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!

SM really is the pits for stuff like this. Just people howling their opinions at each other, while issue threats.

Given that the IFS published two reports that contradict each other, what do you think they would say?

Green advocated lowering "parental demand for private schooling" by raising the tax burden in order to achieve greater "educational equality". It is inconceivable that Sibieta's aspiration of a movement of 0.2-0.5% of the school population in any direction would accomplish that. Sibieta cites Green's research 8 times but makes no reference to Green's paper for the IFS, despite that it is clearly relevant.

Fabrication is not a "big claim", it means invent, or make up. I was mostly referring to the fact that Sibieta misuses or shirks evidence to create a particular impression. It doesn't take him long, his first citation is to "a significant public debate" (in fact a polemic targeted at independent schools that starts as it means to go on with a picture of a golden ticket). He then cites "Private schooling and labour market outcomes" as evidence for how "pupils attending private schools benefit from significant advantages." However, that paper not once refers to the fact that children are genetically related to their parents.

"Most of the current evidence suggests that higher returns to private schooling are likely to be driven by network and sorting effects." In reality what Macmillan et al concluded was the opposite: "Networks cannot account for the private school advantage."

But he also relies on multiple ridiculous assumptions (assertions in the absence of evidence - i.e. fabricated) in his paper. E.g. "the demand for private schooling is likely to be inelastic – i.e. the number attending private schools is not that responsive to the price." The price has never before increased by increments of one fifth!

"Economic theory would argue for ... taxing the resultant increase in earnings later in life...This could be justified by the clear evidence showing that pupils from private schools manage to achieve higher earnings than pupils from the state sector." Fair enough - if economic theory also argues for taxing people for being taller.

It may bear scrutiny in the circles that educationalists travel in, but by any other standard it is dire.

As as economist, I would like to point out that price elasticity increases as you move up the demand curve.

Basically you reach a tipping point where the response from the purchasers is more than proportional to the price increase.

So the analysis about elasticity could have been correct a few years ago but now fees are higher, the elasticity is greater.

We shan't know till afterwards. 2029 maybe!

If only MPs could test out elasticity on something else not children’s education

I suggest anything Labour MPs need

Any sector with a 20% hit will see damage

@Marchesman ,

‘Given that the IFS published two reports that contradict each other, what do you think they would say?’

I have no idea, but how about you ask rather than accusing them of intellectual dishonesty before even bothering?

‘Green advocated lowering "parental demand for private schooling" by raising the tax burden in order to achieve greater "educational equality". It is inconceivable that Sibieta's aspiration of a movement of 0.2-0.5% of the school population in any direction would accomplish that. Sibieta cites Green's research 8 times but makes no reference to Green's paper for the IFS, despite that it is clearly relevant.’

Sibieta’s report makes no aspiration, you are putting words into his mouth. This report is purely about the economic impact of VAT on school fees. He cites research which he sees as relevant. The Green paper that you keep citing was part of a set of papers on inequality, and nothing to do with fiscal impact.

‘Fabrication is not a "big claim", it means invent, or make up. I was mostly referring to the fact that Sibieta misuses or shirks evidence to create a particular impression. It doesn't take him long, his first citation is to "a significant public debate" (in fact a polemic targeted at independent schools that starts as it means to go on with a picture of a golden ticket). He then cites "Private schooling and labour market outcomes" as evidence for how "pupils attending private schools benefit from significant advantages." However, that paper not once refers to the fact that children are genetically related to their parents.’

Fabricating evidence means that he has made his data up. This is a claim of intellectual dishonesty which, again, if you genuinely believe it to be true, should be challenged, so that he has a chance to rebut it. Regardless of his or your conclusion about the correct answer, there is a significant public debate around private schooling. You only need to read these threads to realise that.

I agree re your last point, in that private school pupils have, on average a 10 point IQ advantage over the national average. However, there is still a massive concentration of private school pupils in certain very well paid professions (e.g finance, the judiciary) as opposed to professions where pure brainpower is more important (quantitative research for instance).

‘But he also relies on multiple ridiculous assumptions (assertions in the absence of evidence - i.e. fabricated) in his paper. E.g. "the demand for private schooling is likely to be inelastic – i.e. the number attending private schools is not that responsive to the price." The price has never before increased by increments of one fifth!’

Well, here, you are clearly talking absolute rot. Private schooling over several decades has, in real terms (post inflation) more than doubled and the percentage of pupils accessing private schools has, in fact, increased if anything. Also, the 20% increase you mention isn’t real, it is 14-15%. For someone so critical of the way others present their evidence, you really out to be more careful. What you probably meant to say was it is an unprecedented one-off increase, but whether that is relevant long term, who knows.

‘It may bear scrutiny in the circles that educationalists travel in, but by any other standard it is dire.’

Your posts may bear (quick) scrutiny on a social media forum, but if you want to challenge a researcher’s work, you should challenge it with detail and give him a chance to rebut your criticisms, rather than trying to disguise ad hominem attacks with a pseudo-intellectual critique.

This is the same party that visited Russia in the 60s and came back full of enthusiasm for their wonderful comprehensive system. I read the Hansard about it - context being Kent MPs' resistance to the conversion of grammars to comprehensives.

Maybe Labour MPs could do 20% on their mortgage and come back with the prices elasticity experiment

Give it five years and then let us know

You do know quite a lot of the cabinet weren't born in the 60s don't you.

That's like saying the Conservatives are the same party that appeased Hitler.

@EasternStandard ,

‘Any sector with a 20% hit will see damage’

It isn’t that obvious at all. The private school sector, as I and others have stated many times before, has sustained multiples of a 20% hit over time in real terms and hasn’t sustained damage.

Some see it as the ultimate luxury good and, certainly, for some schools it is, so Will be subject to the Veblen effect.

‘2. The Veblen Effect:
One interesting phenomenon observed in the luxury market is the Veblen effect. Named after economist Thorstein Veblen, this effect suggests that the demand for certain luxury goods increases as their price rises. In other words, consumers perceive high prices as a signal of quality and exclusivity, leading to a higher demand for these items. For example, a luxury watch with a higher price tag may be perceived as more desirable and sought after.’

I would bet that Eton, Westminster, St Paul’s and many others could double their fees tomorrow and still be oversubscribed.

In addition private schooling is heavily subject to cross elasticity, as many know. People prefer to reduce consumption of other goods to keep their children in private schooling. Witness the many who reduce holidays, luxury cars etc to send their children to private school.

Now, obviously, the above effects have a limit, and schools I think were already beyond the sweet spot of exclusivity (which people want) vs lack of affordability.

However, it is impossible to gauge the effect size, which is what people are trying to work out.

‘But he also relies on multiple ridiculous assumptions (assertions in the absence of evidence - i.e. fabricated) in his paper. E.g. "the demand for private schooling is likely to be inelastic – i.e. the number attending private schools is not that responsive to the price." The price has never before increased by increments of one fifth!’

I agree with you. On reading Luke S paper I was struck by very flimsy assumptions, fabrication? maybe. It reads like it’s from someone doing a short piece of work not underpinning a national education policy

I see this figure and conclude that type paper

I still do not understand how they think it is OK to charge VAT on private school fees but exempt many forms of private tuition. They are just bolstering the private tuition industry and it feels anticompetitive. One can conceive of a ton of ex private school teachers forming an LLP and focussing on tuition.
In my mind, if you put VAT on school fees at private schools you literally incentivise people to go state/move house into a desirable catchment to do so, and pay for private tuition instead.

@remotecontrolowls I don't find that a parallel, no. Or tasteful tbh.

I was saying that there have been a number of previous educational experiments that had unintended consequences, as well as the intended ones.

That particular one cut off avenues of advancement for some people (while arguably increasing them for others).

You’re correct. Private tuition, nurseries, universities etc wouldn’t stay VAT exempt for long if they managed to implement the initial policy. Taxing education is a massive step back in a country already going backwards, it’s embarrassing and harmful to everyone’s future prospects.

It isn't, but unless you earn a £90k amount as a self-employed tutor - which most are not - you aren't affected by VAT.

But if you want to argue that VAT should be added to university fees, where there is no alternative free, state provision, or that VAT should be added to all nursery fees which would result in people not working or working less hours and which would hit the lowest earners the worst - go for it.

If you genuinely can't see the difference, then you can't. Though I would argue that private parents views are coloured entirely by their outrage at having to pay more money for a luxury. So any kind of rational thought is out the window.

Sorry for not understanding but can you please explain this in very basic terms. Does the 'tipping point' change mean purchasers (parents) suddenly all stop paying/leave OR are less bothered by a price increase as all the price sensitive people left the system already? I'm hazy on which way is which with price elasticity

University and nursery aren’t legally mandated as primary and secondary are, they are a luxury for those who can afford it. Any opposition to this would simply be parents outraged at having to pay more for a luxury and not thinking rationally.

@goodluckbinbin - the UK tutoring business is worth £7.5 billion and they won’t get much VAT there, nor will everyone pay their full income taxes either.

So if people go down that path instead of private schooling, the overall tax take will be far less. At least private schools always employ and run staff through PAYE. There were some new regulations in 2024 making online tutoring businesses disclose their tutors to HMRC. Clearly they are worried about people not paying their full income tax on tutoring.

This policy is going to be a disaster.

It means that when the price is low enough that not many people have already been put off, then increasing the price a bit only puts a few people off.

But when lots of people have already been put off by the price, then increasing the price a bit means that lots more people who were only just choosing to stick with it stop buying.

Ie as you increase the price, you don't lose buyers evenly. To start off with, you lose them very slowly as the price increases. But then that speeds up: so eventually increasing the price a tiny bit loses you lots of buyers.

Nice explanation

I’m appreciating the economics on the thread

You are doing the same thing as Sibieta - dodging aspects that don't fit your position and misrepresenting others.

"Sibieta’s report makes no aspiration, you are putting words into his mouth. This report is purely about the economic impact of VAT on school fees. He cites research which he sees as relevant" His report aims to arrive at a small figure for the movement between sectors, that is an aspiration. In contrast, Green's report was predicated on movement large enough to have an effect on equality, which is Green's publicly and repeatedly stated position. The reports make mutually incompatible assumptions to arrive at the same ideologically preferred end point, and Sibieta's political associations are well known. See below.

"Well, here, you are clearly talking absolute rot. Private schooling over several decades has, in real terms (post inflation) more than doubled and the percentage of pupils accessing private schools has, in fact, increased if anything. Also, the 20% increase you mention isn’t real, it is 14-15%. For someone so critical of the way others present their evidence, you really out to be more careful. What you probably meant to say was it is an unprecedented one-off increase" That is exactly what I said - "the price has never before increased by increments of one fifth" if you choose to interpret the word "increment" as not meaning a step, and "never before" as not meaning unprecedented, then I am afraid that you are being deliberately obtuse.

"He cites research which he sees as relevant" Even when it undermines his point, either because he hasn't read it, or more likely because he expects no one else to read it, but it looks good on the page

"Your posts may bear (quick) scrutiny on a social media forum, but if you want to challenge a researcher’s work, you should challenge it with detail and give him a chance to rebut your criticisms, rather than trying to disguise ad hominem attacks with a pseudo-intellectual critique." This is precisely how Sibieta uses citations, which I have challenged in detail, and there was nothing ad hominem about it. If you wish to rebut my points you will have to provide something substantive rather than weakly characterising it as "pseudo-intellectual."

@strawberrybubblegum I salute you!

Perhaps if any of you are TES subscribers you could share a bit more of the article but it looks like MPs have voted 363 to 190, a majority of 173, to reject the Conservatives’ motion calling for an impact assessment on the policy of adding VAT.https://www.tes.com/magazine/news/general/vat-private-school-fees-destructive-hinds-warns#:~:text=MPs%20voted%20363%20to%20190,the%20budget%20on%2030%20October.

The more I read about how the policy is hung on one not-very-senior researcher’s work (who has now left social media..) things are looking less and less transparent and clearly no quarter is going to be given to support SEND kids in state OR private which is shocking.

As one of many parents paying for private school to accommodate our children’s SEND, and as a lifelong Labour voter, I just find this appalling and reckless policy making. I trust Labour on family and school policy and this is a gaping hole in their credibility.

hansard.parliament.uk/Commons/2024-10-08/debates/72689604-30E0-4873-82E3-B578516774BC/IndependentSchoolsVATAndBusinessRatesExemptions?highlight=vat%20school%20fees#contribution-ADF7D92C-5794-4A7C-9D22-385DAE40ADD3 here's the Hansard record which is free to access.

"the demand for private schooling is likely to be inelastic – i.e. the number attending private schools is not that responsive to the price"

I've heard reports of the numbers of prospective families attending local prep school open days this autumn halving compared to previous years. That is likely to be the canary in the coal mine of imploding demand for prep school places. It'll take another year to feed through to measurable reductions in pupil numbers.

I wouldn't give them the time of day if they are going to describe your posts as being pseudo-intellectual - it's frankly just condescending snd symptomatic of someone who clearly think they are superior to others.