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.

54% frankly reminds me of the Brexit vote - a decision that had a wafer thin majority at the time but most people now regret as its consequences have become clear. it hasn't solved anything. it hasn't reduced immigration. it's just pitted people against each other and made us collectively poorer. It was mis-sold to a gullible electorate by the lies of a bunch of spivs seeking to scapegoat and ride a wave of dissatisfaction with the status quo for their own ends.

A narrow majority might support the policy now (if asked leading questions) when the issue is abstract and the consequences haven't played out. They're being told that "very few" students will be adversely affected and that 6500 new teachers will magically materialise in state schools. When schools start to close and a wave of displaced students arrive in their children's classes, or they find themselves out of catchment for the state school their kids would previously have got into, that support will likely evaporate.

It is spitefullness when the intention is to remove something good from children simply because you don't want them to have it, rather than because it will benefit anyone else.

Why do people think the intention is to remove something good from children? The intention is obviously to raise some additional money from people who make the choice to privately educate. Yes, there will be a few (although I suspect ultimately not that many) people who decide that this increase now makes it unaffordable for them, but they will still have state education to fall back on.

And if it's any comfort to those people, a state education can also be 'something good'. There are plenty of us who have actively made the choice to use state education when the option of private exists and are very happy with that choice, even^ when our child/children has SEN, and even^ when the school is not one of 'the most sought after'. And FWIW I was privately educated, so do have some knowledge of both sectors.

It won't make a financial impact on the country, like the pp who will take their £250k per year income tax and ££million IHT to another country, will it?

I never fully understand this argument about individuals taking their huge amounts of income tax and leaving the country. Obviously that is their choice, but surely for every CEO, banker, whoever, earning that sort of money there are always plenty of people snapping at their heels to take over? Their roles don't just get left vacant?

What job do you do?

Anyone who has worked at a senior level in an industry which actually creates value is very aware that a very small number of people make a disproportionate difference to success. I mean real, productive success, where real things are actually achieved. The things our economy and our country depend on.

What limits all productive endeavour is lack of capable people. The capable people you say are 'snapping at their heals' are already contributing their abilities.

Their roles don't get left vacant, but they're not filled in the UK. Either the person stays with the same multinational company but relocates to an office in a different country, or the person leaves and the company retains the role but fills it in a different country.

https://www.reuters.com/world/uk/city-london-chief-says-brexit-disaster-cost-40000-finance-jobs-2024-10-16/

if you are talking about investment banks, there is usually some flexibility with regards to which office a region/ country is covered from (most banks have at least offices in Paris, Frankfurt and Switzerland). For a high earner (£1m + sometimes very much higher), they would probably allow setting up a tiny local office - I have heard that Italy has great tax advantage this days. There will also be bankers covering the Middle East who could be based in Dubai as opposed to in London.

I believe that there would be a similar set up for most finance roles - the WFH culture would most likely allow for working from another country without only certain days in the UK (subject to tax treaty).

with regards to private doctors, I would assume that the highest earners could set up a practice abroad and spend only a certain time in their U.K. practice (subject to tax treaty with relevant country).

for all entrepreneurs- that is easy, they could just take tax advice and set up an office in another country (again, certain time can be spent in the UK but tax needs to be considered).

above a certain annual income, most countries welcome high earners and for example Switzerland, Italy and Dubai have very favourable tax regimes - as does Monaco.

a lot of the high earners are also not born in the UK, so have less attachment to the country. For those with children settled in school here, it would probably depend on how the parents perceive the school relative to international schools. Some parents may decide to have the high earner move abroad (can still spend around 90 days in the UK without becoming tax resident I think), with wife and children visiting every school holiday.

you are talking about highly mobile people. Also quite important to remember that the top 1% pays almost 30% of total income tax, top 5% pays nearly half.

generally, with regards to tax payers, net migration to the U.K. was just about 1 m in 2024. That is a lot of people, especially if you consider housing, GP access and general NHS services. How many houses are Labour building again?

In addition, only the top 40% of households were net contributors to the tax system in 2022. Most migrants are not in the top 40% which means that services are becoming increasingly stretched. If then the top 1% is driven away.., probably not great. But I am not a politician, what do I know 🤷‍♀️

sorry for the detail, back to VAT

Some are but the majority are inspected by the Independent Schools Inspectorate which is a very different experience to OFSTED in terms of rigour.

Because they've told us so, with very little need for inference. The complete lack of care - and unwillingness to engage - about the negative consequences, along with the language used by Bridget Phillipson in particular make it very clear that the policy is merely a continuation of Bridget Phillipson, Rachel Reeves and Angela Rayner's previous attempts to abolish private schools. Schools which our children are attending and are good for them.

Those of us who are used to analysing facts ourselves can see that the government has not bothered to analyse the costs and benefits of the policy. Later reports which do cost it up in more detail have elaborated that when you actually think about the consequences instead of inventing a narrative to suit your ideological beliefs, it's pretty clear that it probably won't raise any additional money. Certainly not enough to justify the entirely foreseeable harms.

And as others say, it is this kind of post that hardens us against too. Have a meeting with a financial planner next week and will be rewriting our will after doing some IHT planning. Looks like our kids will be owning their own homes in their twenties rather waiting for an IHT windfall now as we’ll be passing it down early. We’ll also be paying for their uni education, rather than encouraging them to take out the student loans, which will just feed into the ‘education is only available for the wealthy’ trope, no doubt.

Great news as we’ll get to see them enjoying our money while we’re alive rather than grow old worrying about the taxman taking a chunk of our life earnings.

I had thought of going back in teaching at 16plus to meet new people and do something valuable for the 10-15 years before I retire, given there is a teacher shortage and I have 4 degrees, but fuck it. I’ll just join my DH (who has decided to retire the second our youngest graduates, if not sooner if we can sort the finances out) and we’ll just do the travel we’ve dreamed of for the last decade, taking our money and spending it overseas. We’ll join the scourge of economically inactive 50+ retirees, so no PAYE from us.

If we can’t take it with us, and the British electorate hate us so much for working hard at [state] school ourselves and in our careers, we will spend it on a ‘better education and life chances’ for our kids and enjoy an early retirement instead.

No, what happens is that it become increasingly difficult to attract talent to the Uk (or to stay in the UK) as CEOs generally want their children to benefit from their status and wealth. Funny that.

What will happen is that the salaries will increase exponentially to provide to cover employee aspirations for private schools and companies may even offer to contributions to school fees as sweeteners to offset reticence to work here (just as they do when recruiting UK people to overseas jobs). The effect of this is that, for companies to maintain their profit margins and keep shareholders happy, top salaries will increase BUT salaries of less valued workers (admin, cleaning, catering, support staff etc) will become squeezed and will not rise at the same rate AND/OR the goods/services they provide will increase in cost, feeding an inflation cycle. So the ‘rich’ will stay rich, and the poor will get poorer.

And meanwhile, the government has no hope in hell of raising enough to put 6500 teachers in classrooms (the news reported it would cost at least £5-6bn a year to do this) even if they miraculous generate £1.6bn in VAT income… so no appreciable change in state schools either.

Not if you have a role that covers a region of the World or is global. I cover EMEIA - Europe, Middle East, India and Africa. If I move to another country to carry out that role based from one of my employer’s offices in those countries, my lovely tax goes with it. The only reason we are staying here at the moment is because our oldest DC goes to a top state grammar school. If our DC were both in private school, we would have already left.

Also, it’s not always possible for roles to be filled. That’s why we have such shortages in certain sectors such as healthcare and teaching. I know so many who have left for the Middle East and Australia.

We’ll also be paying for their uni education, rather than encouraging them to take out the student loans, which will just feed into the ‘education is only available for the wealthy’ trope, no doubt.

Consider using student loans but then helping them pay the loan payments. If for whatever reason they don’t reach the threshold for repayment you’ve saved yourself the cash and can give them more for a house. If they do reach it you won’t really notice the payments. The IFA can advise if this makes sense

And meanwhile, the government has no hope in hell of raising enough to put 6500 teachers in classrooms (the news reported it would cost at least £5-6bn a year to do this) even if they miraculous generate £1.6bn in VAT income… so no appreciable change in state schools either.

Absolutely this. Which is precisely why it’s a spite tax.

Does anyone else on here have a Year 11 and is really worried about Sixth Form places for September 2025 given this policy? Especially if you have one that wants to do A level Maths, Further Maths, Physics and Computer Science? Given there are teacher shortages already in the state system and given that this is where most kids will jump from private to state - what exactly has the Labour Party planned in this regard? The applications are due soonish but the schools will only make firm offers on one day in August as soon as GCSE results are out? They won’t guarantee subject choices either until they have results in my area. Surely this could have a huge impact on loads of state school kids? And then an ongoing impact on the uni courses they can study if they don’t get their A level options?

@strawberrybubblegum

My ‘prejudice’ is knowing a lot of people who take financial planning seriously, who run / have run companies or balance private / public sector working, who work / have worked overseas, and who employ accountants to be tax efficient. Planning for IHT is no different to being tax efficient with earnings.

I see @CautiousLurker01 is saying they will start financial planning for their children now. The financial advice we had was do it as soon as they are born, so we did.

That used to be good advice, when student loan interest rates were lower and max repayment period was shorter. I don't think it is any more.

Another advantage of paying their fees is that it doesn't count as a gift for IHT, so they get the full benefit even if you die within 7 years.

It’s definitely a concern as I have one in private (year 7) and many parents are already talking about removing their DC after year 11. I think that there is going to be a lot of pressure on state sixth form places for the next five years or so. Luckily my state educated DC is at a top state grammar where existing pupils get priority as long as they make the minimum entry criteria for sixth form.

hope you enjoy your retirement!

Maybe consider occasional tutoring? We have seen several “camps” offered, both online and in person. This is not only for 11+ but also for separate topics - at all levels. The income per child is huge in person (but then you need space) but somewhere around 20-40 per session for online groups of about 6.

I believe that tutors will become increasingly important (some charge £80 per hour) and if you don’t want the weekly commitment, group classes at term holidays could be the way to go?

Not everyone does. Now more will.

Some of us used to actually take pride in being a contributor to the UK but now don't.

You can understand the impact of that, presumably - not in the abstract ('a lot of people', 'on average') - but exactly how many pounds will come into the Exchequer. Pounds which would have come from @cautiouslurker01, pounds which would have come from @boohoo76 , pounds which would have come from me. And now won't.

Kindly stop clouding the issue with facts ..

*What job do you do?

Anyone who has worked at a senior level in an industry which actually creates value is very aware that a very small number of people make a disproportionate difference to success. I mean real, productive success, where real things are actually achieved. The things our economy and our country depend on.*

@strawberrybubblegum well (if it's even any of your business) I work at a senior level in the NHS. But not sure that will meet your criteria for 'creating value' or 'real productive success where real things are actually achieved'

Interesting that lots of responses to my post about highly paid people moving abroad seem to run in direct contradiction to earlier posts in this thread suggesting that increasing the tax burden on high earners would be much fairer and have a lesser negative impact for society than 20% VAT added to school fees...

Yes that is true. I used to feel very proud that as a migrant I was a net contributor and investing my skills and family and future in the UK. Now I feel like a bit of a fool. In my home country taxes are smaller, there is not IHT at all (it was abolished in the 70s) and although the cost of living is higher the wages are dramatically higher. The mean is the equivalent of over £80 k. It's a no brainer. In addition private school is subsidised by the state as the state recognises private schooling relieves the state of a burden. The main school I am looking at has an annual fee cost of about £6 k equivalent. Compared to £20 k where we are now.

Yes, a friend suggested this but our concern is the ‘gifting within 7 years of death’ thing in IHT so we may gift them the money up front in the hope that we’ve healthy long lives ahead and then then can use it to pay the debt off later if needed - it’s definitely on the list to discuss with the IFA! Martin Lewis is very much in the ‘take the loans’ camp, too, so I might have a trawl through his website to see what his current guidance is. 🙏

“I see @CautiousLurker01 is saying they will start financial planning for their children now. The financial advice we had was do it as soon as they are born, so we did.”

@SabrinaThwaite

There’s tax planning and there’s tax planning, though isn’t there?

Eg

• making pension contributions and ISA/JISA contributions - plain vanilla stuff

versus

• consulting financial planners, making a transfer of wealth for IHT purposes (£3k a year gift allowance, PETs for house deposits and the like), setting up a discretionary trust, AIM investments, or even moving abroad to a lower tax jurisdiction.

We’re definitely seeing a shift towards the latter.

The numbers of HNW people doing this are of course tiny compared to the population as a whole, but as above they are responsible for a huge percentage of tax receipts so it absolutely can make a difference.

Labour have wrecked the economy with their budget in October because inflation is sticking and so now their borrowing costs are high too! Go look at the yields and compare to the Liz Truss shenanigans. It is a vicious circle.
They got it wrong! The NI was a complete faux pas.