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?

“Is anyone keeping tabs on how many times Labour is planning to spend the VAT on school fees?

So far I have heard: 6,500 more teachers; breakfast clubs, and now 100,000 new nursery places.

It's like the feeding of the 5,000, or the famous Mumsnet chicken!”

Jesus Christ!

That is what you get with religion/ideology.

Now, now do not commit socialist blasphemy. Bit of propaganda is required to educate the masses…. It is how they operate. Bit of lying OK for the greater good, no?!

If others in your situation didn't / couldn't buy their way out of it, your situation would only conceivably have been worse. You'd have been struggling against more people for those scarce resources supplied.

By all means argue for more supply, but don't blame those that free up supply by taking themselves out of the race.

Unless you actually want more people to have less satisfactory outcomes. You can definitely have that, and Labour are intent on giving it to you.

So children arriving in state schools will get ignored? And you'd be OK with that?

There is a handful of top comps where every car is a Porsche and the PTA (supported by gift aid, and VAT free of course) runs a six-figure budget. But that's OK because in this twisted debate, using state education is socially responsible, but paying for it and not using it is a disgrace.

@MisterChips - agreed, it's so twisted. I have various friends who have been extremely sharp elbowed to get their kids into the best state schools - be that crazy levels of tutoring or buying houses in catchment areas. These are families that could afford private at a push, but choose not to.

Whereas my kids are at a private school that we kill ourselves financially to send them to, but the ever-increasing fees and now the VAT will mean I'll be pulling them out to send them to grammar sixth form that's highly selective. The GCSE results at their current school are far, far higher than pretty much every local state school in the area. So my kids will now take the places of kids who are probably equally able but haven't had the same educational advantage until now. I (and they) would rather they stayed at the private school. No-one wins.

@strawberrybubblegum - thanks so much for the informative post about VAT.

Out of interest Bridget Phillipson was on the radio this morning and said - 'the reality is that private schools have whacked up their fees year on year, way beyond inflation. Private schools are not required to pass this onto parents. State schools have had some pretty tough choices in recent years about how they manage their budgets given all the pressures they are under. I think private schools can cut their cloth accordingly.”

My kids' private school attempts - in the face of parental complaint about rising fees over the years - to be quite transparent with their accounts to 'show' that the fee incomes effectively cover their running costs and it's essentially a matter of breaking even. Not sure how 'true' their figures are (I am not a maths person!) but do we think that schools will be able to lower their fees in order to absorb the VAT?

6500 teachers will cost 0.2-0.3bn

Current funding for free school meals currently costs from £2.41 to £2.53 per student per meal. But breakfast is smaller than lunch, so say £1 per student, 5 million primary school children, 195 school days - cost 1bn

Nursery - the government pays £9 per hour for 2 year old (taking 2yo as an average age for simplicity). They haven't said how many hours they'll provide, but 100,000 new nursery places for say 15 hours/week, 38 weeks/year - cost 0.5bn

If the very optimistic IFS predictions hold: 3-5% of private school children move to state - and those who switch still continue to work and spend all the saved fees money on VATable things like cars and TVs, rather than reduce work hours, pensions and holidays (incredibly unlikely) - then the policy is expected to make £1.3bn.

So the government could have the teachers+breakfast club - but not the nursery places as well.

Or maybe they know that they won't manage to recruit any new teachers, so they're planning a more minimal breakfast club at 80p per student (1/3 of lunch cost) plus the new nursery places.

They certainly won't fund all 3, even if the ridiculously optimistic guesswork of the original Ifs report holds.

If there's any more behaviour change than they're expecting, they'll get less money. If 10% switch to state, they won't get any funds at all.

If private school numbers drop by more than 10% in the next few years, the government will need to make spending cuts to make up the shortfall.

I don’t see the point of free breakfast for those who don’t need it. DC goes to breakfast club at state school when I need the childcare but I always feed breakfast at home because school breakfast is crappy cornflakes or water porridge when I want her to get some protein and fruit. Same applies to Khan’s free school lunches - the posh kids in our class all take a packed lunch despite it being free because their parents value nutrition and want to know what DCs are eating.
DCs at grammar often make their own lunches because the lunch queue is too long and the offering is poor.

I thought it was 6,500 specialist teachers plus a mental health professional in every school. Nurseries and breakfasts are a new addition.

Like you, I'm a parent and I agree that my DD's school seems very aware of the impact of rising fees on parents and seems to try to keep fees rises as low as they can.

Personally, I don't think it's necessarily the right thing for schools to reduce their educational offering by 20% in order to keep the overall cost to parents the same.

And it would be reducing their educational offering: most of the fees go on staff salaries, and reducing staff would inevitably mean they couldn't offer as much.

For me: I'm currently paying the government an extra £13k income tax in order to be able to pay the school £18k. So I'm paying £31k (gross) for DD to get £11k more education than she would in state (assuming per student cost of £7k in state).

If the school reduce the education they're providing to £15k (so that with VAT it comes to £18k), then I'm still paying £31k (gross), but DD is only getting £8k of extra education for it than she would in state.

It's gone from DD getting 1/3 of what I'm paying, to her getting only 1/4 of what I'm paying. The rest goes to the government.

I think if private schools reduce their offering, the value for money quickly becomes very poor.

It's because we're giving up the state school place - which is a large fixed amount (average 7k). And we're paying 5k income tax to earn the 7k of education which we're paying for ourselves as a direct replacement for that state school place we've given up. So that's 12k fixed cost before we can even start getting any additional education for our children. Of course we must also pay income tax on the money we earn to pay for the additional education as well - but at least that's proportional to the education we're adding.

Do you see how the 12k (gross) fixed cost we incur to replace state education before we can even start adding any extra educational value means that the closer private school spending gets to state schools, the worse value it becomes? Hope it makes sense!

(Of course, for some schools, it might be the right thing to do - if the value they're giving is still worth it to those parents. But it will depend on the school).

That's why it makes sense for countries like Finland to have the government always pay for the fundamental education: even for private schools where the parent also pays an extra fee for extra educational services.

It gets rid of the cliff edge. How many more parents would be willing to pay for some extra education for their DC if it was affordable because the government was still paying for the standard education their child is entitled to?

And education is a social good: it benefits society for any kids to get more education. No matter who pays for it.

But I don't really expect the UK to do the sensible thing and allow kids to take their educational funding to the school of their choice. I'd settle for them just not making it worse.

A voucher you can spent at any state or private school has always been my preference (or else a right to set school fees and cost of full time childcare against tax). Janome9300 on boarding houses, that system is how the boarding schools started to house pupils at some schools actually - a person would offer their house and look after the boys who would live there - a literal boarding house with a house master but that would always be owned or run by the school and then the pupils went into school each day. Until we have the draft UK legislation however which Labour will draft in due course it will be impossible to know what options will work.

Now, now do not commit socialist blasphemy. Bit of propaganda is required to educate the masses…. It is how they operate. Bit of lying OK for the greater good, no?!

@Araminta1003 it's how who operate? Two words - Brexit bus.

I really do think the only way to improve our whole education system is to follow the example from Finland. Making private education cheaper would benefit a huge number of children and would open the doors to a variety of schools serving more children with different needs offering more choice. One type of school does not suit all children and this needs to be recognised.

Just look at this looming and avoidable disaster - councils that can’t afford their budgets forcing children into inadequate provision - this is what happens when you have a gimmicky dishonest debate about the costs of education and who has to pay:

https://www.kentlive.news/news/kent-news/cost-send-kids-attend-private-9327518

this has the potential to make state school options in Kent a lot worse for all children.

Is Finland really comparable? Only 2% of Finnish children attend private schools and in general their state education system is far more equitable as is their society more generally - 0.10% poverty compared to 22% in the UK.
While their education system was really strong it has declined in line with cuts in education spending indicating the best approach in the UK would be to lobby for greater spending on state education.
In terms of school types, like many European countries there's a distinction between vocational and academic type schools at 15-19 so it's a bit different to kids going to grammar or private schools at 11 in the UK.

The decline in standards in Finland is not just due to budget cuts; the much vaunted newish curriculum system has its flaws too and, like the so-called ‘Curriculum for Excellence’ in Scotland, the impact is now being more fully felt as children have worked their way through the system with teachers trained under it. Incidentally, it has the biggest gap in literacy between sexes of any of the higher performing countries - their high literacy levels is purely down to the girls.

The other thing about Finland is everyone pays for public services. Tax rates on lower and middle-earners are MUCH higher.

They don't suffer from what our politicians (of both parties) inflict on us: the pretence that you can have highly-resourced public services paid for by "taxing the rich"; they don't pretend that if those public services go wrong it's the fault of "the rich".

I may be missing the point here but the main costs for private schools are staff salaries. All private schools need to do is employ the staff under a separate consultancy company and the school “buy” their services from the company as an external provider, which is then a vatable service. Net this VAT paid against VAT receipts and the school pays minimal VAT.

I’ve commented on another thread about this and am appalled at the hatred being directed at private school parents. For the record, I’m not one but still disagree with this policy as it’s a policy of envy and only fuelling a class divide. Labour are also going back on their promise to stay aligned with EU regulations.

Private school isn’t just Eton. SEN has been covered already but is a huge deciding factor for some families. They aren’t all wealthy. What about military families who want stability for their child, specialist schools where you need to exceed in a non-academic subject to gain a place (which are normally funded by scholarships or bursaries)? Examples include specialist music schools, dance/ballet/theatre schools, those that support elite athletes. Some universities are private because they offer these specialised courses, are those fees now going to be vatable as it’s education? Are posters directing such hatred towards private schools happy to penalise or stifle creativity/sporting achievement, which could include those from less well-off backgrounds? For me, I want the best musician/dancer/stage performer/athlete to be able to pursue their dream, irrespective of their background. That is part of levelling up, not implementing a policy that may make these available only for the wealthy.

I may be missing the point here but the main costs for private schools are staff salaries. All private schools need to do is employ the staff under a separate consultancy company and the school “buy” their services from the company as an external provider, which is then a vatable service. Net this VAT paid against VAT receipts and the school pays minimal VAT.

If this worked legally I would expect most companies providing VAT rated goods and services to manage their staff in this way.

How would this possibly work.

1. contractors often get paid more because they do not receive workplace protections, sickpay, holiday pay, pensions etc. No teacher would want this.

It wouldn't save any costs because the teachers would charge at least their current salary and add the VAT on top. So you're just inventing an extra 20% to be handed around.

The consultancy company would then need to pay their VAT (which they got from the school.. which the school got from the parents) to hmrc. Same amount of VAT is due.

The reason VAT can be offset is so that it doesn't get paid multiple times along a chain - but you do have to pay it somewhere.

Good point - it's not that it doesn't work legally it's that it wouldn't save any money.

@strawberrybubblegum

The consultancy company would then need to pay their VAT (which they got from the school.. which the school got from the parents) to hmrc. Same amount of VAT is due.

Good point, I hadn’t considered that angle.

Yes and if it were a separate independent teacher agency the cost would be higher than employing the teachers direct so would not save money. I charge VAT as I have to and it is no problem for my clients as they are all businesses who can set it against the VAT they charge but if someone has consujmers as customers then it hits and is a huge issue eg I just had very large painting job done over 18 days with vast amounts of VAT paid sadly. Earlier in the year I used a smaller company for a small job and that man doesn't earn enough to pay VAT so he was cheaper as I didn't have to pay VAT and as this was for my house I cannot claim it back so it makes a huge difference.

VAT itself at 20% is far too high and the state far too large but neither Labour nor the Tories agree with me and both are very high tax big state parties at present.