How soon might a Labour Government put 20% VAT tax on private school fees?

[jennylamb1]

That really. Given that an election date has been declared for July, how soon might a Labour Government set their first budget?

That article is appallingly written drivel.

Looks like they got loads of the criticisms for the policy from here (fair enough) but then made the fairly odd leap from 'private school kids moving to state will be bad for state' to suddenly 'so we should abolish all private schools. Then private school kids moving to state won't be bad (no explanation why) but will instead be good.'

And WTF is the food chain analogy?!?

Kids don't eat each other. You also can't be knocked off the bottom of a food chain. And if you were, that would surely be a good thing, since higher up predators wouldn't be eating you.

It's just putting words together randomly. In fact, might it have been generative-AI written? If so, that makes me less worried than before about the impact of AI on jobs.

I do also find it quite funny that the estimated number of private school kids moving to state has jumped again to 60%!!

Nobody "removes" money from the economy unless they first earn it, then turn it into banknotes and burn them. If they do that (pretty odd, but "if") then society is better off by whatever contribution the person made to earn the money.

Apart from that rather strange scenario, it's completely wrong to say anyone "removes" money from the economy. More typically, higher earners' savings are invested, whether via bank loans or creating capital. Investment is also "growth" and also secures benefits for customers, employers and employees.

What you're really saying is you think it's a good thing for the economy to consume more and save/invest less. I don't agree, I think we need to save and invest more. At the same time, we don't want to be "giving" money to people, we want to be helping people to earn money. How do we help people earn money? By encouraging investment and value creation.

By the time we get to the election 157% of privately educated children will be moving to state education.

Maybe some of them are currently at Hogwarts, and have access to a time-turner?

Our first child went to the local state school having refused point blank to go an independent school in s1 - said he would run away! I went to a state school and husband went independent so I was secretly quite pleased. Fast forward 11 years and he is about to graduate with a first from uni, and is a confident young man. My second child however chose to go independent. She is quite shy and very different in nature to her brother. It has felt like a better fit for her and she is flourishing. This is what we have chosen to spend our hard earned cash. We work in health and social work. We don't have a big house and we drive old bangers. We are definitely not rich!!!! Thankfully we only have a few years fees left as there is no chance whatsoever we could be afford an independent education if just starting out. I think Labour are getting this wrong as it is just going to make the divide bigger between the rich who can absorb a £4000 VAT charge and those who can't have this choice anymore. Daughter is heart broken that her wee friend is leaving to go to a state s hook in middle of highers as the looming charge is just a step too far.

@Goingtobeveryskint totally agree. This will widen the gap between those who really an afford to go private and those who can't.

The private schools may have to restructure a bit but will provide those very few elite education. On the state sector the schools will be full of children with not enough teachers or not competent teachers and it may take years and years to get better - certainly nothing will happen fast. Whilst all the changes are happening those that did well in state sector will now suffer due to too cramped classless and standards being too high.

Once children from private come in the standard will raise a lot in terms of academics, so those whose children did well may find that they have dropped.

This policy is clearly a disaster for all involved but how people cant see that is beyond me.

Again some story as with Brexit I remember people being so happy and how we will live much happier lives: do we? I don't think so…

Once children from private come in the standard will raise a lot in terms of academics, so those whose children did well may find that they have dropped

This does rather imply that all privately educated children are cleverer than state educated children. I doubt that is the case.

Of course that isn’t always the case, but, anecdotally, when we moved our DD from state to (non selective) private when she was in year 5, the private school told us that she was a year behind her new peers. It took a term for her to catch up and now she is bang in the middle.

not cleverer but smaller class sizes and usual exit points to selective private in year 6 means they would be at least 1 year ahead than state kids. It’s one of the reasons why private prep kids do better than state kids at grammar schools.

Radio 4 had an item on this I heard in the car (I only heard half as I arrived at the shop) https://www.bbc.co.uk/sounds/play/m001zv8y It was as ever very left wing assumptions - even when trying to be unbiased and with an election coming up the BBC still cannot be unbiased. However the points were interesting - that most people are more than happy the VAT will be applied (as I knew).
I wonder if it will be possible to donate to the very many private schools which are charities and how Labour will draft the law to distinguish what is fees and what is a general donation such as the kind people make to the national trust in return for visiting the houses.

I wonder if it will be possible to donate to the very many private schools which are charities and how Labour will draft the law to distinguish what is fees and what is a general donation such as the kind people make to the national trust in return for visiting the houses

I can't see this being an issue really - presumably the laws we already have to determine what is a donation will apply.

This issue doesn't have any impact on me as my DCs are beyond education age, but when they were younger a series of events meant that I couldn't afford to continue their private school education. I imagine many parents may be in a similar situation if they face a huge hike in fees.

After being told by the local over-subscribed state school that there were no places, and considering the cost and logistics of suitable wrap around care, I decided to give up work and home educate. I was a higher rate tax payer at this point so this move would have cost the treasury a substantial amount of tax and national insurance over a 7 year period to see both my DCs through their school years. It would also have an impact on the economy as I was one less person generating income for this country (much of my work was exported services).

Many parents may decide that one of them staying home to educate their DCs would be preferable to them attending a poor school and needing the wrap around care that is included in private schools. At a minimum, hours in school will be considerably reduced and parents will need to reduce their hours to accomodate this.

I’m sure private schools will be delighted with the donations. They’ll still send the invoices for the fees plus VAT

There are rules for when charities are allowed to charge for a benefit (eg the National Trust charging for admission) but treat it as a donation: which not only exempts it from VAT but also makes it eligible for gift aid. The rules require that it has to either be available to most of the public, or else benefit the public for it to be structured that way.

Schools already can't do this for any part of fees. That won't change.

Of course, if the school is a charity then people will still be entitled to give additional donations freely - which won't incur VAT, and will additionally be eligible for gift aid (ie the government pays back the income tax, so it effectively comes out of untaxed income) and may also leave money in their will with the donation exempt from IHT. None of this affects fees.

Yes the whole state system should be better. But it isn't. The money raised from this will not fix that. As you said, it is not a large proportion of children therefore not enough money will be raised to fix the huge issues that the state system has. So it's pointless. Why don't they put tax on gambling? That ruins people's lives and they would raise loads more cash by doing so. This is such a decisive policy and setting people against each other.

If you could pay for a seriously ill family member to receive private health care which could save their life, are you really telling me you wouldn't because it's immoral? You'd make them wait on the NHS and potentially die? No way. If you could, you would. Same with private education. We just moved our two to private. If we hadn't, I dread to think what would have happened. Morals don't come into it when you face certain situations.

The years they’ve spent in their small nurturing private school have made a huge difference to their mental health. But yeah, resigned to it. Huge missed opportunity driven by ideology to leverage the private sector better to help more children.

On the fairness point currently at GCSE, just 43% of 16-year-olds eligible for free school meals achieved a grade 4 or higher in maths and English in 2023, compared with 72% of their better-off peers.

If we are truly seeking fairness surely the grade boundaries for those on fee school meals should be lower than those that are not.

Especially as currently 37% of pupils from disadvantaged backgrounds are now “persistently absent”, meaning they miss at least one day of school per fortnight on average.

That's a high number persistently absent and a big difference in attainment.

I think you're creating a strawman with the suggestion to change grade boundaries, since that obviously isn't the right solution.

Has that attainment gap always been so high, or has covid increased it? And has covid paticularly increased persistent absence in that group of students (and hence increased the attainment gap further)? There was meant to be funding after covid to help those most affected to recover wasn't there? I'm sure I've heard anecdotally that not much ended up being provided.

strawberrybubblegum, thanks. I thought that was likely otherwise schools could halve fees and have the rest as donations. When our son went to the school where his father taught we paid 15% of fees only as 15% was the marginal cost of adding an extra pupil and it was the amount the Pepper v Hart case said meant the benefit was not a taxable one. He went there aged 4 - 12. Some other private schools only offer teachers' children 5% off so it is does vary hugely.

In these few days, I am thinking about how much additional revenue could be received by the government after adding the VAT. Any chance there is an additional expense if there is a significant % of private school students shift to state schools.

Then I make the following calculation:

Let N - Number of UK students included now studying at state or independent schools. This means 0.93N is the number of students now in state schools; 0.07N is the number of students in independent schools

S - average cost per pupil spent by the government. £4,679 in primary and £5,992 in secondary. So overall average £5,336

T - average cost of private education per education i.e. £18,000 (day school)

X - be the % of students shifted from independent to state schools after VAT is added

VAT received = (7 - X)% T (20%) N

Government additional expense because of more state school students = X%NS

Net Income Received = VAT received - Additional expense
= (7 - X)% T (20%) N - X%NS
= (7 - X)%(18000)(20%)N - X%N(5336)
= N%(25200 - 8936X)

The breakeven point of X is 2.82

This means out of the 7% UK students now studying in private schools. If less than 2.82% (around 2 out of 5) go to state schools, government would generate additional net income, otherwise if X is more than 2.82, then government has to pay more after this policy

This also doesn’t take into account that when parents switch from private to state the need to work (and earn) more stops. That means dentists doctors and nurses and psychologists (who form the bulk of the parents of most of the mid-point private schools in the country) working less overtime & fewer appointments for all.

So less income tax from those of us who aren’t ‘net drains’ in terms of our usage of services vs tax recipts.

There are loads of things Governments do that lose or waste money however, for political gain. Labour think this is popular (as indeed the VAT policy may well be) so are likely to try to proceed with it.

My real anger about this policy is that many Labour politicians make themselves out as being morally superior to the Tories but then come up with a policy that causes hatred and division for little or no fiscal benefit. And they are way ahead in the polls so there is absolutely no need for it. Rachel Reeves is also a bloody liar saying that she isn’t increasing tax on working people. I think you will find that most private school parents are working people.

ENT have challenged her on that and she won't deign to reply.

Why do you include N in the first term?