Labour confused and arguing among themselves over VAT on school fees

[Another76543]

This policy is getting more ridiculous by the day.

We have the shadow Attorney General who doesn’t understand the basic concept that the VAT position and charitable status are entirely separate issues. She also doesn’t understand that it’s parents and not schools who will pay the charge.

“the question is, is it appropriate in these circumstances for schools, such as in Eton or Winchester or whatever, to be seen as a charity and that, therefore, they should not be paying VAT on the huge fees”

This statement is factually incorrect on two things.

She also seems to think that any money raised will be spent on breakfast for children. The potential money has already been allocated to new teachers. They seem to think they can spend the same money twice.

https://www.independent.co.uk/news/uk/emily-thornberry-labour-institute-for-fiscal-studies-education-secretary-winchester-b2559439.html

The Party are also now fighting among themselves over this proposal.

https://www.independent.co.uk/news/uk/emily-thornberry-bridget-phillipson-labour-david-lynch-london-b2559684.html#

“sign of divisions within Sir Keir Starmer’s party over the policy”

I’d much rather see taxes on the highest earners/wealthiest raised to pay for better education. Good education is crucial to our society, it should be a priority. Some people can access good state education, some can’t, that needs fixing

@MisterChips

"You could raise 5x the amount by increasing income tax a little for upper-quartile earners, ensuring, or 10x the amount by covering top-half earners"

Easier to avoid and the outcry then would be even higher than this on private education.

Technically this is a political advantage to Labour, they raise about 2.5% exttra of the schools budget which can be spent immediately and attract less negative publicity for high taxes.

Posters above were saying they definitely wouldn't be spending the money they save - it would be going into pensions, savings, paying off mortgages etc.

But why should it be exempt?

@Runor

Because there is no free state provision therefore no choice, there is always a choice between state and private education when its compulsory, as shown by the fact that only 50% of those who are in the top 1% of household incomes privately educate their children.

Right, but the question was "what are the arguments against the policy"?

The argument against the policy is "it's a bad idea". Not "some people are happy with it".

That's classic level-down thinking.

Yes, there are severely-dyslexic children in state schools and they require extra help. If some of them instead go to independent schools, there's more money left in the pot for those that can't.

Make independent school even less affordable, you're left with more people chasing the same resources.

All part of "independent schools save the taxpayer £8-12k per child".

@CoffeeCup14

"Posters above were saying they definitely wouldn't be spending the money they save - it would be going into pensions, savings, paying off mortgages etc."

Posters are making threats they won't carry through, 99% of parents won't move their children from private school.

Those that do were overstretched anyway and will increase their consumption due to the fact that they have been not spending on other things.

And if a private school provides nursery/pre-school education would that be exempt?

It's amazing how accurately you can predict the future behaviour of hundreds of thousands of families. Any chance you can let us know which horse will win the 1710 at Doncaster?

"those that do were overstretched and will increase their consumption". D'you think they might have been working rather hard and will no longer work so hard, because for various reasons they might want leisure instead of consumption?

""independent schools save the taxpayer £8-12k per child"

Is this without removing the benefit of the VAT exemption, business rates reductions and charitable status benefits?

As it is, the average spend per head in school is just over 7k, so wildly incorrect calculation.

In which case why haven’t they simply said that in the headline grabbing then rather than just saying Private Education? Simple wording to make it clear they understand some of the implications of the policy. They quickly back-tracked on state boarding schools being excluded so it makes me question whether they have thought of all the implications.

You're missing the point. My point wasn't about nursery per se it was about whether, as higher earners, we decide to use state or private (amd we haven't decided - tempted to use state if it seems fine) and the impact that has. I was simply saying, if we do use state then we're not contributing anything more - we're just using state resources.

And FYI we do earn more than that but that's besides the point.

@Wetellyourstory because most people reading it will rightly think that it just applies to private education.

I'm fairly sure they've thought through the implications but it doesn't stop the Tory faithful/private school parents from scaremongering to protect their interests.

I have to say the mental gymnastics on here have made me incredulous.

@Aladdinzane you mental gymnastics have been pretty impressive too

Take a look at Oxted in Surrey - small town... one state secondary

@OhCrumbsWhereNow

Which is rated good in all categories, has higher than the national and local authority average taking the EBACC etc etc.

No doubt private school parents would see it as a sink school

The "Good" is new - was "Needs Improvement" for year

@Runor

"I’d much rather see taxes on the highest earners/wealthiest raised to pay for better education"

The top 1% of income earners already pay 30% of all income tax revenue a higher share than at any time in past twenty years. In other words, three in every ten pounds that the government receives in income tax is paid by just over 300,000 individuals.

You really don't need many of these individuals to either reduce their hours or leave the country to make a big hit on income tax revenues.

Such resentment and bitterness. I do wonder what sort of inverted snobbery you are teaching your DC.

Don't you see how Kafka-esque this is? What is 'non-compulsory education' but a non-essential purchase, and therefore by the logic you've used elsewhere, a luxury? Can everyone afford a private nursery school? This appears to come down to 'exempting people like me' while still ordering the 'rich' to 'pay up!'.

"wildly inaccurate". I'm afraid you picked the wrong economist.

• average spend £7690 for 24/25
• state schools have a unique tax break (yes, an actual tax break not a made-up one) - they reclaim VAT on purchases despite not charging it on sales - that's worth ~5% of spend so ~£400
• state schools TPS top-ups have been centrally funded for several years, worth ~3.8% of payroll costs or £200
• state schools capex comes on top and is around £500
• various industry overheads are paid for from DoE budget...which spends, for example, £2.7bn on "R&D" about £350 per child
• plus cost of school transport which is an entitlement in state schools over some distance, and not available at all for independent schools, and will be a very large unfunded expense if independent school kids move across
• plus other permanent fixed costs such as construction and land, which you can look up in Oxford Economics

To simplify:

• if 1 child moves across and there's space in a school, the extra cost is probable minimal - a few books, a desk and a chair.
• If 20 move and you create a new class in physical space that already exists, the £8k is a fair bet.
• If you need to build new classrooms and schools, you should assume £12k. Surrey, for example, has 30% of kids in private schools and ZERO school places.

Sure, then you can compare £8-12k to the VAT exemption notionally worth £2.5-3k, and see that it's rather good value.

Then you can look at the tax contribution made by the school itself, and also the tax contributions made by parents as they earn the fees from after-tax income, and you get to ~£30k. As the Adam Smith Institute reports, that's a >1000% return on the £2.5-£3k tax exemption.

@Grace1980xxx

No snobbery and bitterness, just experience. Good schools/outstanding Ofsted schools have all been described to me by private school parents as "sink" schools. It does make one question the justifications given on here by private school parents of their need to send their children to private schools. As I've said before, who are all these people who can afford to spend 90k in 6 years for secondary ( assuming a year 8 start) but can't afford the catchment of a good state school?

@MisterChips

"wildly inaccurate". I'm afraid you picked the wrong economist."

Hahah, yet you didn't include the cost of the tax breaks for the private schools?

To simplify:

The mental gymnastics you took to get to the 8-12k figure saved do not include tax breaks given to private schools as a net cost to the exchequer, therefore are wildly inaccurate.

Private schools also get to reclaim VAT on purchases, yet you haven't included that.

Average spend for 24/25 is also estimated, not confirmed.#

Wildly inaccurate is justified.

@Aladdinzane my comment/post about VAT being an unfair tax was in specific response to a post my be @Mepop