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”

If you are expecting to pay between £15k and £20k on VAT then currently you are paying up to 6 figures on school fees.

At the level of income required to support such spending you have options including moving house to somewhere less rural.

@Boater - I do not even have DC in private schools. However, I have 4 DC. Our local coed school is 23,500k odd per child. Assume we have a 200k household income, live in London and are relatively well off but not super rich. Because that is the kind of salary for two professionals in London that is typical for this demographic.

So if we had gone private rather than state we would now be looking at 18800 per year in extra tax on our working family. That would be another 9.4% of extra tax on our household income. Couple that with the marginal rates these people tend to already pay in income tax, you might start understanding where they are coming from.

So Labour Party are absolutely coming for some working families and their DC. For those with multiple children in private school the figures are truly staggering.
People may have saved a bit in advance, but lots have very difficult years getting through school fees.

I completely understand why they are upset because I can personally empathise what situation they may now be in. I suspect the anger and resentment will just keep on building from here and won’t just magically go away when the VAT is implemented. Many families will have to make difficult choices and perhaps choose a different path for younger siblings, creating all sorts of emotional issues within the family unit as well as distrust towards a Government. I am not sure what this will lead to in the long run when we are talking about the next generation of workers.

@WaftherAngelsthroughtheskies has already explained up thread that her DH has retired from the military and they decided to keep their DC in the boarding school they'd sent them to due to moves in the UK and abroad, for stability. They bought a house rurally to afford that and she also left her public sector job to make more money to afford it.

Buying a house later in life after a military career (and military housing) probably would have put a 'leafy suburb' out of reach, and I'm sure it was the decision that made the most sense at the time.

A sudden 20% hike on top of inflationary fee increases is huge. It's easy to say with hindsight that we should all have realised Labour would get in and do this, and planned for it - but I really don't think that was obvious 4-5 years ago. Labour still looked unelectable, and their attempt to remove charity status had failed so spectacularly - due to their lack of understanding of the law and the consequences before announcing it - that it looked like a stereotypical 'Labour are so clueless about reality' policy which would disappear without a trace. Not a zombie which would keep coming back no matter what body parts fall off.

I'm so sorry you find yourself in this situation @WaftherAngelsthroughtheskies , when you tried to do the right things.

Yes but that’s because you have 4 children. Which is unusual.

I am one of those professional people that you refer to and I’m well aware how much tax my DH and I pay. I also have DC in private school. So I am one of the people who the ‘Labour Party are coming for’.

None of this has much to do with the point that Wafther Is spending six figures on school fees. With this level of disposable income, which is currently spent on school fees, they have choices.

With probably 2-4 years left of school, high cost of moving including stamp duty, one parent mid-50s the other retired, not much house equity due to buying late after a career in the military, they likely have very few choices.

They're really messed up by this, and it's shit.

£100k on school fees is a choice based on an income level that means people have other options.

@WaftherAngelsthroughtheskies

It was issued in general.

" I do think this has been an unnecessarily toxic and divisive thread, and I believe you set the tone for that, and bear a good measure of responsibility for it."

No, I have been the target of the vitriol and nasty comments, this is very typical of MN where one group gangs up on another, often in an attempt to get a reaction so that they can get posts deleted.

"You make huge generalisations and dismiss any other perspective or experience"

Almost every other poster makes arguments for entirely specialised cases, of course there will be exceptions to the rule, but in general its not representative of the income data on who privately educates their children. Nor do some of the seemingly contrived stories ring true ( The Doctors who live in a scrimp and save, small house but are going to spend half a million educating their four children for example).

"Whether intentional or not, the overwhelming message received from your posts is of one who despises us as a group and is rejoicing to see us get our comeuppance."

This genuinely isn't the case, but if you look at some of the post directed at me all along you may see that this is a result of a certain combativeness/nastiness made in my direction too.

I am sure that there are a large number of parents like yourself who are worried about fees, and if you are looking at 15-20k PA this is no doubt difficult Are you sure its this figure? The IFS only estimate that the VAT will amount to 15%?

I suspect the anger and resentment will just keep on building from here and won’t just magically go away when the VAT is implemented

I think that's true. We're one of those professional couples you talk about, and I feel a lot of anger about this - even though yes, I do have plenty of choices and will keep my DD at her school.

It's made me painfully aware of quite how much tax I'm paying to subsidise people who hate me and want to actively harm my DD. That's the only way I can interpret the support for a policy which anyone with the slightest logical analysis can see isn't going to bring in any money - in fact will likely bring some harm to state education - but is popular because it will cause even more harm to a tiny, unpopular part of society.

I can't forgive that. Especially when it's aimed at my DD.

The only silver lining is that I've learned one hell of a lot about tax (I do love mumsnet for the way I end up reading loads around whatever subject I'm following!) and so will be more careful in future to legally minimise my tax. I should really have been doing that already, but I always felt fairly good about contributing to society. I'm also thinking much more broadly about my mid-term future (after DD finishes school), and what options I have available.

Everyone will always do what's best for their family from the choices they legally have. Good government is making sure that what's good for the country will be the result of each person doing what's best for their own family.

Which part of her situation have you misunderstood?

Its comments like this: " when you tried to do the right things."

That annoy people greatly, like people who aren't sending their children privately aren't doing the right things, however it was intended this is exactly the way that it comes across.

@Boater

is entirely correct in saying: "£100k on school fees is a choice based on an income level that means people have other options." and this comment,"

"Buying a house later in life after a military career (and military housing) probably would have put a 'leafy suburb' out of reach". There are many places that someone would be able to buy a house in a leafy suburb with an outstanding school nearby if they had 100k to spend on a mortgage payment even for a few years.

Even then it comes back to me that AFTER private school is over, families like this will have the same type of money available to spend, this is more than enough to top up pensions, over pay mortgages etc etc so that people will be very comfortable. Yes, it is your money to spend and that's fair enough.

The reality of the situation is though that the country is broken after 14 years of Tory rule ( and I have very deliberately not mentioned which party people who privately educate their children tend to vote for, and no that is not a sweeping generalisation, again its backed by data). The country needs to be fixed somehow.

If Labour were raising taxes on the highest earners- there would be outcry and they'd all threaten to leave/quit work etc etc, just like we've seen with these threads.

If Labour were to tax wealth, again the outcry here would be way OTT with the "I worked hard" self attribution bias that we see all over the PE threads and threads regarding any tax increase.

Labour increase deficit spending? Nope, fiscally irresponsible, Labour are always spending other people's money, etc etc.

There is no win.

@strawberrybubblegum

Having 100k PA to spend on fees means that there are a huge range of other options.

They're a couple with one parent retired and the other working. Little house equity. Almost certainly dipping into savings to cover the last couple of years of their DC's education having gone from a substantial military subsidy to none. And made a calculation when that happened which has now been trashed.

Sure, they have more options than someone on minimum wage in council housing. But they bloody should have after a high-level career, with the amount of tax they've already paid all their lives. Both of them have been in public sector jobs, one in the military.

They should have choices. They shouldn't be squeezed for every penny. It's shit.

There may be no 'win' @Aladdinzane but declaring war on the 10% of people who pay 60% of the country's running costs might well be a way to speed the defeat.

You keep saying that our jobs are replaceable, that we're less mobile than we think. That's true to a certain extent, but as an economist you know that change happens at the margins.

And the economic health of a country is measured in decades, not years - plenty of time for young people just starting out to make different choices.

No it's not. TPS increases were funded by central government, not from schools' budgets.

"They're a couple with one parent retired and the other working. "

They have 100k to spend on fees, which is more than 3 times the median household disposable income.

The pay rises a few years ago were. It was poor behaviour from the government to accept the increased teacher pay as recommended, but not increase the per pupil funding to match.

Still not sure why teachers accepted that and didn't keep striking.

" but declaring war on the 10% of people who pay 60% of the country's running costs might well be a way to speed the defeat."

But they don't pay 60% of the running costs. 60% of income tax accounts for about 14% of the UK's tax. The UK runs a deficit, so its no where near "paying for". Poor households pay more as a % of their incomes in tax than the higher earning.

Also, the "net tax contributor" thing is a total red herring, over a lifetime only about 3% are net tax contributors.

"Even then it comes back to me that AFTER private school is over, families like this will have the same type of money available to spend, this is more than enough to top up pensions, over pay mortgages etc etc so that people will be very comfortable."

Being an economist, do you think paying £100,000s affects a family's lifetime finances, or not? I mean, you complain that people have been horrid to you, while claiming a background in economics, and you come out with guff like this?

A family that struggles through paying for school fees is significantly less well-off, on completion, than an otherwise identical family that doesn't. That's their reward for having saved the public finances £100,000s while paying taxes on the income for the school fees.

@strawberrybubblegum

Still not sure why teachers accepted that and didn't keep striking.

They did keep striking, the last ones were in November 2023.

Fairness isn't everyone having the same amount of money.

We don't belong to the state and we should benefit from our own ability and endeavours.

Humans being what we are, we'll seek out ways to do so.

Communism fails because it's a fundamentally economically flawed model.

Selecting a small, unpopular minority in society to deliberately squeeze is shit.

They accepted the pay rise though, and that stopped that round of strikes which were directly linked to pay.

Sure, they have more options than someone on minimum wage in council housing. But they bloody should have after a high-level career, with the amount of tax they've already paid all their lives. Both of them have been in public sector jobs, one in the military.

A family that struggles through paying for school fees is significantly less well-off, on completion, than an otherwise identical family that doesn't. That's their reward for having saved the public finances £100,000s while paying taxes on the income for the school fees.

Except the state paid a massive % of the fees due to CEA. Again the result of a choice.

I was trying to save for my old age, but seeing the threads on here with people saying we should tax private health care, nursing homes, care packages. Stuff it! I'm going to sit in my old folks' home (paid for by YOUR children with THEIR taxes) with drool dribbling down my chin moaning that everything would be better if the rich didn't get all the tax breaks.

That was part of their renumeration. Clearly the state wanted him as an employee enough for it to be worthwhile.

"Being an economist, do you think paying £100,000s affects a family's lifetime finances, or not?"

Well of course it depends where the 100k has come from, if its from income family finances may be fine after a couple of years, and in the most part fees are paid from income.

"I mean, you complain that people have been horrid to you, while claiming a background in economics, and you come out with guff like this?"

How is it guff when most will continue earning following their children leaving school? If this particular poster is funding this from savings, then the circumstances are different, but if its funded from income then there are significant options available regarding pensions/mortgages etc later for the parents.

"A family that struggles through paying for school fees is significantly less well-off, on completion, than an otherwise identical family that doesn't. "

That's a choice though isn't it? You do not have to privately educate your children. Families that can't afford to privately educate their children will be significantly worse off too.

" That's their reward for having saved the public finances £100,000s".

Yes and they did so for entirely this reason or is this just a positive externality of that decision? Portraying private school parents as being more deserving, whether you have unintentionally done so or not, is really por.