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”

@MrChips But the accommodation measure IS used, is doesn't matter if it little is, it still comes at a cost to the treasury.

Ok, taking your Average VAT + 0.1k on business rates, means that at the estimate of 8k saved, comes down to 5. 2k and at the top of the estimates comes down to 8. 2.k BUT...

State schools also don't have to provide transport for children out of catchment, its only provided if you go to they go to the nearest suitable school and live more than 2 miles away for under 8s and 3 miles away for over 8s. The fact is that this extra cost applied to all private school children is erroneous as most will live within 3 miles of a suitable school. Even then in London all children under 18 are given some type of free or discounted travel, which given the massively disproportionate number of private school students in London, would further reduce your erroneous per head calculation. This also means they currently do receive some sort of state funding for travel, something you didn't add into costs to the exchequer for private schooling.

The thing that is laughable is that to get to your 12k figure you added costs which aren't divided per pupil and would be spent anyway with thousands more or less in school), so come at 0 opportunity cost and wouldn't be included in a per head calculation in how much the state saves from private schooling. Nor have you considered that private schools may also benefit in some way from R and D spending by the DofE. So these are easy to dismiss from any per head calculation used to say that the state has saved from not having to educate these students.

Your simplification to get to 12k also assumes that schools would need to spend 12k to accommodate each extra child in order to provide for them, when if you spread out the entire private school population across the state school population the figure would be something like 1.1 child per school, so far closer to the figure of 8k at the lowest.

In actuality no school, even if ALL students left private education, would be adding 20 students to a year group and therefore have to provide extra spacing, an extra 20 students divided even across 1 year group wouldn't come to the 8k estimate on saving.

And as said you didn't take off the cost of the VAT tax break business rate reduction from the figures you used in order to come up with the 12k figure, and made some wild and inaccurate assumptions on the costs to reach it

Lets make it even more simple.

Take the 2023-24 figure of 7460 and minus just the cost of the tax and business rates per child from the private sector being 2.8 k, this gives us 4660. All in all, So yes, the state is maybe saved about 2.9bn in having private schooling, rather than the maximum of 7.8 billion (and minimum 5,2bn) you suggest, so yes they are wildly over estimated savings. The even better thing is that so few children will leave the private sector ( all the think tanks are under predicting how inelastic PED for schooling is) that this saving will be added to a 1.7 billion, or more, increase in spending for schools.

Double win.

Adding on all the tax breaks for state school students, dividing capital expenditure and R and D from DofE onto the figure, whilst not taking the cost of tax breaks from private schools into account on your "saved" figure massively undermines your point and thoroughly shows the mental gymnastics you are prepared to go through in order to try to prove.

It is fun showing that though, but maybe you didn't understand that.

Is anybody else feeling a little lost on this thread now?

What is interesting though, is that if you take all the state school children in England and divide the entire schools budget ( for England) between them, you only come up with a net spend per head of 6411, which means that some of @MrChips figures that he added to the 7460 (such as the spending on teachers pensions etc) to get to his 8-12k figure, must already be included in the net spend figure.

:)

See, even more wildly inaccurate.

@twistyizzy

There won't be numerous places need though will there :)

On a separate note who thinks £6k is a realistic figure for state schools to provide a good education and everything else that DS e to provide. Maybe this is what we need numerous threads about. We should t be arguing about VAT on fees we should be arguing that the state s hook budget is not fit for purpose. And the VAT policy is not going to touch the sides

It won't be evenly spread through the country.

30% of children in Edinburgh are educated in private schools. Bristol is slightly lower but similar: I can't find the total percentage but 34% of children in Bristol spend at least some time at private schools.

In those cities, 10% moving doesn't just require new classrooms, it requires whole new state schools to be built.

I think you should read the Adam Smith report: Short Term Thinking

It's very clear.

That seems like a very good idea. The state school budget is definitely not enough, and teaching is in a really bad place just now (not only due to budget - that would be worth exploring too).

I think the way to approach it would be looking clearly at numbers and outcomes.

As well as looking at inflation-adjusted change in spend per student over the last 20 years, I'd look at comparing to other European country spend adjusted for salaries/cost of living in different countries (since the same budget would mean different things in Switzerland and Lithuania) and teacher ratios - and then comparing outcomes.

I'd also be comparing levels of SEN and deprivation which are handled within those differing budgets - what interventions are made in other countries and how much proportionally is spent on those. Mainly because I'm genuinely curious about whether our levels of need are similar to others, and whether we're taking the right approach. It seems anecdotally to me that we spend a high proportion of education resource on the most needy, yet kids with SEN are still massively failed. Are we doing something fundamentally wrong? Eg I know there was a huge push to move more kids to mainstream education: how has that actually played out in terms of outcomes (for all kids: including but not only those with SEN)

I'd want to try to find some way to compare outcomes based on different education spending in different countries/at different times. School attendance and completion, exam results, proportion going to tertiary education, some kind of analysis on the difference made by extra spending on SEN and specific challenges (eg the extra spending on inner city London schools in the last decade) especially the impact on later employment and crime.

Very tricky, since you'd be comparing against different populations and different economies (a small, homogeneous, agricultural country will behave very differently to a large, diverse country with an export service economy). But looking at the numbers is the only way to genuinely understand the consequences of different policy choices. What seems morally 'obvious' often has unintended consequences and doesn't play out the way you hope and expect.

The Adam report has been brilliant for that in the very specific area of VAT on private schools.

There must have also been analysis done on the wider questions already by some of the think tanks. @MisterChips - you are an economist with an interest in education. Any ideas where to start looking for analysis?

The Adam Smith Institute is also a neoliberal think-tank, coming at it from their pre-existing political perspective.

Ultimately on migration, no one knows. Those who oppose the proposal predict high migration, those who support the scheme predict low migration.

Most of the opposition is ideological and about self-protection, not the scheme itself.

Most of the opposition is ideological and about self-protection, not the scheme itself.

I'd say that's even more true of the policy itself than opposition to it.

The alternative to ideology and self-protection in tax policy is economic analysis, and trying to find the most efficient tax to fund a spending goal.

Which has been conspicuously, outrageously absent from the Labour Party wrt this policy.

You may not like the Adam Smith institute, but if you compare their analysis to the IFS one which Labour use to justify the policy, it's night and day.

So if you're, say, a year 9 pupil living in the north of Buckinghamshire, e.g. Buckingham itself, and you need a place, where do you go? It looks like there are only 2 schools with places, and they're both over 2 hours by public transport, or over an hour by car.
There may be spaces nationally, but they're in the wrong year groups and wrong locations. At primary level, there probably wouldn't be too many problems accommodating kids leaving private schools because the falling birth rate means there are more vacancies, and there are more primaries than secondaries. But at secondary there will be major problems, particularly if a large private secondary becomes unviable and has to close, leaving hundreds of pupils in the same area with no school.

With your crystal clear predications of what will and will not happen I do hope you are putting the lottery on. No-one can say for certain what will happen but professionals who do this for a living (therefore have more knowledge and experience than either you or me) have been modelling and forecasting likely outcomes and behaviour changes. I will take their research over your assertions.

You are incredibly blinkered and tunnel visioned, not wiling to consider alternate thinking which is why I do hope you aren't involved with teaching children in any capacity.
You accuse others of having fanciful mental gymnastics but yours are none the less impressive.

The latest from Labour. "Schools don't have to pass this [the VAT] onto parents. Ampleforth has already said that they will be able to absorb the entire cost". Well, isn't that fabulous. All those stretched Ampleforth parents must be feeling relieved! 🙄

Ultimately on migration, no one knows

You're right, no one knows.

So it's a pretty big risk. Even best case, it's a relatively small economic gain (high political upside of course). And there's a very real possibility of economic cost. 10% migration brings no money, any more actually costs the government.

That's on top of the cost to the people paying it (every tax does have a cost, though it may be more or less harmful).

Worth just a bit of analysis to try to get a better prediction on the likely migration, wouldn't you say?

And the likely consequence of that migration?

I thought Ampleforth had backtracked on that?

https://finance.yahoo.com/news/head-catholic-eton-ampleforth-no-180000623.html

Is that comment from Labour today? If so, it’s just another example of them not understanding the sector or following developments.

Yes they have backtracked

Frankly the VAT issue is the least of Ampleforths worries . Not a good example to use . It’s only a couple of years since they were banned from taking any new pupils due to safeguarding issues .

It isn’t about how many migrate to state it is also about who migrates.

Friends who are well off have just sent one autistic DC to grammar and fully funded transport instead of choosing the local small private. That is going to happen more and more. If the Government is making those type of parents feel unsafe in the private sector, that will happen more and more and is already happening even with just the threat of VAT. And Councils and the rest of our children will bear the brunt of it. Of course those DCs deserve all they can get but if they are not going to fund SEN properly this will be the outcome.
My DCs received abysmal funding in our Borough per head because our schools do well overall and we parents plug the gaps. Our Council is very open about that.

It's just not possible that they don't understand the sector. Many Labour MPs and their supporters went to private school themselves or send their children there. They must recognise that there's a difference between the income of parents who send their children to the local day school and those who send their children to the big names like Ampleforth. You're not going to miss a few thousand a year if you're earning over 300,000.

I am not sure that is true because I have friends in this income bracket with eg 3 kids. Let’s say two at public school 42k a year currently and one at prep 19k. VAT makes boarding 50k and prep 22.8k plus extras. If you have one person earning 300k take home will be more like 170k (don’t have exact figures). Adding almost 25k a year on spending on school fees won’t work unless they have investments/family money. So I would expect some of those people to migrate back to day schools and some of the day school lot to migrate to state schools. People will absolutely adjust their behaviour. Big name public schools with boarding facilities and a brand will have to tap into the overseas market more and more. And dare I say it - if you want your kids at Eton maybe you have to do a stint in Dubai now or UAE if you are a lawyer or banker where you then temporarily pay no income tax but then you have to go on a short term contract so you don’t end up paying overseas uni fees.
We are talking about bankers and lawyers here rather than big name family money and I would expect them to adjust their behaviour very quickly. Being financially savvy by definition.

@strawberrybubblegum

Whilst the folk who work at the Adam Smith are lovely and Madesn is a true gent, their work is biased

A quick scan of it shows that lots of assumptions are made ( that families who choose not to send once VAT is paid on fees will withdraw the labour that covers the cost of fees is one which is unlikely) They also make the erroneous remarks about catchment areas given here.

It is rather clear, that they haven't read the UCL studies on who sends their children to private school.

The other thing in this study is that it's discussion of elasticities is inaccurate and whilst it waffles on about income being a high determinant of demand for private schooling ( in fact as the UCL studies show, it's the most important determinant) it doesn't really justify it's conclusions about people removing their children. It also doesn't discuss the PED/YED for private schooling enough outside of the few examples given.

It makes an assumption about a 5% fall in demand for places automatically leading to a 5, 150 teachers (5%) of the total, which is COMPLETELY ridiculous and simplistic as the 5% fall will be spread across all schools, and that as we know, the number of teachers in schools (especially private ones) is not directly proportionate to the number of students.

The assumptions that it then makes for falling tax paid from private school staff and payroll taxes is also there totally unrealistic and erroneous. It also waffles on later that people now in their 20s and 30s may choose not to work as hard as they will have already decided not to privately educate their kids and counts this as a loss to the treasury.

I could go further in taking apart their analysis but I can't be bothered, it is SHOCKINGLY bad and makes huge assumptions and incorrect assumptions in order to reach its conclusions.

Basically its a fluff piece written for ideological reasons rather than using good economics

You're right. I was forgetting that families have multiple kids. I think a lot of families will be thinking twice about boarding school. They will take up the places at day school and the government will say 'look, the places are still filling, the parents can afford the tax' 🙄

it is SHOCKINGLY bad and makes huge assumptions and incorrect assumptions in order to reach its conclusions.

Not dissimilar to the IFS report then. For example, the ridiculous assumption that every parent who withdraws their child from private school will spend every single penny saved on fees on other goods and services taxed at 20%. They don’t think that perhaps some of the money saved in fees will be spent on foreign holidays, savings, pension contributions etc.

@Araminta1003

Someone earning 300,000 will continue to send their children to private school, probably not move their children at all if they are at boarding.

:)

YED/PED says so.

People will buy bigger houses in better catchment areas and pay 3% stamp duty. For a lot of families, the choice is between school and a larger house. The government is really misleading the public into believing that they're getting ripped off. School fees don't attract VAT, but they provide employment. The money I put into my house doesn't pay anybody's salary.