Whitehall “braced for private schools collapse” 6

[ICouldBeVioletSky]

Continuation of previous threads to discuss VAT on independent school fees.

Ideally this would be ringfenced to provide better SEN provision/smaller classes in state schools

The arguments about costs are missing the impact of a more balanced society with less inequality that this policy will bring. Which is very difficult to calculate but will certainly bring both economic and social benefits.

the whole point of this policy is to try and very slightly even out the playing field and make life better for the majority.’

Apologies, but this just all seems like a wishlist of unquantifiable and unprovable assertions.

It's a policy in which the resulting costs are irrelevant because of certainty of good things, which conveniently cannot be measured but we just accept the good things have arrived? If this policy costs money meaning that there are less funds to pay for everything, yet levels the playing field, by definition that means levelling down, doesn't it?

As for additional taxes being ringfenced for anything, I'm not a legislator but surely this is a rare scenario and would probably require new, specific taxes? If we have the pot of VAT or income tax etc (which all goes into the general taxation pot anyway), how would we write it so that we know this %age of this pot came from those broad-shouldered taxpayers and therefore this £amount will go to this list of deserving items?

What happens when said people change their behaviour, or some situation changes, and less is raised or there's even a loss? Do we make the deserving recipients pay it back? Clearly that would be absurd.

But. I'm neither a legislator nor an economist. So presumably there's a way. But it surely would need to invoke a new, named tax rather than the general pot.

https://www.isc.co.uk/media/bmigntu2/isc_census_2025_final.pdf

If the decrease is 5% already in key transition years of Reception, Year 3 and Year 7 for a January 2025 census, the month the tax came into force, this is only heading one way. Terrible policy all round, anti aspiration and just plain loss making.
It is probably good it is not going into state education, because they would have to be taking money out of it to make up for the losses if it were earmarked!

It’s simple base spite against children because Labour doesn’t like their parents, mixed in with the usual people not caring about a tax they don’t have to pay. Supporters wrapping it up as some virtuous act is just ridiculous, it’s using tax payers money to reduce the number of schools. It’s plain idiocy and vandalism.

Regardless, it doesn’t seem like money raised by VAT on private school fees is going anywhere near state education. Real term cuts are on the way, despite the fact many state schools are already in deficit and teachers’ pay is going up. The sums do not add up.

Plus the state now covers those extra pupils (circa £8k a year) whose education would have previously been paid for by their parents. Education tax is simply stupid, I find it hard to believe it was actually implemented.

Labour will just fudge State education by scrapping standards like KS2 SATS and will likely make GCSEs easier too. It is really expensive to bring up poorer kids and they just won’t do it and they know the sharp elbowed parents will simply purchase EdTech, books, tutoring anyway. Sad state of affairs for the next generation, no investment in them. Hence I have no interest in future grandchildren being here. There is too much dishonesty. I mean we already pay for university here, education spending is not great and yet some of us are e paying the highest taxes in Europe given the thresholds we find ourselves in.

It’s no more spiteful to tax schools than it is to tax fuel or biscuits. Taxation is taxation, not spite - it’s just looking for money to fund things, sometimes with unintended consequences. Once you go down the route of claiming spite, you could use exactly the same word for the two-child cap on tax credits combined with the scrapping of SureStart centres and the like, which harms the innocent in order to punish their parents and has not benefited society at all, so far as I can tell, because it’s the next generation we are harming. Too often, choices made by all the parties are disproportionately harming our children.

Yes, you’re right — they are both spiteful. The two child cap was Tory spite; the VAT on private education is Labour spite. HTH

It’s not a tax on schools, independent schools already paid VAT. It’s a tax on fee payers for children of ‘compulsory school age accessing full time education or vocational training for a fee.’ .

A benefit removed is not a tax. You’d have a point if Labour were taxing having a third child or sure start was funded by fees to supply burseries and they implemented charging full business rates & charged the fee payers VAT. Do you understand?

I think you are the one who does not understand. Spite can exist independent of taxes and vice versa.

And when it comes to VAT, the poor tend to lose a greater proportion of their income to it than the more well off.

No. That's a myth.

It only looks that way when you look at short term data (and don't think about what you're seeing): because people's income fluctuates more than their outgoings. When you're temporarily down on your luck, you spend your savings, so the amount you buy (and so the VAT you pay) is a higher proportion of your current income than usual.

When you earn more, you put more in savings, so what you buy (and your VAT) are lower than usual as a proportion of your temporarily higher income. You'll still pay VAT when you eventually buy things - but only when you spend your savings!

So actually, the numbers show that over a longer time period higher income people pay more VAT than lower income as a proportion of what they spend (as well as in absolute terms)... exactly as you would expect, given that so many necessities are exempt from VAT.

OK no, it’s not a choice to have no suitable state school available to meet your child’s SEND needs, without waiting for years on end.

I think scrapping Sure Start was a huge mistake and also that making larger poor families poorer via the two-child cap is terrible too.

I would have thought people’s outgoings fluctuate more than their income, not the other way round? Boilers breaking down, cars needing MOTs, etc, are not regular occurrences, but a full time job provides a regular income. Zero hours contracts, of course, do not provide much stability, but if you are that badly off, you won’t have any savings to rely on in any event.

I would have thought people’s outgoings fluctuate more than their income, not the other way round? Boilers breaking down, cars needing MOTs, etc, are not regular occurrences, but a full time job provides a regular income. Zero hours contracts, of course, do not provide much stability, but if you are that badly off, you won’t have any savings to rely on in any event.

It’s certainly not a choice for the majority of people.

Gremlins on my computer, or Mumsnet making double posts…

So tell me why on earth you think that a higher proportion of the spending of rich people is VAT exempt than that of poorer people... given that necessities such as housing, food and children's clothes are VAT exempt?

I mean, just think about it for a tiny moment.

Now you might be cheating by looking at proportion of income rather than proportion of spending. Ie, again not taking timeframe into consideration.

Rich people might save more (and so not pay VAT today... on money they aren't spending today). But that money only becomes useful when it's spent. And at that point, the saver will be paying that same higher proportion of VAT that we would expect if they are still rich enough to be spending it on consumer goods instead of necessities.

numbers on VAT proportions

"A greater share of the income of lower income households goes on indirect taxes (VAT, duties and so forth). However, some economists argue that indirect taxes should be considered relative to households’ spending, rather than their income, not least because indirect taxes are generally levied on spending. When looked at relative to households’ spending, indirect taxes are broadly similar across the income distribution"

Basically, more money is needed for public services and the Government is running out of places to find it. Obviously, the lowest hanging fruit will get picked. It’s not doing much more than spreading the pain a bit further, of course, but I think private school parents were going to get picked on regardless, because they are low hanging fruit. Spite is irrelevant.

Not meaning to be rude, but if almost all your income goes on VAT on fuel, getting essential repairs done, your clothes, etc, so that you cannot save money in order to spend more later on, your analysis is somewhat offensive. One person can save for little and large pleasures which they don’t have to indulge in until they can afford them (ie don’t urgently need), in the meantime growing a nice, often tax-free nest egg in the savings process, and the other can’t ever afford to start saving, because money they might otherwise be able to save tax-free is being spent on VAT now.

Each person is of course entitled to their own opinion about the intentions of each of the Labour leadership team in bringing in this policy.

And their competence.

Not meaning to be rude, but what proportion of someone's income should be spent on driving a car, buying clothes and buying other VATable consumer goods when it is being supplemented by other taxpayers?

The same amount as the people helping them financially? More?

Not meaning to be rude, but this goes back to whether you think pay rates for different types of work are actually fairly calculated in the first place. It’s not as if current pay structures are attracting people to the shortage careers. If things were more sensibly calculated, you might find less need for redistribution of wealth simply to enable things to keep running at all.