Business rates on private schools

[liverpudcounsel]

Lots of threads on VAT on private schools, which I don’t have a strong opinion on.

I have not seen much information or views on business rates, which has come up on the budget today; new legislation to remove their business rates relief from April 2025 which means loss of charitable status for private schools.

Anyone know much more specifically about this? Just curious. Along with the employer VAT increases, and VAT on fees is this budget going to blow a hole in the finances of these schools?

It does not mean loss of charitable status for private schools. Private schools founded as charities will remain charities. It is not possible for a charity to convert to a non-charity and continue operating unless it has net zero assets as charity law requires that if a charity is wound up all its assets must be transferred to another charity with broadly similar aims.

The impact of business rate relief being removed will vary from school to school. Each school's buildings will have a rateable value same as all physical property in the country. I calculated the impact for one specific school and it worked out as equivalent to £400 per pupil per year.

Ah you obviously bought into Labour lies without knowing anything.
State MATs are run exactly like businesses, even down to bloated SLT with Heads on over £100k in some cases.
Most indy schools are not for profit ie surplus has to be invested back into the school. One of the ways they do this is through bursaries and scholarships for less well off kids. These are rightly now being reduced/discontinued in the face of pressures from VAT, NI rise + business rates. So indy schools will become even more elite. Well done Labour!
It is Labour who have turned indy schools into profit/loss business through tacing education.
No other country in Europe taxes education. Friends on the continent can't believe this is even happening.

Lastly, Labour have continually lied about the cost of imposing this tax. They rely on 1 single document, which even the owners of that paper have gone on record admitting it won't raise any money now.
The only realistic outcome is that taxing education will cost the state money.

And I agree with them. An establishment that makes up part of the local community and is open and accessible to all, not just those with huge sums of money should be supported more than elitist institutions that buy privilege and advantages for the wealthy. That's how I feel about every aspect of society, including schools.

Ah so you feel that way about universities too? Because they neatly fit into your definition of elite private institutions which bestow advantage and privilege.
Ah sorry I forgot the education tax already captures anyone under 18 going to a uni!

This! Private schools are businesses. Businesses which perpetuate inequality and entrench priviledge. Live by the sword die by the sword. They're businesses not charitable, benign institutions which do great deeds and should be treated as such.

And to hell with the kids already in Indy schools about to be turfed out? People crowing about this when we are talking about kids is obscene.
Starmer was afforded the luxury of not paying fees when his school turned private a few years after he started because they understood that it is neber good to disrupt kids in a school they are settled in. He won't allow the same reprieve to kids already in the Indy system.

“open and accessible to all”

This is a ridiculous argument. Many families cannot afford to visit pubs, restaurants and shops. Michelin star restaurants and Gucci shops are hardly accessible to all, but will benefit from business rate reductions.

Would the posters agreeing with the labour policy of taxing Independent schools, who probably buy educational privilege by buying expensive houses in the tiny catchment areas of good state education, be happy with a blind ballot system of entry into local schools?

So actually get rid of school catchment areas entirely…..
I think this is a much “fairer” system and means that house prices adjacent to good schools would fall in line with others in the location.
Additionally I believe educational outcomes would increase across the board as the parents who’ve “bought” the privilege via their houses would be invested in increasing standards across the area.
But it won’t happen
Some people buy houses, others spend their money educating their children based on their needs 🤷🏻‍♀️

The OBR has confirmed that Labour’s estimates for money raised from their vindictive Education Tax do NOT include increases in spending in the state sector.
As each child leaving Indy for state costs the state 7-8K per year then I will leave others to do the maths if 10% ie 50,000 leave.
The net result = £0 extra money for state to fund: breakfasts, 6500 teachers, toothbrushing, mental health support, careers hubs,unicorns + rainbows.

This is purely a revenge policy aimed at who Labour believe are Tory voters! See the same with WFA + farmers.

People would lose their minds over this idea!!

I think they should do this. It is ridiculous to think that there won’t be a two tier education system in the state sector. Those who were planning to go private or who remove their children from private will now drive up prices to good state schools and thereby pricing lots of families out of the area.
It’s disgusting the gloating at children being removed from their school and not having places to go. In Edinburgh (which is disproportionately affected) parents are being told they are 35+ on the waiting list or that lists are closed. What will happen to these children?

I agree but can you imagine the outcry then?!! My decision on secondary is - if they don't get into the excellent grammar school then we'll send them private to avoid the awful non-grammar options. Nobody wants to admit that though - they'd rather play the "holier than thou" card for using excellent state schools rather than private.

The state has to find children a place. You appeal and they have to do it.
State education has been two tier for ages. Most areas do not have enough transport to do a lottery system.
The game is now pay for tutoring, that’s it. The policy won’t do anything for equality, just cause harm for some families and kids especially those with SEND. Appeal, appeal, appeal.

I know some families are doing this in Scotland but at the moment they are getting nowhere.

It’s ridiculous and I feel for the children for the impact on their education and the parents who are feeling so guilty. Not everyone who sends their children to private school are rolling in money and the SEND provision is woeful in Scotland.

Private schools have known for some time that VAT on fees and business rates were going to come in.

I'm sorry to not be sympathetic but it was always going to happen.

Well as there are now several legal challenges it certainly isn't a done deal. The fact Labour have prioritised this over increasing tax on vapes speaks volumes about their real intent

It genuinely hadn't occurred to me that Labour probably do assume that farmers are Conservative, and that's why they're introducing the destructive, punitive IHT change.

They have the fucking cheek to say that 'most farms won't be affected' - just like 'most kids won't be affected'. As though that makes it better: to introduce a tax which affects such a small number of people that it raises no significant money - but is devastating to those it does hit. Labour are complete fucking bastards.

Ah, of course: businesses which increase the load on the NHS and welfare (through alcohol use) and environmental damage (pointless consumer spending) should be supported... but not schools which educate children at their parents' own expense - saving the state £7k per child per year, and improving the UK's future productivity.

That's shit-for-brains not very sensible economics.

They’ve chosen to reduce the cost of a pint of a beer in favour of taxing children’s education. From a business rates perspective, pubs will be treated more favourably that independent schools. It’s madness.

And those schools which are charities will still be expected to contribute significant amounts to society in charitable acts!

What happens if they just don't?

@strawberrybubblegum I assume many of them will have to abandon their charitable status, cancel bursaries and partnerships with other schools, and start charging the full market rate to state schools and clubs that use their facilities. I know the local state schools all do their swimming lessons at the local private school's pool for free so they'll start charging fees for that kind of thing, I would assume.

If you tax a non-profit charity as a business, they will need to start behaving as a business to afford it.

Also for people saying private schools are all businesses, about half of them are and already pay business rates.

The other half are educational charities that have to evidence their charitable activities- usually in the form of bursaries, facilities sharing with state schools and clubs for free or very subsidised cost, and partnerships and support of state schools. These are the ones now to be taxed as businesses as well, charitable status notwithstanding, so I can only assume they will all have to stop their charitable activities and become for-profit organisations. Impact will be on the local state schools and the families of the kids who would have received bursaries but now won't.

Agreed. They're providing a excellent education. I don't want them to diminish it just to make people who hate our children happy.

@mugglewump
State schools funding has dropped from 5% of GDP to below 4% over the past 10 years.

Sure, you can cherry-pick a time period when education spending dropped. Although you're a bit out of date when you say 'past 10 years'.

ifs.org.uk/education-spending/schools

Education spending per child rose hugely between 2003 and 2010, then dipped a bit between 2010 and 2020 (probably the time you heard that figure) - still always staying above the 2003 level in real terms, ie even allowing for inflation - then there's been another big spending boost the last 3 years.

Education spending per child is 20% higher now than it was in 2003 in real terms.

GDP has only gone up 10% in real terms.

It seems quite difficult to give up charitable status.

What would actually happen if they just stopped the charitable activities?

Have to laugh at the IFS coming up with an 'education specific' inflation measure (in blue on the graph) to allow for 'staff pay per head growing by 7.5% instead of 3% in 2024/25.'

I bet businesses wish they could just hand-wave away staff pay rises!

(Spend per pupil is still higher than 2003 in real terms - both absolute amount and as a % of GDP - even if you do the magic hand-waving)