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”

Someone on £300k nets around £170,000. Take a boarding fee of £45k. 2 children means fees of £90k. Extra VAT on top of that makes it £18k extra, taking it to £108k. You don’t think that someone netting £170k won’t think twice about spending £108k on school fees and might consider switching to day? Of course they will.

Depends how many children they have. 3,6, 8? You'd have to be pretty rich to afford boarding for all of them.

@Aladdinzane- there is no point relying on “studies” anymore when you yourself are pointing to the real life behaviour exhibited by private school parents right now all over social media and the press. They are clearly indignant and outraged, it’s very clear to me and you have a real life case study now. I doubt that kind of anger won’t translate to behaviour changes - do we have any studies for that?

To say they are all just “campaigning” and bluffing is rather bold. Especially because we do in fact rely on the tax take there.
It is negligent to ignore this and it will hit the most vulnerable children and children with SEN hardest etc if you have less tax take. And let’s not forget about councils. Go ahead with this policy but councils must be fully funded first. And where is the money?

I'm seriously considering compiling a list of all the local businesses I can no longer support because I have to pay this tax and sending to my Labour candidate.

@Another76543

You are making large assumptions, one of which is that the 300k is the only income coming into the house. 2nd of which is that these people do not already have significant asset wealth/savings that can be used to make these costs lower.

I'd also wager that any parents with 2 children at 45k PA schools is going to have a far higher income than 300k.

You're also assuming that they wouldn't withdraw from boarding ( and the price you are quoting is top boarding schools) and put into top day schools.

@Araminta1003

I don't think they will change their behaviour, its not that they CAN'T pay, its that they don't WANT to pay.

In fact most will make relatively minor adjustments to discretionary spending and just get on with it.

Some, will access savings, change pension payments for the duration of schooling, or use wealth that they hold to pay for it.

Mostly this anger is just for show to the press and to in an attempt to use their political influence. It is working to an extent, but this policy is far more popular than they can challenge.

The vast majority will pay, and I reckon those leaving will be about 3%.

@alladinzane- having 4 DC myself I can absolutely tell you categorically that if I had 2 older ones in private school and would be taxed in this anomalous manner, my younger 2 would 100 per cent be going to state school. Out of principle.
We have good state schools locally so we didn’t have to pay for private school nor do any of my DC have SEN. However, people in my life do not just blindly sign up to private school. It’s a very conscious budgeted financial decision they make just like buying a house!

Parents leaving private school will reevaluate their financial needs. Plenty of people at my kids school work 2x FT jobs and everyone talks openly about how the second is only to cover the school fees. You might benefit from reading about the backwards-bending supply of labour, which is taught to A-level children.

Unlike the IFS, the ASI paper doesn't even make any conclusions about elasticity. Do you think it's a strength, or a weakness, of the IFS paper that it doesn't mention YED or affordability at all? All the ASI paper says is that the IFS paper doesn't cover the ground and that policymakers should treat it with caution, and take into account more pessimistic scenarios.

"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 (1), and that as we know, the number of teachers in schools (especially private ones) is not directly proportionate to the number of students (2)."
(1) You are the only person in the country that thinks "the 5% will be spread across all schools" That's one of the few things both the ASI and IFS strongly agree on - nobody can predict where demand migration will occur. Did you even read either paper? And however it's distributed, maybe you could explain what effect a 5% fall in revenue WILL have on employment of teachers? My take would be some costs are fixed therefore employment would fall by more than 5%, but I'd love to hear yours.
(2) doesn't make the remotest sense. Neither you nor I have the faintest idea what you're trying to say.

What I'd really like: maybe you write a paper with some assumptions, whatever you think is going to happen.

@Araminta1003 Forgive me if I don't take you seriously based on fantasy families, you simply can't know what your situation would be like if you had four children, or if you would have afforded private school for the first two in the first place.

Yes people make financial decisions to send their children to private school with budgets, this doesn't seem to have deterred people from sending their children ( and continuing to do so) to private school over the last decade when school fees have risen every year above inflation.

“Mostly this anger is just for show to the press and to in an attempt to use their political influence. It is working to an extent, but this policy is far more popular than they can challenge.”

The thing is if the policy is “popular” private school parents will feel discriminated against and are even more likely to change their behaviour!

I think not “wanting” to pay and it be no longer worth paying would lead to behaviour changes for all but the top 0.5 per cent.

I don't think anyone should take you seriously if you think economists can predict the past based on the future, especially if you claim to have read the Adam Smith report which lays out in great detail why the IFS is wrong to do so.

"You have a car. That proves you can afford to buy a more expensive one"

"You're walking towards a cliff but haven't fallen off yet. That proves you can keep going"

Like Labour, either you haven't thought it through, or you actually know it won't make money / will harm schools / poses risk to state school capacity....and that's all good stuff because it's the whole point.

It’s a spiteful, illiberal policy. The motivation isn’t to raise much needed funding for state education, but to hurt people who frustrate them.

It breaks the notion that education is a public good; that parents should make choices for their children, not the state; it furthers are dis-alignment from Europe. It’s dog whistle politics.

But if all these private school kids head off to state school as some are predicting they will still need to be educated. More teachers will need to be employed. Maybe in more well off areas another school might eventually need to be built. All of it provides employment.

" Plenty of people at my kids school work 2x FT jobs and everyone talks openly about how the second is only to cover the school fees"

Anecdote. Fail. This also doesn't mean that they'll remove their children and send to state either.

@MrChips

If the IFS doesn't mention elasticity ( its a while since I read it) it is a failing, I think the PED for private schooling is going to be highly inelastic due to the fact that parents consider it a necessity, and this is backed by the data on the numbers rising during the last decade when fees rose at above inflation, and cumulatively over 50% during this time.

The spread across all schools is perhaps a little simple, but the impact of students leaving will be spread across the country, it won't be uniform, but it will be mitigated by the spread.

You've asked about a 5% fall in revenue and the impact on the employment of teachers? I think it will be negligible as the fall in demand will be spread across the entire school, rather than 5% of each year grouping. Even if it was 5% of each class, the smaller class sizes and smaller cohort sizes in private schools would indicate that there would be no redundancies for teaching staff, as classes won't be collapsed. Private secondaries will still need to have broad offers, and again won't be able to collapse classes enough to lead to staff redundancies. What may happen is what happens in state schools is that some schools will have non-experts teaching subjects to the lower school in order to fill timetables and reduce the need for new hires. The Smith's assumption that a 5% fall in demand leads to a 5% reduction in staff shows a glaring lack of understanding of how schools work.

What don't you understand about 2? Basically the Smith assumption is that people will work less hard in their 20s and 30s because they are going to choose state schooling in the future and that this is a loss to the exchequer. Frankly that's a ridiculous assumption

"You write a paper"

As said, you want evidence of how little effect this is going to have, go look at the numbers attending private school in the UK whilst there was an exponential increase in fees over the last decade. Whatever impact this has it will be negligible.

And it all costs serious money. the £8k variable cost per child is £12k, conservatively, if you have to start building new schools. And we're not short of jobs, either in teaching or construction - demand for labour is plenty strong enough, what we're short of is people willing / able to work.

The single biggest point is this: currently, families are picking up 100% of the bill for something the government is obliged to provide. That's a good thing.

The second biggest point: Labour are telling families that already pay ~16k of tax to pay for education and save the taxpayer £8-12k, that they alone don't do enough to support the state education they don't use.

@MrChips

The Adam Smith report is full of glaring errors and assumptions that make it easy to dismiss though. :)

"You have a car. That means you can afford a more expensive one"

Well you are rather misrepresenting the argument there aren't you.

The point has always been that most parents will choose to keep their children in private education, this is due to the fact that the vast majority of private school parents are in the top income decile and view private education as a necessity.

In most cases they will make some adjustments to their discretionary spend and absorb the increased cost at very little effect. The numbers will not fall by anything like the worst case scenario ( and I think the IFS are actually a little too generous about the numbers that will).

Like the Tories and private school parents you are grasping at straws and making wild predictions about the numbers that will change in order to protect the privilege granted to the already very privileged.

@MrChips

"The £8k variable cost per child is £12k, conservatively, if you have to start building new schools."

As we showed last night, that 8-12k saved is wildly inaccurate and the only way that new schools would be built is if every child left private education. Even at 25 -50% of children leaving they would just be absorbed into current school provision.

You couldn't possibly prove, more emphatically, that you're out of your depth.

As said, you want evidence of how little effect this is going to have, go look at the numbers attending private school in the UK whilst there was an exponential increase in fees over the last decade. Whatever impact this has it will be negligible.

As said "walking towards a cliff, the fact you haven't fallen off yet doesn't mean it's safe to keep going".

You might also want to look up the word "exponential"

@MrChips

"
You might benefit from reading about the backwards-bending supply of labour, which is taught to A-level children."

You might benefit from not making up figures to reach your fantasy targets, but then I'm not as pompous or patronising as you.

You might want to read up on PED and YED, which is taught at GCSE.

Oh you are indeed pompous! Everything you write is a pompous statement that only you have 100% certainty and you dismiss any other point of view.
You are not an economist yet you are arguing black is white with economists.

@MrChips

Explain why I'm out of my depth then? Seriously.

Exponential means an extremely rapid increase, and there has been :)

Keep being patronising.

"You are not an economist yet you are arguing black is white with economists."

I am an economist.

I've taught economics at A level and undergraduate level at RG insititutions.

I've not said everything is black and white either, I've said many of the predictions are off because they do not take into account certain things because of their ideology. The IFS is not fully right either, it doesn't take into account that people will not consume any extra savings from not privately educating their children, its much more likely to be put into pensions/savings due to the fact that higher earners have a higher MPS

This was also covered on Radio 4 this morning who did a fact check on More or Less

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

You aren't paid as an economist though are you?
You most definitely have spoken in absolutes and black/white language in every post ie emphatically stating that this/that will/will not happen.
Surprising that an undergrad teacher isn't prepared to acknowledge any other point of view or opinion.

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

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