fits the narrative to blame VAT but the timing is to do with falling birth rates, cost of living and the end of the school year.

VAT is not a luxury tax. Even if it was, your argument is flawed as it’s based on factually inaccuracies.

We have no qualms asking foreign customers to pay VAT on other luxury items we 'export' to them.

This is factually incorrect.

https://www.gov.uk/guidance/vat-exports-dispatches-and-supplying-goods-abroad#:~:text=VAT%20is%20a%20tax%20on,outside%20the%20UK%20and%20EU%20.

“VAT is a tax on goods used in the UK and you do not charge VAT if goods are exported from:

1. Great Britain to a destination outside the UK
2. Northern Ireland to a destination outside the UK and EU”

International customers are still able to buy luxury goods in the UK without having to pay UK VAT. For example

https://www.selfridges.com/GB/en/features/info/tax-free-shopping-explained/

I am sure it will back fire massively.....I just hope labour have plans to be able to fund more state school places l!

I agree

Will they have to do a consultation with the industry before proceeding though?

In any event, I have a hunch it will be watered down, maybe with further exemptions aiming at the smaller or heavily SEN focused schools, or at least, phased in rather than slapped on immediately in the end (I have no evidence of this btw, but just hoping common sense prevails! )

No. As this policy has been known to be coming for several years, most parents who'd struggle to afford the VAT have already withdrawn their child or didn't send them in the first place.

Current private school parents will have prepared, it isn't a surprise thar VAT is coming.

Nope I can assure you we haven’t prepared! However now we all jumping ship left right and centre! I have 3 moving over to state school now and 7/19 children have put notice in to do the same. It’s a race to state now!

I work in a state school with falling rolls and we will be facing staff redundancies if we can’t get our numbers up, so will welcome any new starters with open arms!

Which area are you in? We’re Yorkshire , no real problem here either as they’ve said they have capacity to do 1 and a half year groups to over come it and put in mobile classrooms . So that’s good! I’m also a state school teacher but in a different authority and they are oversubscribed and not got a plan, but where we’ve applied for our kids they said they can expand

Many parents with kids in prep already continue as these fees tend to be lower and make plans move at the natural exit point (secondary). At that point in 5-6 years time when these parents begin to leverage their catchment places in outstanding secondaries I think most ‘normal’ people will begin to regret this policy. Especially if it results in grammars becoming even more elite.

The solution re grammars is simple and is already being carried out in some areas; focus on kids from poor families.

In fact, if grammars are supposed to be about this sodding “social mobility,” OK, let’s just make them literally for the poor kids. Look at all the FSM kids, and offer a grammar place to the top-performing 30% (or whatever) of this group. Nobody else allowed in grammars - just the top-performing FSM kids. Totally feasible solution if we actually want grammars to be about social mobility.

Most grammar school parents, of course, would be horrified if we did this. Because for all the vague whining about “ooh, grammars are about social mobility! They are full of rough-but-bright kids!” the reality, as we all damn well know, is that grammars are about middle class parents wanting a private school that is free.

I'm sure lots of other staff in schools with falling rolls agree with you. But the point is that the government still has to fund those children. You may have the space - and your school might be crying out for the extra funding that the extra children will bring - but that still means the taxpayer will now have to pay to educate those children, when it's not at the moment. As Rachel Reeves said yesterday, there's not much money. What's the point of putting a tax on private schools only to have to use it to fund more students in the state sector? They'll still then have to find extra money to actually improve state schools - and meanwhile they'll have added in some extra problems such as overcrowding in those areas where schools are full, or looking after SEN children whose needs are not easily met in state and who will therefore increase the pressure on those services.

The ONLY justification I can see for this policy is a long term aim to reduce the number of children in private schools. Personally, I think that would serve to make private education even more exclusive than it already is, reduce inward investment, damage jobs, increase geographical inequality and reduce innovation in education.

I can also completely see the other side: I'm not so stupid that I don't understand the argument for intentionally damaging and reducing the private sector. But if that's what Labour want, then they need to have the integrity and the courage to be honest about it, rather than pretending that this is a policy intended to raise money for state schools.

There's a low birthrate in the current primary-aged cohorts so actually it will be beneficial for state schools to get more pupils.

Also eye-roll at the suggestion that all the privately-educated kids will jump straight to the front of the grammar school admissions list ahead of all the thicko state-educated pupils.

@lavenderlou more pupils, funded by the government. Where is this money coming from?

And I question your eye roll. Yes, it's silly to suggest that private school kids who leave private in the middle of Year 10 will parachute straight into grammar schools. But what about all the many (and I assure you there are very many) families of children in grammar areas who will now be deciding not to go private for Year 7 in September 2025 or 2026? They will be throwing everything they've got at preparation for 11+. They're not cleverer than state school kids, but they are generally much better resourced. Anyone who doesn't think this will make selective state schools more financially exclusive is dreaming. This will also happen with the best non selectives (though that will depend on house moves so the effect may take a bit longer).

Did you prepare for mortgage % rises 3 years before they happened?
Yesterday 10 kids in DDs year 7 group had the 1 term notice handed in, extrapolate that across all schools and you see the problem.
Our LEA has 0 in year transfer places for Yr 7-9 but those 10 kids, by law, have to be accommodated.
This is hitting parents hard, now. Despite what Labour told everyone, indi schools are not all Eton/Winchester etc. Most are
small, local schools serving the local community and big employers for local people.
Don't be fooled by the rhetoric that has gone on during the election. The maths was wrong but it now has to go through OBR before it can go any further.

There isn't a low birth rate in current secondary though and that's where the bulk of leavers will come from

There isn't a low birth rate in current secondary though and that's where the bulk of leavers will come from

Sorry if someone has already made this point. But the measure was first floated in 2021. Any sensible business would have been making savings to accommodate. I doubt there'll be a school in the country which will pass on the whole 20 per cent. If there is then they're very badly managed.
The schools won't want to sacrifice bursaries and scholarships to talented pupils either - they rely on these for results. They don't reach out to those students purely out of kindness.

Well considering Brudget Phillipskb refused to engage with the indi sector prior to, and during, the election I'm not getting my hopes up. She was invited on numerous occasions but flatly refused and has never stepped foot in an indi school.
Now as SoS for Education she represents ALL forms of education in the UK so it will be harder for her to continue to refuse to engage but it really shows where Labour's head is at with this
I wouldn't mind so much if Starmer and his wife plus 8 of the front bench hadn't benefitted from private education. It reeks of pulling the ladder up after them ie it was fine for us but not for your children. He admits that he owes a lot to his education and now seeks to deny that opportunity to all but the truly wealthy who won't notice that 4K+ additional cost per year.

In the end, this is a risky policy whose effects are simply too unclear. It will drop a bomb in the education sector and nobody really knows how big that bomb will be. It might be a tiny little firecracker that nobody notices much. It might be a great big bomb (at least in certain pockets of the UK).

But why do this now, when it's pretty obvious that it's not going to raise much revenue, and it's going to soak up a load of government attention, just at a time when the new government has a million other things to worry about?

Tony Blair understood the way to approach this. You completely ignore the private sector, and you accept that what you have to do is use general taxation (increased if necessary) in order to improve state education. You allow private school parents to carry on choosing to spend their money on saving you the cost of educating their children. You recognise and probably regret that this means that richer children are getting a better education - but you also recognise that if you want wealth creation (which Starmer says he does), then you have to allow the people who facilitate this wealth creation to spend their wealth on making their own lives better - otherwise they'll go elsewhere. So you let them carry on, while you use the wealth they're creating to make state schools better. In the long run, if you do this, then you will ultimately achieve a higher proportion of children in state schools, because parents will vote with their feet - if state schools are reliably good, then only the very richest will choose to pay to go private. And actually, nobody cares very much if some kids are still going private, as long as everyone is getting a decent education.

The problem is that KS has moved his party towards the centre in order to make it electable, but a lot of his members are not happy about being there. This policy is just one example of that. They still hold the Corbynist view that equality is what matters above all, at all costs, and that if the route to achieving greater equality is (in the medium term at least) to make things worse for those at the top rather than better for those at the bottom, then thats what they want to do - even if the 'equality' they ultimately achieve is actually worse for everyone in the end. It's the very definition of levelling down rather than up.

I'm not a Tory defender, not at all. They let the private school sector carry on without doing nearly enough to improve the state sector. But if KS is going to be a centrist than he has to actually act like one.