Whitehall “braced for private schools collapse”

[ICouldBeVioletSky]

Whitehall ‘braced for private schools collapse’ due to fee rises

Worth reading the whole article, it’s not quite as alarmist as the headline suggests. But as you’d expect, gov sources are talking it all down while the ISC is ringing the alarm bell.

https://www.thetimes.com/article/e6465c9e-d462-48cb-a73e-74480059a1f3?shareToken=05bf599cd4a2376fe3ce83cdce607100

I’d be quite surprised if some of the schools near us don't fold tbh. There will definitely be a contraction in the sector, I just hope those that hold on can remain a viable concern.

They had 3m notice. Less if you allow for the actual passing of the budget in Oct and implementation in January term.

And yes, they may have enough operating capital for, say 3m, but if that kicks in in January, how to they pay bills after that 3m period in April? Contrary to belief, they don’t sit with millions in the bank. They pay expenses out of the related income for the same accounting period [or academic year], only drawing on reserves in an emergency or for unexpected hikes in costs (eg. already increased running costs such as food, staff, electricity/gas which have all gone up in the last year).

If you're the sort of person who doesn't mind moving to a gold-plated slave-built dictatorship in a gated desert rather than either pony up some extra taxes or send your kid to the local comp, then fine, goodbye.

There was no confirmation of or actual details on the proposals until the autumn, so how can schools plan for a change that they have not yet been given the details of by HMRC? Are major tax changes normally implemented in that time frame, within one tax year?

It's not three months notice. The policy was announced a couple of years ago. It was in their manifesto for an election they won six months ago. It was massively clear for a long time that Labour were going to win the election. If schools haven't been preparing for this for a long time then they're the ones who've been negligent, not the politicians.

The timing of school expenses doesn’t match income as you suggest.

”the policy has been known about for ages. It has been talked about on here earlier than 3 months ago.”

We have been over this. Why has HMRC not given all the private schools their VAT registration number then? They have had ages to prepare and staff it properly! Will Rachel Reeves 100 per cent respond the judicial review claim in the very easy prescribed form in the next 10 days?

Lots of things are announced as policy ideas years ahead of an election and even get put into manifestos - it means nothing unless or until it is passed into law…. Which most manifesto policies are not, and certainly not within months of forming a government.

Should the elderly have also been planning on the off chance that the government would stop the winter fuel allowance, or people stop having 3rd children in case child benefit is stopped by one or another government because it’s been posited as a strategy at some point in the last 20 years?

Yes, I am happy to move to Abu Dhabi for a few years once the DC are at uni, to have a change of scene, work full time, save a lot and pay off their uni debt for them and fund my retirement so that I will never be a burden on the state. Surely that is a good thing for all if I save in advance for my dotage and care home fees if I can? What exactly is the problem? And the state does not necessarily have to incur more debt to pay the uni fees of my younger two? Win win for all, surely? It is exactly how economics is meant to work. The place that will pay me the best for my services is well worth a 5 yer stint abroad before my retirement.

No, no, you have not understood @Araminta1003 . You are only a moral worthy person if you have no ambition and take everything the state has to offer, even to the detriment of yourself and that of your family.

Must try harder.

When doing accounts, the income is matched to the associated expense of the same accounting period, though there will obviously be cash at bank brought or carried forward.

Not everywhere though, and there are growing numbers needing schooling in some areas. Plus the impact of immigration hasn’t been well-accounted for!

Department for Education has essentially said they don’t know how many kids will be entering the education system.
Source: www.bbc.co.uk/news/articles/ced3e219lxzo.amp

Any business or organisation that is well run has a risk register with mitigations in place for risks. Any school that did not have vat on a risk register as soon as it was announced as Labour policy, has very poor governance.
I have been responsible for updating risk registers and I looked at whether any parties had proposed policies that would impact on our industry. It is such a basic thing to do.
If your school though is poorly run, then yes it might go bust.

Any affected person or school who wasn’t expecting VAT to be imposed in September 2025 and planning for that possibility was living in cloud cuckoo land. Moving the implementation date to January was a surprise but announced in the summer. They’ve had time to plan.

Businesses plan, risk manage and forecast potential.policies all the time. Successful businesses do anyway.

Rubbish - a risk register doesn’t work like that; the manifesto was only even announced within this last tax year, and no business would have huge amounts of capital reserved for something that wasn’t even on the table in the previous tax year.

Which is irrelevant to cash flow which doesn’t work on an accruals basis. Cash flow is what’s important to your scenario.

The fees for Easter term don’t just cover expenses in the Easter term not least because teachers and utility bills are paid monthly.

I’m not the one moving. Whatever your thoughts are on people moving to another country, the fact remains that it produces a net loss to the taxpayer. Given we already have a diminishing proportion of the population who are net contributors, we could do without losing more.

Of course risk registers work like that. The risks and mitigants are rated and if possible costed in any well run organisation and they are regularly updated

It’s been Labour Party policy for years that VAT would be charged on fees. VAT was factored into our decision to send DC to an independent school over a year ago when we thought about affordability.

Look back at the many many many MN threads on VAT. They didn’t all start in September 2024.

Schools have planned. Even with planning, it doesn’t mean that the affects of such policies are removed. It’s a similar story with the recent Budget announcements. Too many people see a headline of raising taxes (which they view as good), without understanding the knock on effects.

www.cityam.com/national-insurance-hike-will-be-difficult-for-businesses-warns-cbi-boss/

Many people at private school entered the system more than a decade ago. You might have only needed to plan “over a year ago”, but many of us have been in the private system for far longer. People accounted for fee increases. What they might not have accounted for is a global pandemic hitting their finances, inflation in double digits, high interest rates, plus an overnight 20% tax hit.

For many, the imposition of VAT may not have been a problem. It’s the cumulative factors which are causing the issue. VAT is the final straw for many.

The planning point is aimed at schools (medium term) not at parents (long term)?

Schools have also faced these issues. Even with excellent planning, high interest rates, inflation and changes to the TPS have had an impact. School running costs have increased massively. The imposition of higher NIC and living wage changes will hit hard as well. Coupled with falling demand due to parents not being able to afford fees any longer, this might mean that some schools become unviable.

Not every organisation which fails is a result of poor planning. There’s only so much planning a business can do. There comes a tipping point.

So how do you do it "responsibly" over a few months then?

You support pupils and advise parents about alternative schools and facilitate their move there as far as you possibly can. You don't just say - sorry we are shutting the school at the end of the month. Have a good life.

A risk register is normally updated each year for accounting/audit. The auditors assess it. It isn’t constantly updated.

There were threads on MN when it was announced as a policy by Labour - just in advance of the election. Don’t you remember that Sunak announced an election out of the blue, and the election was held in July (after the start of this current tax year?) Are you suggesting that responsible organisations should be scouring opposition websites to cost out some of their policies every year just for funsies so they can put them in the risk register in case an election is randomly called? I’m a trustee of several charities (and a state academy school as well), so I see their risk registers every year for each audit, and not one of them do that kind of thing. You’re just talking nonsense, I’m afraid.