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?

This was also covered on Radio 4 this morning they did a fact check on More Or Less that looked at class sizes, birth rates etc

https://www.independent.co.uk/news/uk/vat-institute-for-fiscal-studies-emily-thornberry-bridget-phillipson-labour-b2561025.html

Don't know how to link the right part but VAT on schools was the last story

https://www.bbc.co.uk/sounds/play/m00202g3

All based on 'evidence' that the IFS says is 'thin', 'limited ', and their conclusion a 'best guess'.
None of the limited historic fee data includes a 15% jump. And apparently there are no parents who are stretched to their limit, they all have infinite moneys they can call on.

Yet all the 'facts' come purely from that report, with no suggestion of its unreliability or comparison to other reports.

> pupil numbers in state schools are expected to have peaked in 2023, and are projected to decline

... and for kids already in those busy year groups that need to move?

Pupil numbers might well decline, but that doesn’t mean it won’t still cost more, require more classes and teachers, and possibly schools in some areas, if private pupils move across to state.

Why is it that we can find money to help support Ukraine, We can find money to bail banks, but we can't find money to invest in education? Why can money for education only be raised through this VAT?

Because this policy isn't about raising money. It's never been about raising money. Labour pretend that it's about raising money, but it's really about winning ideological votes on the left and hoping to god nobody reads the small print until after the election.

Well yesterday Starmer said it is about teachers.. raising money to recruit Maths teachers. Does he actually think the teachers at Winchester or Westminster are now going to go state because of VAT?
This policy will hit preps and lots of primary prep teachers there and staff will lose their jobs. Last time I checked we were not that short of primary school teachers due to the falling birth rate.

My personal opinion is that people who can will stay & pay for private 11-16 when the value added seems greatest, especially if the state sector creaks further.

Yes, Labour are apparently the party of working people, but they have remained utterly silent on the prospect of redundancies in the private school sector. It seems that their bitterness towards private school parents extends to the many, many perfectly normal 'hard-working families' who work in private schools too. In what other potential redundancy situation can you imagine Labour staying silent, or just effectively saying, 'Never mind mate, I'm sure you'll find another job'.

I agree. We’re going to stick with private until sixth form for our youngest and then swap to state (our oldest is already in state secondary). The youngest’s school is reducing reception classes from three to two this September and that’s a large all through private. The smaller stand alone preps are not going to survive this.

And anyway, it's not going be Maths teachers at Winchester who lose their jobs. Maths teachers will lose their jobs if schools close - yes. But all schools will be trying to cut their costs in order to reduce the impact, and in those schools it's not going to Maths teachers being made redundant. It's going to be Latin teachers and German teachers and music teachers and grounds staff and maintenance staff and sports coaches and theatre technicians and finance staff and admissions staff and marketing staff. Those jobs either don't exist at all in the state sector, or they exist in tiny numbers.

There was an interesting article the other day about the huge increase in British teachers moving overseas to places like Dubai and Australia. That's where your Maths teacher from Winchester will go, if she goes anywhere. Starmer is saying this morning that his manifesto is all about economic growth. Yet he is deliberately setting out to damage a sector that is both economically successful and renowned around the world, that attracts foreign talent and investment, and that helps keep homegrown talent and wealth here. All of which grows the economy and increases the wealth tax take.

From an economic point of view, this policy is totally senseless. But as I said before, Labour is lying when they pretend it's about raising money.

Exactly it’ll be all the teachers already struggling to find positions that’ll be hit - and the teaching unions know this.

its just a cynical gamble from labour that the data shows that parents willing to invest so much in Education will pay even more.

you might think they had a bit of shame that so many have switched from state to private for various reasons, as they have with nhs treatment.

but parents are indulging in privilege whereas using private health is completely understandable….

It's not just a cynical gamble, it's an incredibly reckless one. The IFS themselves have said that the figures on which Labour have based their modelling around pupil transfer and school closure are 'thin guesswork'. That's quite a gamble when the stake is children's education.

@potionsmaster - I think regarding Maths teachers, obviously private schools can pay teachers in shortage subjects whatever their market value is. And recruit young Chinese students straight out of uni without a teaching qualification.
Maybe they need to think about WHY private school can still get Maths teachers and they can’t.

Agree and they wouldn’t do this with people paying for private health due to state failures…

Any government could quite quickly remove the 0% vat rating for private schools, no new legislation would be required just a statutory instrument amending what can be given a 0% tax rating. I this this could be achieved in 12-16 weeks if desired.

This would also enable the charging of full rates for private schools I stead of the 20% reduced charity status currently. They will be treated the same as state schools that pay 100% rates for their buildings. Given the rates on a secondary school are often well in excess of £70k a year this will be a huge increase.

The charging of full rates will probably increase base fees per pupil so that when VAT is also added the increase overall may end up being over 20%

For the record I'm a professional working in rating and it's always felt unfair to see the local comp forking out £100k in rates whilst the local private one of a similar size only pays £20k.

Except Labour have opened the gates to legal challenge now they have exempted state boarding schools but not private boarding schools.
In state boarding the parents are paying for the boarding aspect (10-20K per year) and private boarding parents do the same ie they pay up to 10K more per annum for the boarding. So therefore 1 set of psrebts who are paying for boarding (food + pastoral) will not be charged VAT but another set who are paying for exactly the same thing will be taxed. So this will result in legal challenges because that is not 'fair'.

@Lavendersquare https://www.supremecourt.uk/press-summary/uksc-2021-0138.html#:~:text=Nuffield%20Health%20is%20therefore%20entitled,members%20of%20the%20Court%20agree.

So how do you square that case for private schools with charitable status? Is it really that simple for private schools in that bracket?

In addition VAT is a tax on goods and services, there are no exemptions for the end user? It’s based on turnover and registration. The more exemptions for EHCP/boarding etc they introduce the less this looks like VAT and the more like an anomaly.

We understand they want to “tax” private schools. The question is how will they actually do it. I am no expert, but it is all terribly confusing. And obvious that the politicians proposing this seem quite confused too.

So how do you square that case for private schools with charitable status?

What about The Royal Opera House? Income of over £130 million, 8 members of staff earning over £150k including one earning over £500k. A luxury product few can afford to see…

What about any other arts charity?

Does it really matter what taxes state schools pay? The government can keep the net amount available for actual education the same by adjusting funding. What difference would it make if the government reduced business rates on state schools if they also reduced the headline funding by the same amount? It's just moving money from one pocket to another.

OTOH, if you're talking about reducing business rates on state schools while keeping the headline funding the same, they could just as easily keep business rates the same and increase headline funding by the desired amount. But, either way, that would require that they actually put their hands into their pockets....

Did you think it's unfair that the local comp could reclaim all of its input VAT while the private school couldn't? Because that tax break is worth, nationally, about 5 times as much?

It matters because state school "tax breaks" affect the net funding per pupil. Which turns out to be rather a lot more generous than the class warriors profess to understand. The example I just gave is worth £400-600k per child at state school, not featured in the IFS' Friday afternoon "shall I do it before or after I nip to the pub?" analysis

Isn't it obvious that, if it is a state school, it doesn't really matter? Money out of the public coffers and money back in. So what.

Any government could quite quickly remove the 0% vat rating for private schools, no new legislation would be required just a statutory instrument amending what can be given a 0% tax rating.

Would you mind explaining this. I thought education was exempt not 0% rated (and the proposal is to make it the standard 20% not 0). Or do you just mean to change the VAT exemption.

Seriously?

Worked example: state school budget £8k, various taxes of £7.9k, can only spend £0.1k on the teaching. "Money out of public coffers and money back in"

Or: same budget, no taxes, can spend £8k on the teaching.

"doesn't really matter"