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?

@lavieenwhisperingangel ,

‘As for wealth which (my assumption of you) that you don't like, these people may have built business, may be they are entrepreneurs and have created local employment and thus the multiplier effect for the coffers and the economy. Obviously not "talent" in your books but that term doesn't really matter. The point is, why would you cut this off to spite your face. ‘

You assume a lot. I am not poor myself. What I object too is the conflation of wealth and talent, which is almost always used coupled with the threat of fleeing overseas or protecting bonuses in the financial sector, I very rarely (if ever) have heard scientists or doctors refer to themselves as ‘talent’.

Mostly we aren’t losing doctors over salary or VAT on private schools, we are losing them over the appalling working conditions in the NHS.

Both France and Germany have more progressive taxation but aren’t desperately worried about losing the talent, although I do think the EU is rapidly brewing its own crisis and maybe they are starting to be.

As a society we can’t just consider one side of the coin (taxation). We also need to consider the actual pay of some real talent whom we need like doctors (especially junior ones), nurses and teachers. The wealth distribution matters just as much as fair taxation. Our GINI coefficient has grown massively over the last 25 years and is not making for a cohesive society.

The ratio of your average VP at an investment bank and GP has probably trebled since the 80s, despite the banking collapse.

It is no good the wealthy feeling they are carrying everyone else without considering why they are so wealthy…..l

We are talking more about typical private school parents - the GP and teacher combination, the lawyer / teacher (in my case) (day school parents, not boarding school parents) who currently have the highest tax burden in 70 years unlike most other people. The very wealthy are very few and far between and almost de minimis as there are so few of them. One problem for GPs is so many work part time and UK has a very very low productivity score at present - even worse since covid; and of course who wouldn't work fewer or no hours if they can help it? It's human nature.

The budget background note just says "Measures will be brought
forward to remove the exemption from Value Added Tax for private school fees". It does not mention business rates as far as I can see .assets.publishing.service.gov.uk/media/6697f5c10808eaf43b50d18e/The_King_s_Speech_2024_background_briefing_notes.pdf

The problem in this country is that income is very highly taxed via PAYE but wealth is not. No good attracting a lot of wealthy people who do not have a huge income that is taxable in the U.K. That is why we will lose talent - talented young people do not have wealth, they simply have income potential. And if they are better served elsewhere and pandered to there, they may leave.

We don’t even have reliable data on people’s wealth in the U.K. which is a mistake.
Someone earning 200k is only wealthy if they already have hundreds of thousands in equity in eg their house and pensions. If they simply rent in eg London and pay school fees, they are not “wealthy”.
You see it in the IFS report- they only go on about income and have zero clue regarding actual wealth. In many other countries the tax authority has a very clear idea of people’s wealth. Income is just one small facet and we have overfocussed on that.

To be crystal clear, the reason we are losing junior doctors to posts abroad is a combination of awful working conditions, unclear progression and real salary erosion of approx. 35% over the last 15 years. It is not because of VAT on school fees.

Yes @BasketsandBunnies but also the prospect they face as to quality of life which includes housing, prospect of having a family and educational opportunities for their offspring (potential or actual). Excellent quality of state schooling or lack thereof is relevant especially if you have a mobile job and zero control over access to excellent state schools. And if you can’t afford private as an alternative it does become relevant.

@Araminta wraparound care in independent schools can be helpful in the juggle when both husband and wife are in medical careers working long hours in hospitals unless grandparents are on hand. School fees should be affordable if you have a couple of children and you are both at consultant level, particularly if you are doing some private work. The earlier years are a more challenging unless again grandparents are helping out with fees. A bit of a generalisation but doctors' children tend to be generally pretty academic and the cultural capital aspect is usually well covered so the type of school is not such a huge issue. Having to move the DC around is a far bigger issue rather than the actual schools.

Anecdata, but 17 years ago when DC was attending a small town prep school, the craic was that 8:15 am in the drop off zone was the safest place on earth to be taken ill. In DC's year, of just under 75 kids, there were 37 senior medical consultant parents, plus another tranche of senior registrars. It wasn't a call for a doctor; it was "which specialist do you need". Twenty years later, I still meet acquaintances at hospital appointments from then. DH's urologist most recently. Remembered, as they got on well when the kids were small.

That is such an invisible boost to your healthy successful result; the consultant knows you personally so asks to be told the test results and reviews. My best friend is a GP, not mine because she's retired, but if I ask her to look at statistics to decide whether I should take x to prevent a recurrence of my breast cancer, we reach an answer because she's medically trained, and I have read a lot of statistics. But if you don't have the intellectual capacity to crunch the numbers personally, then you are going to take the advice offered. Intelligence is not evenly spread, and it is largely inherited. So if both of a person's parents worked in retail or labouring, that person is unlikely to become a conultant neuro-surgeon.

@Papyrophile oh yes, one of our teachers had a rugby accident last year. By the time the ambulance got to the hospital half of the staff on duty knew that Mr C was on his way and was a special case.

A lady recently collapsed in front of my DH at pick up at DC’s prep. Two doctor parents also at pick up immediately took charge to the relief of DH. My oldest DC goes to a super selective state grammar and that’s also full of doctors kids. The only doctors that I know who don’t send their kids to either private or grammar in this area are white British. So messing with private and grammar schools is very likely to have an impact on attracting doctors from overseas, as many come from cultures which place huge importance on education.

Oh and I’ve also had gold standard A & E treatment thanks to a school dad being in charge of the department last time I attended!

Gosh @Papyrophile that really does paint a picture of a two tier society!
We joke that our local (non selective but extremely shiny) private school would close if it wasn't for the local hospital doctors who send their children there.

I really would like to see a society where the children of doctors and the children of labourers go to the same schools. That would really encourage aspiration and opportunity. We are so segregated at present.

I really would like to see a society where the children of doctors and the children of labourers go to the same schools. That would really encourage aspiration and opportunity.

charitynamechange in the post above yours:
The only doctors that I know who don’t send their kids to either private or grammar in this area are white British.
So doctors do send their children to state schools along with labourers children.

That's good to know @Barbadossunset . Not in my friendship or family experience (many doctors and mostly white), or at the private school in Cornwall I was talking about (not all white).

Think this is very location-specific - I don’t know any doctor who can afford private school, unless they have a spouse in banking or grandparents paying. Combination of very high house prices (London) and very high fees for even mediocre preps (£27k pa locally). Mine’s in state, and so are all of my colleagues’ children (London teaching hospital).

Doctors aren’t particularly rich by London standards though, especially during the junior doctor years when they are making decisions about school. The previous generation of doctors were, but house prices were lower then, and salaries were relatively higher.

@Saschka doctor friends and relations in Oxford, Somerset, Cambridgeshire and Dorset. All can afford private schools. As well as Cornwall.

@Saschka - it must depend on exact location in London. I live on a street with a ton of doctor couples and now some of the children have grown up and are doctors too! There is no generalising on my street, some state primary then private secondary, others private prep then state grammar, others have taken different decisions for different children in the same family! Amongst my uni friends the same applies - mostly for my age group now it seems to be state primary followed by private secondary 11-16 if the child in question needs it. Quite a few of my doctor friends have very bright but slightly quirky boys in particular who benefit from private secondary especially for the GCSE years.

www.bbc.co.uk/sounds/play/m0021377?partner=uk.co.bbc&origin=share-mobile

Really interesting
Both sides can take points from this. But the phrase that sticks with me is 'these are businesses after all' spoken by the woman from GDST.

Also that there is elasticity and innovation.

Doctor's DD... we all went to super-selective grammar school bar my youngest sibling who went to a very academic Public school as only needed fees for one by that stage.

All the other doctors in the area either did grammar or private school. Can't think of any whose kids went to non-selective schools at all.

I really would like to see a society where the children of doctors and the children of labourers go to the same schools

During my PGCE, I taught briefly in a 12-form entry rural comprehensive. By GCSE, the classes were streamed into 10 mainstream and two academically able. Guess what, the academically able streams contained a significant % of DCs of local GPs' and other professionals. Almost without exception they passed 10 or 11 GCSEs with high grades, and went to good universities, medical school and Oxbridge. So while the labourers and professionals children may attend the same school, they won't be in the same classrooms.

This was my kids experience of comprehensive school too.

The kids in my DD’s GCSE sets (top sets) went to top unis like their parents and went into subjects that will help them become professionals like engineering. Their forms weren’t based on sets but you generally end up being friends with people in your sets because you spend the most time with them so the future doctors and lawyers generally ended up friends.

It's exactly what happens.

DD's comp set their tutor groups based on the banding test used for entry (NVR)... no SATS due to Covid. Huge school so they are also able to be balanced for sex/SEN etc. Very diverse intake as you would expect for the area.

In Y7 we had an online session with the tutor for parents. I managed to mess up the timings and logged into the wrong tutor group, so ended up doing 2 zoom sessions.

The difference between the two in terms of parents was stark. DD's actual tutor group was very much middle-class university educated professionals in terms of parents - DH and I were a perfect fit. The other one very much wasn't. This was also reflected in the kinds of questions being asked by the respective groups, and even the willingness to ask questions at all.

@SonicTheHodgeheg and @Papyrophile ,

I don’t see what is wrong with that! Realistically, streaming is necessary but there will be the odd labourer’s child in the top sets with the professional’s children. Having those sets in the same school does encourage social mobility.

And, of course, they will have form time together, PE and PSHE, encouraging more empathy and mixing of different social strata.

You need successful top sets to get the professionals to buy into the schools and they provide role models for others.

That depends on the school.

DD's tutor group is very much reflective of our home social strata - and that is where they do PSHE, PE etc.

Far more likely to meet kids from different ones in her GCSE options set... although if you pick Latin and Music possibly less likely.

It’s a fiction that mixing kids from different classes at schools increases social mobility. Do people also think schools mixing people of different religions would encourage atheism or some religion-swapping? It’s ridiculous. Culture is ingrained on both sides at home and there is no changing that. You have to spend the rest of your life with these people. There’s no way you’re going to start talking like your parents’ handyman. That’s another part of the Corbynista dream at that heart of this VAT policy destined for the scrap heap.

Agree with this it's why I dislike means testing based on income as it takes no account of wealth.

You could have someone earning a high salary but pays mortgage, full childcare and bills etc. out of that salary with no access to any benefits. Contrasted with someone earning a lot less but who perhaps inherited a property or money and due to their technical salary qualifies for child benefit etc. but actually has a lot more disposable income than the higher earner.

I think that not religiously segregating children probably does promote better integration, understanding and tolerance.

Those things were certainly hindered in my faith school, where it was very much Catholics v Protestants, and other religions were beyond the pale. I was similarly clueless about socioeconomic diversity; my son at a comprehensive is certainly more aware of more of the breadth of people in society than I was in my private school bubble (though his experience is still a bit sheltered by local demographics.)

I believe the data indicates that there is very little difference in social mobility outcomes between comprehensive education and selective state education. There is obviously no similar data or research for the impact of private education, though the IFS's Deaton review in 2022 recommended some reform of private education if a substantial reduction in inequality was desired; the author argues that the resource supremacy of private schools has lasting impacts opportunity for state pupils at all stages.

It's an interesting paper - I'm not sure I agree with all the conclusions but it's worth a read if you're interested.