Thread 2: VAT on school Fees- High court challenge

[EHCPerhaps]

Following on from thread 1
https://www.mumsnet.com/talk/education/5160565-vat-on-school-fees-high-court-challenge

Background to legal challenge (not yet a case):
https://www.dailymail.co.uk/news/article-13824931/amp/Single-mother-autistic-child-launches-High-Court-challenge-Labours-private-schools-VAT-raid-claiming-violates-daughters-right-education.html

Sorry to begin a new thread, OP, but your thread filled up very quickly!

They explicitly dislike private schools and they are prepared to say anything that might help to shrink the sector, even if it involves contradicting themselves.

ifs.org.uk/inequality/private-schools-and-inequality/

@Araminta1003 ,

‘The IFS is essentially proposing to tax one part of middle and higher earners up to 10% extra. For some people, it is even more than that in percentage terms. To think that will have no consequences is utter madness.’

The IFS doesn’t propose anything, it’s purpose is to analyse the fiscal implications, that is it.

Well, whilst I'm on the opposite side of this debate with @Newbutoldfather (for clarity - I hate the policy, it disrupted our lives badly and I will never forget and never forgive Labour for this), but they are one of the very few intelligent posters from the supporters, who actually read policy and analysed it.

The modelling of the policy, IFS paper specifically, looks like if was done by some lefty student (on contextual offer) who doesn't get any basic of behavioral impact of taxation. They believe that PS parents are super rich (only some of them are) or held hostages and can't do anything (only very few of them are, predominantly in Y10-11 and Y13).

As posted many times on similar threads, there will be proportion of parents (me included) who will reduce their working hours or retire altogether. No-one modelled this, but given that we're talking about high earners here, their income tax and NI will have more impact than total tax collected even if we're talking about rather small percentage. Some of these parents are GPs and consultants.
Just look at non-doms policy.

The modelling of the policy, IFS paper specifically, looks like if was done be some lefty student (on contextual offer) who doesn't get any basic of behavioral impact of taxation.

Yes it has the author’s name and you can look at similar papers that would just be background level, daily job, not underpinning a whole policy for education

As for the WFA no impact assessment from Labour. Shoddy

I think IFS have tried to disclaimer it a lot as you would with that level of rigour

https://ifs.org.uk/publications/education-and-inequality-international-perspective

This article is far more interesting to me.

@nearlylovemyusername ,

Thank you for at least acknowledging that I am not a total moron!

https://schoolsweek.co.uk/luke-sibieta-director-sibieta-economics-of-education-research-fellow-at-the-ifs-s-and-the-education-policy-institute/

This is the person who did the report. He is well qualified and has been in educational research for years.

‘As posted many times on similar threads, there will be proportion of parents (me included) who will reduce their working hours or retire altogether. No-one modelled this, but given that we're talking about high earners here, their income tax and NI will have more impact than total tax collected even if we're talking about rather small percentage. Just look at non-doms policy.’

That is very much modelled in the transmission coefficient. His number may be too high but he is not assuming 100%

His papers are background research and I question if the IFS even thought this would be what Starmer hangs his whole policy on

How does leaving the labour market / reducing hours play out though?

Some options if you do indeed leave/reduce hours

• someone else will be recruited to fill that role
• someone else may wish to increase their hours, possibly to cover the cost of the school fees VAT

Either way the work is still done and tax revenue remains the same

• The company does not fill the role and tax revenue goes down. That would only occur if there was excess capacity in the business and would probably have happened to someone somewhere so all you have done is save the company your redundancy pay

• The company cannot afford to lose you, in which case you could potentially negotiate a payrise to cover the 20% increase in fees. Presumably you have already done this to cover the annual above inflation increase in fees that has happened anyway.

I'm sure you will all now rush to tell me that this is all just sixth economics that would never happen because I don't understand the uniqueness of your situation, but all of these scenarios are possible in many cases.

Or, people leave the country or the jobs can't be filled by anyone and tax revenues go down. Which I think is the least likely.

The IFS model assumes that every single penny not spent on school fees will be spent on items subject to 20% VAT. This will not happen. At least some of that money saved will go on foreign holidays (no VAT), savings, or pension contributions on which tax relief is due. No one is saying that none of the money will be spent on vatable items, but at least some will not be.

The IFS model also assumed that 3-7% of pupils would leave the private sector. Numbers fell 3% last year alone. Early indications this year suggest that numbers have fallen further. This is before the VAT is introduced, so the IFS numbers are looking to be on shaky ground.

The IFS have also said that their (optimistic) calculations show that a relatively “tiny” amount of money will be raised and that it won’t make a meaningful difference to spending on public services.

Yep that's possible.

But it's also a fact that at v senior levels they pay you for your skill set and not whether you're in 4 or 5 days. And as for people who are doctors etc, do we want them reducing their hours?

In terms of covering the cost, those people will ask for more money but ultimately that is a cost which is passed to clients/customers. Or increasing rent on rental properties...

• someone else will be recruited to fill that role
• someone else may wish to increase their hours, possibly to cover the cost of the school fees VAT

UK has significant skills shortage, in highly skilled areas. In my business we're struggling to recruit for £100k+ packages. I will retire earlier than planned and I'm training someone in EU to take my role. I'm in large corporate - when there was exodus of people to EU post Brexit (all high paying jobs), these roles weren't replaced by locals, we restructured to move abroad.

Close to home, SEN assessments - if you want to go private (and prepare to pay 3k+) to assess your DC for ASD, you'll be on waiting list for several months. Why? because all these consultants only work very part time.
The list goes on.

IFS paper assumed that prices were increasing and demand not, so another 20% won't make much difference. Well, it's the same as - peak of COL inflation was only 11%, why all these fuss?
Any model is sensitive to assumptions. If they put 15-20% of exits there, the outcome would be totally different.

Tories, Reform, Lib Dem and EU are strongly opposed to any education tax. It’s unlikely the policy will be implemented given it contravenes ECHR, but if Labour ignore ECHR then the policy would be rolled back if we want closer alignment with EU regulations or when Reform/Tories take power.

How does leaving the labour market / reducing hours play out though?

Just in case this a genuine question, losing skilled labour from the workforce has very negative consequences for the economy. Google is your friend. It plays out much the same way as an education tax does, just quicker.

This is totally irrelevant for the thread but have to share
Proposed changes to the assessment of mathematics, physics and combined science GCSEs in 2025, 2026 and 2027 - GOV.UK (www.gov.uk)

"DfE has now told Ofqual that students taking exams in 2025, 2026 and 2027 will not be expected to recall all the usual formulae and equations in GCSE mathematics, physics and combined science. The longer-term expectations will be confirmed after DfE’s Curriculum and Assessment Review."

So basically it's lowering down expectations across the board in STEM! of course their results will improve and Labour will beat themselves in chest "look we did it!"
😱

@Araminta1003 you will love it

If someone retires early from their job because the new VAT policy means that PS fees have become unaffordable, the new hire (on the same salary) is unlikely to go and spend the money instead; they won't be able to afford it either.

No, but they won't necessarily want or need to spend it on private school fees, so it's irrelevant. And we were talking about tax revenues.

As for skilled labour, I completely agree. The best way to do this would be to rejoin the single market so you never know.

@nearlylovemyusername ,

‘So basically it's lowering down expectations across the board in STEM! of course their results will improve and Labour will beat themselves in chest "look we did it!"’

I don’t think that is the intention.

A levels, which is a far harder examination has had formula sheets for years. It is a very belated response to the fact that finding knowledge is easier in the internet era and skills and application is what matters.

I half agree, but I do think having intrinsic knowledge stored on your brain helps you have creative thoughts and, certainly, the Oxbridge interview process expects you to have a considerable knowledge base.

But it is the actual questions that matter, not a formula sheet.

(On a practical note, it is still worth learning the formulae for any candidate who finds time a challenge).

As for skilled labour, I completely agree. The best way to do this would be to rejoin the single market so you never know

Where education tax would be illegal under EU law.

I'd take that to be fair.

Interesting discussion of the IFS author’s latest comments: https://open.substack.com/pub/mrchips4schools/p/early-day-indicationsare-far-from?utm_campaign=post&utm_medium=web

In medicine it is the actual answers that count, and you won't get them from the internet. I can't think of any branch of science where memory retrieval practice is not advantageous.

www.ncbi.nlm.nih.gov/pmc/articles/PMC7272192/

Re the bit about reducing hours - I work in financial services and we offer phased retirement dropping a day every few months. We don’t recruit anyone to fill the non worked days as doesn’t stack up financially with paying 2 times car allowance, private medical, pension contributions, bonus etc. We’d rather lose the headcount from budget and also can’t easily recruit the skills we need so can’t see posters predictions of more people job sharing and paying tax coming true. Instead we’ll just lose more tax from high earners being paid.

Are we colleagues? it's very similar here. Plus moving to EU and US

I could not disagree more strongly. Ability to remember formulas and facts is one of differentiators of academic abilities.
I still remember my GP appointment when she started googling my (rather standard) symptoms.

You can't aim for any professional career if you can't memorise well enough. It's not sufficient, but it's necessary skill.

And some parents, who either wanted a good private or state, may now realise that the private they wanted is looking at lower attaining pupils to fill the places, and may well switch state to private. I have a strong feeling this has been going on for years now, with less well off parents of higher attaining children being substituted by wealthier lowers attaining ones.

I'd say it's opposite - it seems that private schools want to maintain their league tables and where they can't find sufficient numbers of bright wealthy kids they supplement with bursaries. In London at least this is most definitely a fact. Which partially explains fees rising above inflation and privates maintaining attainment lead. I can't comment on the rest of the country though, don't have sufficient knowledge.