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”

The Telegraph are reporting that Labour insiders have said that VAT on school fees wouldn't be imposed until the 25/26 school year "at the earliest" because of the timing of the budget and how long it would take to work out the exact policy.

I can’t read them as they are behind paywalls but Times/FT headlines are reporting that Rachel Reeves has said 25/26 at the earliest.

@wokcommuter I agree with most of your post. But actually 1.6 billion came from a guesstimate from the Fabian society and the Corbyn 2017 manifesto. This simply assumed that all current fees would be taxed at 20% with no reduction in demand. Wishful thinking.
The IFS at least assumed a drop-off of around 5% in demand, and some VAT recouped due to capital expenditure. From memory, they estimated 1.3-1.5 billion on that basis. Still unrealistically high. The reports by Baines-Cutler, EDSK and ASI are broadly consistent, and generally project a loss to the exchequer.

The Baines-Cutler study projects an initial sharp drop in numbers of around 10% in the first year, then further drops of around 2% per year, such that the drop-off over 5 years accumulates to somewhere from 17-25%.

Excellent, DS leaves in June 2025.

“The Telegraph are reporting that Labour insiders have said that VAT on school fees wouldn't be imposed until the 25/26 school year "at the earliest" because of the timing of the budget and how long it would take to work out the exact policy”

The more I think about this, the more I wonder if other Labour policies need the same level of scrutiny. A couple of comments spring to mind:-

—Why didn’t they quote a start date in their manifesto? (Wouldn’t sound as good, the same reason they quote Eton/Winchester when talking about private schools)

-they’ve had years to come up with the policy details. Does this imply they haven’t considered all the finer details and how this would impact children/government financing? To me, that’s something you do before you commit to a policy. What else is in their manifesto that also hasn’t been thought through in depth?

-25/26 is “at the earliest” so potentially you could be looking at the year after. VAT receipts (if any) then take longer to be received. You are therefore looking at the tail end of their first term in government before there is any possible income from this policy. Where is the funding for the state sector coming from in the meantime?

This isn’t a private v state debate, it’s a fundamental issue that seems to drive a cart horse through one of Labours main manifesto pledges.

At least it is being acknowledged that it will take time to come up with the exact policy. Most school policies imposed by the Government don't have any thought behind them

That is really good news. Each year that the policy is delayed cuts the number of children having to leave a school they are settled in by about 15% - since parents start private school with VAT factored into their calculations - which has to be a good thing.

I know it won't help the kids with SEN who now won't benefit from an education which meets their needs if this has tipped the affordability balance for their parents. But it does give an extra year to get an EHCP (although I know that delays are several years currently).

It will also give the government a bit more data to work with. They can observe whether the percentage of children starting YR and Y7 next year dips from last year. Given that the policy has been talked about quite a lot on the last few months - and so most new private school parents will be aware of it - that's at least some indication of how the policy might change behaviour. It might have been too late for families to move house/tutor for grammar - so might not fully reflect long-term change - but it's better than no data at all.

@strawberrybubblegum it also gives more time to try to persuade the leadership to engage with independent schools and parents. Raynor, Reeves and Starmer have refused up until now.

I wouldn’t hold my breath.

That would be a long time to hold your breath!

But a government should think about a policy which will harm tens of thousands of children (even using the IFS migration assumption of 3-7%) for a bit longer than you can hold your breath.

Agree! It’s been pretty clear from the start that they are literally making it up as they go along - sound bites to attract attention without any sensible data or plan to back it up! You only have to watch starmer in a debate or answering questions on the fly to see him bumbling away without a clear comprehensive answer!

You put it like if I am agreeing to this policy. I do not have respect for the Labour Party. They would create chaos and launching with more division rather than bringing people together. Happy to see kids suffering and parents running like headless chickens looking for places in State as not clear of when is starting. But yeah they are the caring party. Who is so gullible to fall for that? Can’t wait to see how it all turns out.

Ah, I misunderstood what you were saying!

I think this is a terrible policy. But if they're going to bring it in then at least if they bring it in with some thought to prevent the worst of the fall-out and a lead-time long enough to change course if when it proves to be a problem, then that's better than immediately bringing in a half-baked version with no care for the consequences.

I don't want to see them crash and burn with a reckless policy, because it is kids who will suffer the consequence.

You can't fix the impact on individual children of an unnecessary disruption to their education just by removing the VAT a year later when it proves a disaster. And if schools close down, they won't re-open.

Like, Starmer's comment: “I am very comfortable with private schools, but I want our state schools to be just as good."
This guy is going to be PM very soon and he comes out with this crap. Why would anybody pay 15-20 grand, plus VAT for something 'just as good' as the free version?

@MyNameIsFine but this policy doesn’t impact the quality of state education

what do you mean? the whole point of the policy is to impact the quality of state education. What else is it for?

@MyNameIsFine to get votes

I see what you mean now. As I said, it would be a miracle if the policy actually worked to radically improve state education.

It depends what you mean by just as good. Private schools essentially consist of two parts:
(1) the academic conveyor belt, where the kids cover essentially the same curricula at the same ages leading them to take the same qualifications as state schools.
(2) the associated country club, where there are expensive leisure facilities, classes by specialist teachers etc. Also drama and music. aka the co-curricular programme. Also, grounds / green space.
Many grammar and partially selective schools and some comprehensives are as good as most private schools, at least regarding the academic provision. The teachers are just as well qualified (or better), and just as (or more) committed. Any differences in results are largely due to selection / differences in attainment on the way in. The more selective the school is on the way in, the more complacent the teachers become - they know the top grades are already in the bag. The stellar results of the top private schools are due mainly to selection on the way in, and also the the fact that if a kid drops below an A, many parents will hire an external tutor. In that regard, private schools are actually terrible value for money.
Where private schools tend to offer significantly more is in the country club aspect - specialist sport / drama / music provision. Also, less disruption from poor behaviour and a peer group of kids from homes that value education. The peer group is a very important influence, particularly in secondary.
Nothing that Labour have proposed will change any of that. The Blair/Brown initiatives, starting with "Excellence in Cities" and "Building schools for the Future", and continuing with the G&T programme that ran until 2010 was far more ambitious and did have a real impact.

Yes, it's true that people pay for all the extras. I'm just wondering how much further the schools/governments can push this. For this kind of money, people could hire a nanny to drive the kids to all the extras at weekend and after school, and hire a private tutor to get them through exams.

Great post, @Lebr

This is why there’s a good argument for parents to get given a credit equivalent to the state funding of the academic element, and then add VAT onto the additional element. Eg fees of £18k. Credit of £7k for the basic element which children are all entitled to in the state sector, and then add VAT onto the difference of £11k. Taxing the basic element of education is ridiculous.

Completely agree with this point and thank you for making it!!

Where private schools tend to offer significantly more is .... less disruption from poor behaviour and a peer group of kids from homes that value education. The peer group is a very important influence, particularly in secondary.

I think you'll find that describes the following:

Many grammar and partially selective schools and some comprehensives are as good as most private schools, at least regarding the academic provision.

I believe this aspect of selection is more important than outright academic ability for all but the very "top" schools. Unless a government eliminates the ability of parents to concentrate "good" students in some state schools, e.g., through ballots within fairly large catchments, the inequality of education within the state system will remain larger than the inequality within the private system, and larger than that between the "averages" of the two systems.