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”

judging by your “assumptions” I also highly doubt you are having any first hand conversations with any highly skilled and highly paid professionals 😂

Do you think that's what Chavez's economic advisors told him about nationalising the oil companies in Venezuela?

Many EHCP's are refused if children are meeting age-related expectations, i.e. if they are bright but with an associated difficulty or SEN (i.e. DME).
There are a lots of kids with an SEN / DME in private schools. Many don't have EHCPs. One consequence of this policy is that there will thousands of applications for EHCPs that were not previously needed because parents were funding support and/or a private school place themselves, but will now need to apply for EHCP either because their child is moving to state and won't get support without an EHCP, or because they need the EHCP to exempt the VAT and keep the private place affordable.
The EHCP process is already overstretched/failing and unfit for purpose. Thousands more applications will cause a backlog of years, even with diagnosis already made. To get the diagnosis in the first place can take up to 5 years. So a kid who is starting year 7 now may not have a diagnosis and EHCP in place until they've done their GCSEs.
The fact that Labour intend to introduce VAT immediately without having thought through the mess it'll create with SEN and EHCPs is another example of how this policy treats children as acceptable collateral damage.

"Do you think that's what Chavez's economic advisors told him about nationalising the oil companies in Venezuela?"

Yes that's exactly what is going to happen.

Yawn.

"they may well get excellent advice from their senior civil servants" - which they are free to ignore, and ram through populist/ideological policies which make no sense.
"workable" - There's little doubt that VAT can be imposed. it is "workable" in that sense. However, it is likely to (a) raise far less money than projected by Labour, and quite possibly cause a loss to the exchequer, and (b) have several unintended, undesirable effects, which are understood by many people on this thread and dealt with in detail in reports by Baines-Cutler, EDSK and the Adam Smith institute. It is not a workable policy in this latter sense, i.e. it will raise no additional revenue, and cause chaos (as it did when introduced in Greece) and this should be known to the Labour party, who can't say they weren't warned in advance when the shit hits the fan.
The 1.6 billion figure they continue to spout has been repeatedly debunked - continuing to use it is a deliberate lie - it's no better than plastering "Let's give 350 million a week to the NHS" on the side of a bus.

Sir Keir Starmer came across badly on LBC this morning with Ferrari. The head teacher of the SEN school asking about what will happen to the 30% of her pupils who do not have an EHCP. Why can they just not introduce an exemption for specialist schools like hers? I mean come on a school with 70% of kids with EHCPs is clearly a SEN school and no VAT should be payable. It is exemptions like these which will be absolutely critical. If they do not introduce appropriate exemptions this will lead to a full inquiry further down the line at huge tax payer’s expense. There is no doubt about that.

Yep, that's probably exactly what Chavez said to any advisors brave enough to tell him that the companies would leave and would not be replaced by others. 'Yawn. Everyone wants oil. Of course they won't leave. They just have to accept whatever we do'

Tell me you don't understand what happened in Venezuela, without telling me you don't understand...

Do tell.

You think it was a great idea, presumably? Which worked out so well for them?

Keep on using bad analogies, it's funny.

Keep on ignoring economics. It's funny.

Dying to know what you think happened in Venezuela?

A combination of bad decisions, global oil price crashes, lack of investment in nationalised industry by the government, economic sanctions, political and civil unrest and more.

Not really the same impact as putting VAT on school fees.

‘A combination of bad decisions’

Nah just one mainly very big bad decision voting for Chavez to take power. Follow by letting him to change the constitution. Sanctions and the rest came after they set up a dictatorship.

The closest analogy is with Greece, not Venezuela. Thankfully, we know what happened when Greece introduced VAT on private schools : "total mayhem".

https://www.economist.com/europe/2015/10/30/greece-reconsiders-a-tax-on-private-education

Interesting listening to Starmer on Questiontime just now. He talks about all that is needed to improve the NHS and what a dire state it’s in. He then goes on to rationalise the Private school VAT with an answer of wanting every child in the UK to have the same level of education as those in private school. So with that same correlation, wouldn’t you want NHS patients to recieve the same brilliant healthcare as in the private setting? so why wouldn’t he suggest a VAT on private healthcare? What is the difference?

He then goes on to rationalise the Private school VAT with an answer of wanting every child in the UK to have the same level of education as those in private school.

I wonder what he’d make of the view of many posters on here that state schools are better than private schools.
I agree with your point about private healthcare and no doubt VAT will be added sooner or later.

I don’t disagree with him but in what way is this policy going to do anything to achieve that . This money ( such as it is) will do nothing to level the playing field at all.

Unlikely though as the majority of Private healthcare is paid for by insurance…. And I am sure they have been lobbying against the introduction of VAT to private healthcare for years! PE parents on the other hand seem to be a much easier target though 🤔

Another problem with the 'we want everyone to have the same great education' logic is that, if by some miracle is actually works in evening out the standard, private school is going to look a lot less attractive to parents if you're paying extra for a cut back service and the state option is no longer dire. Then you've lost your source of revenue. The whole concept of funding one sector of education from another sector of education is puzzling.

It's possible to be in favour of better state schools and more funding for state education, but still be against this policy because it is economically illiterate, fundamentally untruthful, and will cause immense disruption without achieving its stated aims.
Labour's figure of 1.6 billion is fantasy economics - it ignores the reality that if prices go significantly up, demand goes significantly down. It's likely to raise little money, or quite possibly cost money. The breakeven point at which the policy costs more than it raises is around 12%, i.e. if only 12% of pupils switch from private to state, the policy raises nothing at all.
Even if raised, 1.6 billion would not be nearly enough. In order for state schools to be significantly improved, a figure more like 10 billion per year would be needed to tackle the effects of austerity, Covid, and the discontinuation of the schools building programme. This would need to come from progressive taxation on income and wealth and beefing up HMRC to pursue tax evasion. Labour are too scared to say that better public services will require more investment. They lack vision, and aren't being honest.
By imposing a regressive tax that's ultimately not based on ability to pay, Labour are placing children, including those with SEN but no EHCP, and school staff at the smaller indy schools which are most likely to fold directly in the firing line, while those at the likes of Eton will remain blithely unconcerned. The policy will therefore cause needless suffering among families whose finances were already marginal, without effecting the social change intended.

Another problem with the 'we want everyone to have the same great education' logic is that, if by some miracle is actually works in evening out the standard, private school is going to look a lot less attractive to parents if you're paying extra for a cut back service and the state option is no longer dire. Then you've lost your source of revenue. The whole concept of funding one sector of education from another sector of education is puzzling.

@MyNameIsFine i hasn’t thought of that but it makes absolute sense - every private school that shuts is less revenue for the government.

Brilliant post

The 1.6bn figure has come from the IFS report which is full of guesstimates and assumptions. It makes no allowance for lost tax because of behavioural change. It assumes that the money which parents no longer spend on private education will be spent on other vatable goods. In reality, the most impacted group will be higher rate taxpayers, not the mega rich, and they will divert the money into pension schemes (big loss of tax and NI for the government), spend it on foreign holidays (tax goes to overseas governments), private tutoring (not vatable) etc. Like you say, the key to them getting any money from this at all will be the percentage that make the switch from private to state. It will be more of a case of people not sending their kids private in the future, rather than disrupting their existing education, so the actual impact won’t be known for many years. By then, going by history, we’ll probably be back to a Tory government and the policy will be reversed. However, the damage will be done, and the private school system may never fully recover.