I’ll be paying my 20 percent

[Froginpot]

I’ll be changing my car to a much more economical one and paying the 20 percent vat on private school fees when it comes to pass.

The reality is in general the trend in the UK has been for lower and lower academic attainment and the UK educational system ( including a respectable segment of the university system ) is now sadly mediocre at best. And this is directly going to have a significant influence on the long term trajectory of post brexit Britain.

Sadly we are so mired in short term politicking and yes the politics of envy and entitlement that we seem not to notice this ominous decline.
A British education 80 years ago and A British education today are two very different concepts.
There have been some progressive improvements primarily around inclusion and pastoral care but the actual quality of academic progress..we have been left behind.

The recent riots were a very stark demonstration of how our educational systems are failing our children especially in world where misinformation and lies travel around the globe in minutes.

The number of children with Autism and other neurodiverse conditions is increasing rapidly (not limited to the UK) and the funding required to properly support these children is going to be astronomical. Let’s not even contemplate the burgeoning mental health crisis in our society and the its implications.

A truly progressive government would be looking to improve the education of all children (our future) anyway they can and would be looking to encourage and incentivise a greater uptake of children in the private sector and grammar school system as well as create more education streams such that children regardless of their abilities will receive an education that adds value to their lives and in so doing adds value to Team GB.

I wonder how it is not hypocritical that they are happy for the private hospital sector to undertake so many NHS operations to reduce waiting lists yet think it is somehow not okay to look at an education sector that is doing better and not look to collaborate similarly?

It is shamefully okay to levy a tax on the education of a sector of British citizens while actively importing academics, doctors, nurses, radiologists, radiographers, engineers etc from abroad?
If these privately educated kids finally enter the workforce, one wonders if they will work in vacuums benefitting only themselves and their loaded parents or might they work in jobs that are also useful to society..teachers, social workers, doctors,dentists, academics, estate agents, actors on corrie and all the other jobs in between?

https://www.scotsman.com/news/opinion/columnists/vat-private-school-fees-damage-nhs-pro-bono-lawyers-work-edinburgh-4818066

Just read this article and I wonder if all the unintended consequences of this policy have even been properly considered?

For those who choose to keep their children in the independent sector, it is naive to assume that all these people have tons of money sitting in their accounts ( some no doubt will but that’s no different to the general population) but as they have their individual reasons for their choice of education, I wonder how many of us will indirectly end up contributing to their 20% ?

According to the optimistic IFS figures, this tax would probably equate to 0.4 extra teachers per school if fully realised so I think I’ll much rather drive an old car and give my kids the education that I choose and the rest of my wider GB family the 20 percent. We will need all that and much more..of that much I am certain .

Just leaving this here...

https://www.theguardian.com/education/2024/oct/12/eton-among-elite-private-schools-set-to-cash-in-on-windfall-from-new-vat-rules

I was just thinking we need another vat on ps thread. I don't think we have had one yet this weekend.

I’m glad there are so many threads about this. Sincerely.

But as always, feel free to read something else.

Free to choose and all that. There has been much more discussion in wider society of the deprivation of pensioners of the roughly £50 a month for 6 months. This is a serious issue but in all honesty not one as impactful as the issue above and yet our politicians are hesitant to speak for fear of antagonising a loud largely uninformed and entitled section of electorate. Education matters and the political chaos we see across the pond can probably be traced back to poor education decades before.

It is hypocritical and shortsighted and somehow demonises a sector of society.
More importantly it is not going to have the desired effect. All of the educational sector matters and the need in this sector is absolutely urgent. This policy is regressive and I sincerely hope to be proven wrong on this point for the sake our kids.

My husband works in a sector in which almost all of the staff are here from abroad on visas because we can't train and retain senior level (post grad) staff. No-one takes a whole economy, lifespan and world view.

Good for you, and I'm assuming by your post you can afford to.

I agree that things are broken but so are a lot of family finances.

My household has a good income on paper but we can't afford a new car/s and our children go to a state primary school (a beautiful school I might add, we're very lucky, I'm not upset we can't afford private fees).

It's a bit frightening at the moment to be honest, financially speaking. It feels very bleak and I don't have the sense of hope I did 8/9 years ago when we first got on the property ladder and decided to TTC etc.

Yes the unintended consequences of the 20% VAT policy will be incredibly far reaching. In a couple of years time the fall out will be clear. The shame will be on Labour and people who don’t get it now will look back and finally understand why it is such a poorly thought out policy.

Yep because that's how VAT works. Labor want to turn all indy schools into businesses by forcing them to charge VAT, well then equally that allows them to claim back VAT which they currently can't do. Despite Guardian's divisive language of "windfall" etc this purely what happens when a business registers for VAT.
So whereas prior to Labour, the state paid £0 towards indy schools, now it will indeed be paying some £ towards them.
So surprising that Labour/supporters of VAT hadn't realised this.

Also interestingly what many of us have been saying for 18 months+: that the wealthiest parents often choose state schools

www.bbc.co.uk/news/education-39076204.amp?fbclid=IwZXh0bgNhZW0CMTEAAR0uZmq-7ca_DWmg8ZtbZnu0x6ypnEZ0f_eHfRIOL11l-PDEOqrmL37zt5I_aem_Tx-LJanIaKLsj3DLkBZlmQ

Things are tough at the moment. No doubt for so many families. Getting up at 5 am to work so yes we can just about afford it but definitely a massive sacrifice. I also quite like my car too 😀but needs must.
There are some brilliant grammar schools around where we live (Kent) and tbh this year our best local one had a bumper intake because of the increased number from the local private schools ( one had to have two separate inductions due to the numbers) who made the move because of the upcoming charge.

The reality is that this still had an impact because I wondered about the kids from less affluent families who missed out on a place because of these kids whose parents have been nudged out of the private sector. The kids who are able and who would have thrived in that school who have been nudged elsewhere because of the more affluent parents. This is more just? Or the extra premium on the house prices around excellent state schools to be within the catchment area? Parents will try their best for their kids. It is natural.

Sir Keir was not from an affluent family but he had a brilliant education and presumably a decent career because he attended a Reigate Grammar ( then state now private). Even a look into the background of our most successful musicians and a common thread of excellent schools ( state and private) is quite noticeable.

Private school classes are generally quite small, the IFS report predicted about 7 percent movement into the state sector. At present I’m seeing about 12 -15 percent ( about 2-3 kids per class) at that level the tax raised starts to be a real head scratcher for the government but hey ho

I read that article. The difference in impact on different schools does annoy me, but I thought the article was populist and shockingly inaccurate.

Particularly
"They will also be able to now claim VAT back on operating costs and are developing significant capital projects on which they will also be able to claim the VAT back. In short, the taxpayer will now be funding 20% of their running costs and capital projects."

None of that is right! Where on earth did they get that the taxpayer would be funding 20% of their running costs?!? How would they be claiming VAT back on operating costs: mainly teachers salaries which VAT isn't charged on so can't be reclaimed??

What would be more accurate to say is that private schools have previously been paying an extra tax on any VAT-able goods they bought - unlike VAT-registered businesses who offset it, or state schools who get it refunded by government. Now that they're charging VAT, they'll get that input VAT repaid like everyone else.

In the short term, they'll get VAT back on certain capital projects from years when VAT wasn't being paid. This is consistent with normal accounting where you count the capital expenditure across a number of years - because it's an upfront investment rather than being a cost only for that year (I'm not an accountant, but I've seen that).

Long term, you would expect fees to be much higher than capital expenditure, since they also cover non-VATable running costs like salaries. So the VAT paid by the parents will be much more than the VAT refunded to the school by hmrc.

I mean it's possible that the huge public schools have such big cash reserves that they'll run those down to do capital projects and reclaim VAT (ie getting the project for 15% less) in excess of fee income for many years. But really, it's unlikely that they'll make spending decisions for that reason.

The only real risk of cost to the state would be if VAT was charged only for a very short time and then they abandoned the policy...

Ah, I get it… those that can’t afford private education will be supported in their lives by those who can because paying for something you can get for free is clearly better. Your assertion that a free education is a mediocre education is elitist and snobbish.

Its a stupid policy that won't achieve its stated aims and will only make private schools even more elite.
But we will be paying the extra, our school will absorb some of it and Ds is in GCSE year so it won't cost much and even if it did we would somehow pay.

Its time to stop whining about it now, its happening so people need to try and find an alternative or find the extra money

This☝

I don't think it will be implemented until Sept 25, our school still hasn't been able to register for VAT.

And when it does, my DS will only have his A'level year to go. I'm not letting Labour's small minded spite wreck his chance, having got this far. I'm a single mum and I've taken a second job, two evenings a week to cover it.

But I will never vote for Labour again. (I voted for Blair). Intentionally damaging the life chances of children for no benefit other than rabble rousing is as low as any politician can go.

Did you actually read the post 😂 or are you repeating something you have seen somewhere?
Go do some research.. something like 4 in 10 doctors registered by the GMC currently gained their primary medical qualifications in another country. Similar number for Dentists, don’t know the number for Nurses but I’m sure you can find it on their websites. It’s freely accessible info.
I had an excellent state education thank you. I am a scientist and so more concerned about facts and figures.
Being snobbish, elitist, egalitarian or socialist is irrelevant to this conversation. The most deprived boroughs in London do better than most wealthy boroughs up North. If I was choosing based on education only, I’d probably be looking to see what’s happening in Dagenham that is different from Newcastle.

The state still won't actually be paying anything towards private school.

VAT is a consumer tax. (not a luxury tax: people just get confused because some goods are zero-rated or exempt in order to make the tax progressive).

VAT offsetting is so that the end consumer pays the consumer tax once, not each step along the way of a complex manufacturing chain.

Eg a wood producer sells wood both directly to customers and to a chair manufacturer. They charge VAT - so the government gets it's 20% on the sales cost of the wood, regardless of who it's sold to.

But the manufacturer turns it into a chair, which a customer buys. The sales price of the chair obviously includes what the manufacturer paid for the wood. So the manufacturer is allowed to offset the VAT they paid on the wood, so that the customer doesn't pay VAT both on the original cost of the wood and then again on the full cost of the chair (which includes the cost of the wood). You can imagine how it would multiply up with a multi step manufacturing process otherwise!

Effectively, the wood seller gives the government the VAT on the wood, and the chair manufacturer gives the government the VAT on the value they've added with their step (ie the sales cost of the chair minus purchase cost of the wood). Hence the name 'value added' - each company pays the VAT on the value they added to the end good. So the end customer pays VAT on the end price, but not multiple times.

Previously, the school was the end consumer, so they paid VAT on the cost of any VAT-able goods they bought.

Now, education is considered to be a 'good' which VAT can be charged on. (like the chair)

So previously, the government got the VAT only on the building work etc directly from the school.

Now the government will get VAT on the whole education from the parents, who are now the consumer of the 'good'.

So the VAT the school paid on building work is offset by the school, so that the parents aren't paying VAT both on the cost of the building work and then again on the full cost of the education (which includes the cost of the building work).

The government still gets the VAT on the whole end product (education). They just don't also get VAT on the component parts.

There is still £0 subsidy from the state to private schools.

To be honest I know but I was just using Labour's language ie incorrect and misleading and populist.

it makes more sense to put a education levy to high income earners (eg 1% surcharge) using the state system to raise the funds. I think Australia does this with their medical - if you don’t pay for private then you get charged extra for high income earners in order to relieve the burden for the state.

I think people don’t understand independent schools help save tax payers money but instead Labour is pushing this cost onto us taxpayers! Why?

Oooorrrr.... crazy idea... use existing, efficiently collected, highly progressive income tax.

1p on the basic rate would raise £7.5billion.

I agree. I cannot understand why the Labour Party cannot see that the world is a big place. We are a tiny island. If we keep telling privately educated children and parents that they are disliked, that they are not welcome at universities or in many careers, what do they think will happen? There are plenty of countries who will welcome these well educated people with open arms. Why are they intent on driving high earning, skilled, parents and potentially high earning, skilled, children away from the UK?

Exactly. Either basic rate income tax or 1p on the standard rate of VAT. It would raise a large amount of money. You can never raise enough tax to make a big difference by taxing a tiny percentage of the population. It never raises enough (look at how the 50p tax rate worked out). If they are really interested in raising money they’d be looking at this. Instead they are obsessed with “the privileged rich” (and struggling pensioners). Neither the WFA removal or VAT on fees raises a meaningful amount of money.

You sound like you know what you're talking about to a much greater extent than I do, so not arguing with you, but does the chair analogy work here? Just trying to get my proverbial head round it.

Schools may be able to reclaim VAT back for capital projects (and operational costs) for I believe up to 10 years, but of course VAT will be chargeable only prospectively on school fees from whenever it's finally implemented (January or TBC a deferred date)?

"Effectively, the wood seller gives the government the VAT on the wood, and the chair manufacturer gives the government the VAT on the value they've added with their step (ie the sales cost of the chair minus purchase cost of the wood)."

Here, the government no longer gets the VAT from the 'wood' (school building costs for the last 10 years) because the school reclaims it, but the government has received no VAT either from the 'chair purchaser' (the parents) for the last 10 years either, because no VAT has been chargeable on school fees until now - so it's a loss-loss for the government surely?

There may be arguments that post the inception date pupils are benefiting from the 'value added' to their education by buildings built 2/5/10 years ago of course, but there is (AFAIK) no requirement to try to apportion the benefit between those who have already paid school fees but no VAT and those who will pay VAT moving forwards.

Incidentally I wholeheartedly agree with the suggestion that all this should be funded by a 1% top rate income tax rise (and I say that as a top rate payer and even if that means it would cost me more overall).

Much fairer, more efficient and more transparent, but Labour isn't interested in that, only in pursuing their vindictive race-to-the-bottom class war.

100% right. A former Tory minister gave a talk where I work and said that the only reason for applying high taxes on the highest earners is to justify the level of taxation applied on the vastly greater numbers of middle-earners.

There just aren't enough highest earners for it ever to make any meaningful difference to the bottom line, but it suits Labour to keep people wilfully ignorant about this. They would seemingly always choose ideology over maximising the revenue position.

This.

The supposition that if the government cared about children's education then they'd make more opportunities for repaying and grammar schools basically said that the government would make more opportunities for children of higher income parents..because we know that grammar schools aren't exactly filled with children from the most economically deprived families.

So basically OP wants all kids from poor families to have little glimmers of hope of getting into grammar school while those with higher income parents would all get a superior education.

Niiiiiiiiice.