Labour’s private school tax raid ‘likely illegal’

[Zizzagaaaaaww]

Thought some may like to read this article

archive.ph/i1XD3

Sir Keir Starmer’s planned VAT raid on private schools is likely to breach human rights law, The Telegraph can reveal.
The Labour leader risks falling foul of European Court of Human Rights (ECHR) law <a class="break-all" href="https://archive.ph/o/i1XD3/www.telegraph.co.uk/money/tax/labour-private-school-tax-moronic-policy/" rel="nofollow" target="_blank">over his party’s flagship policy, one of Britain’s top constitutional and human rights lawyers has warned.
Lord Pannick, who has taken on some of the UK’s most high-profile court cases, backed legal advice warning that making private schools subject to VAT was likely to breach ECHR law.
He told The Telegraph: “It would be strongly arguable that for a new government to impose VAT on independent schools would breach the right to education.

“That is because all other educational services will remain exempt from VAT and the charging of VAT on independent schools alone is designed to impede private education, and will have that effect.”

The KC and crossbench peer said that the Labour policy risked breaching two articles in the ECHR which protect the right to education.
He referred to legal advice written in response to Labour policies as far back as the early 1980s, when the country’s most senior lawyers warned that plans to end tax exemptions for private schools or abolish the institutions altogether would likely breach international human rights law to which Britain is signed up.
Previous leaders of the party have floated the idea of taxing private schools as part of plans to integrate them into the state sector. Under former party leader Michael Foot, the Labour manifesto of 1983 pledged to “charge VAT on the fees paid to [private] schools”.
The policy to abolish the schools was eventually shot down by senior lawyers, who argued it could be at odds with the ECHR and spoke specifically about the risk of imposing VAT.
While Sir Keir has ruled out abolishing private schools, he plans to force the institutions to pay business rates and 20pc VAT on tuition fees.
In an unearthed legal opinion from 1987, seen by The Telegraph, the late Lord Lester and Lord Pannick, prominent human rights lawyers, concluded a government “could not lawfully prohibit fee-paying, independent education or remove the benefits of charitable status or impose VAT in respect of such education” while a member of the court.
A foreword to the opinion written in 1991 by Lord Scarman, who served as a Law Lord in the precursor to the Supreme Court, said it would “encourage a challenge which could be mounted by taking the argument to the [ECHR]… if ever a government should seek to abolish or discriminate against [private schools]”.
The opinion was jointly written by Lord Lester and Lord Pannick as advice for the Independent Schools Council (ISC) and later published in its journal. Lord Pannick confirmed his belief that the argument still stands today.

The zero-sum game logic of it also implies that this tax is the ONLY way to fund improvements in state schools. By that logic, if you feel sympathy for the 7% of children in private schools, you are putting their interests above those of the 93% in state schools.

Yes, that's another misleading thing they're implying.

Whereas actually, a responsible government raises the money it needs to fund state services in the most efficient way possible.

Ie causing as little harm as possible to the population due to taking money from them, and also causing as little harmful distortion of behaviour as possible. And this policy certainly isn't an efficient way to raise that money!

Not in a way that somehow 'mirrors' the planned spending! What nonsense is that?!

Should SAH mums fund the free nursery hours for 2 and 3 year old, because it's 'unfair' that their children are getting parental time which the children at nursery aren't??

Agree they are amateurish and disingenuous. Would also add callous and vindictive. Beggars belief they would bring it forward to January - just to add a little more distress to a group of families and institutions they have made it quite clear they don't give a damn about.

Agree

It isn't that they don't give a damn, they HATE the Indy sector. Raynor et al have been very vocal about that previously.

It’s ridiculous to make policy with this kind of mindset

It ends up with poor outcomes and if it costs tax payers money politicians will feel they’ve ‘got’ some people

No thought to children and their education at all

They are screwing the state sector too by bringing it forward to January 2025, because the autumn census means budgets are set on a per pupil count in early October. So the private school kids moving after that are going to be entirely unfunded for state schools too, for the whole remaining academic year.

@Araminta1003 they will be unfunded for 2 years as census is for funding for the following year

@crumblingschools - so up to 90000 unfunded children? As acknowledged in a technical footnote that the 40000 by the IFS may not be enough?

In reality, it may be more.

I really think the state sector needs to demand full funding for this vanity project.

OK so we have the DFE acknowledging SEN is about to colllapse and they know for a fact that small private schools catering to SEN will go bust? And Angela Rayner wants the real estate of those schools to build council houses?

What a mess!

Except if those schools are charities then the government won't get the land because it will be tied up in trusts etc.
Just proves yet again that Labour have no clue, driven by hate and spite which overrides everything else.

@twistyizzy https://insidecroydon.com/2024/06/18/school-site-to-be-sold-off-as-pupils-finish-their-final-term/

Whitgift are managing to sell off Old Palace. Where they are part of a bigger group, it appears they can do it to plug the financial holes?
Bigger schools will first buy smaller ones and then flog them? Lots of preps have already amalgamated with bigger private schools due to being on the brink. It is dressed up as guaranteeing a future cohort, but it is about the real estate. Big schools have already acquired small ones on the cheap. You are buying an asset full of liabilities at low value (but high real estate potential).
Is this really what we want for some SEN kids?

They are encouraging this anyway because of the VAT set off regime. It is again anti competitive because they are encouraging loads of private schools to get together and merge their finances. It is going to be much better to have eg football coach private school company (connected party) going in to loads of schools to deliver football coaching now, then it is going to be to employ loads of prep teachers, pay their salary and pension and insist they teach a bit of football too during the school day.
So “academy style chains” of private schools - when the case law says private schools are not allowed to price rig. It is being dressed up as private schools having to cut costs, but essentially they are being turned into full businesses by a Labour Government. So what if they employed too many people in the past? That is a good thing.

What will happen to the places the kids go for a “residential”. I have two grandchildren we have gone to a place on the Menai Straits - Wales. Will all those places have to charge VAT?
I know my Scottish one is going somewhere in September - so I imagine lots of schools do it. Parents pay.
mis that included?

https://www.pgl.co.uk/en-gb/school-trips/offers/uk-offers/secondary-school-offers

PGL already charge VAT. They are businesses that make profits up to 10 million a year that the owners can keep? The point about private schools that are charities is that they can’t distribute profit, they have to spend it on the school/education. Some may have spent it on large head teacher salaries and staff salaries and discounts for staff but that is about their only crime. And I think no different to what academies have been doing. I also just do not see a problem with cash spent on salaried employees who pay a big amount of PAYE. It’s great for the tax payer. As many are charities, everything would have gone into the accounts and so all contractors would have been paid legitimately too. They are not “efficient”
for parents paying but they are really good for the tax payer as a whole. And that is where we need the OBR to step up!

Actually, I'd think they were very reasonable if they said "a mitigating factor of the new legislation is that we will be able to reclaim input VAT and, therefore, can afford to charge 5% less after the changes take effect."

They've already covered that. The business rates will cancel out the VAT reclaimed. They've not left à quarter of an inch of ass on show 😁

This story is set to run it seems….

I’m glad it’s being challenged. Yesterday at the olympics 3 of the 4 gold medal winners in the swimming are Millfield students. Millfield offer a lot of scholarships and bursaries to talented sportsmen and women in not well funded sports. Helen Glover is another example. All of this would likely stop under Labours plans.

People just see the headline and don't think about it at any deeper level like this. It's brexit again - frankly it's ignorance and if they understood that it would impact them then they might think again. I'm a labour supporter but this just really makes no sense and it does feel like the final straw for some of us - I work long hours to earn a decent salary but I think I'd be better off working less hard. Or moving abroad.

What about local authority owned places? They charge and they teach. I suspect staff members are members of staff of the local authority.
will they charge VAT?

https://www.lawhound.co.uk/vat-and-tutor-fees-3-things-you-must-know/amp/

That is the current position on tutoring. The new draft legislation keeps the exemption for subjects ordinarily taught in schools, as currently drafted.

Ex teachers can form LLPs etc in theory I think. It’s a massive growth area, private tutoring. The Labour Party seems set to keep it. Which tells me that they don’t mind people buying academic advantage. What they are simply trying to avoid is what they think of as Tories all sending their kids to the same schools and networking with each other and becoming future Tories. This seems to be more about future Labour voters and as such, it is undemocratic and anti competitive.

Give it a few days - it’s the school holidays. This is not good news for state schools, far from it, our school makes additional money via breakfast and after school clubs and via extracurricular clubs too.
I don’t know what is childcare and when it becomes education? Anyone know?!

“There are currently some holes in the drafting that do not marry up with the policy paper, notably SEN schools are not currently in the new definition of "private schools" at all – so regardless of whether the LA arranged the pupil's place there as necessary or not, they would currently remain VAT exempt – which is contrary to the policy paper.“

https://www.mishcon.com/news/vat-on-private-school-fees-value-added

This is interesting to me. If you look at the drafting - very clearly there is disagreement amongst those in charge as to how to treat special schools. These kind of omissions tend to happen because of last minute disagreements!

Do you have an inside track on what further research has been carried out or is this just speculation?

“Parity issues
The Government have extended the 20% charge to extra-curricular educational supplies by private schools to achieve "parity" between "these supplies…made by private schools… [and those] made by other third-party providers who are not eligible bodies". But what about extra-curricular educational supplies made by state schools for a fee? At the moment, from 1 January 2025, state schools would not have to levy VAT on any charges, but private schools would. This seems to conflict with the Government's equality objective.”

I do not even know if there is exact case law on what is childcare vs extra curricular education? I mean our TAs in state primary are in the after school clubs and play board games and maths games with our DC in after school care and they will go to the IT suite and play on the computers and do TimesTables Rockstars and Hit the Button etc and Phonics and help the kids (if they want to). Is that childcare or education? Is the cross country club they run and charge a small fee for - what is the status of that?
Parents at our school complained that kids were not doing enough in after school care so they have incorporated sports and they are allowed to do their homework etc and sometimes they get help from the TAs. What is the status of that? What is the status going to be in private schools? Who is going to police any of that?
There is no parity if state schools do one thing and can charge a fee (and we desperately need the extra funding as it is a church school) and private schools can’t do exactly the same without charging VAT?

It is also very naive as to how teachers and TAs are. Put most of them in a room with DCs - even if it is childcare based - they will play educational games of some sort or extend the DCs in a healthy manner.

The detail will be fascinating! And probably hopeless to be “fair” since it is so complicated.
What will be the unintended consequences?
Tutoring seems obvious. I have seen figures that show a very large percentage - much more than those in private schools - have extra private lessons. But in a shop space so not a school!