Whitehall “braced for private schools collapse” 7

[ICouldBeVioletSky]

Continuation of previous threads discussing VAT on independent school fees. The thread title is a headline from a Times article last autumn.

https://www.mumsnet.com/talk/education/5237575-whitehall-braced-for-private-schools-collapse
https://www.mumsnet.com/talk/education/5242586-whitehall-braced-for-private-schools-collapse-2
https://www.mumsnet.com/talk/education/5280646-whitehall-braced-for-private-schools-collapse-3
https://www.mumsnet.com/talk/education/5301690-whitehall-braced-for-private-schools-collapse-4
https://www.mumsnet.com/talk/education/5317397-whitehall-braced-for-private-schools-collapse-5
https://www.mumsnet.com/talk/education/5337850-whitehall-braced-for-private-schools-collapse-6

Thanks @Icouldbevioletsky 😊

Ah, that's interesting about the CAF always ending at the end of the summer term! You're right, that does make it a fair comparison. Although I suspect that slightly more families may hold onto their state places this year than previous years due to uncertainty: more private schools closing, and also the general uncertainty about what Labour will tax next (I certainly feel future tax raids hanging over my head, and feel less financial confidence as a result)

Good point that the birth rate difference probably isn't significant.

I do wonder what proportion of children who go to private school apply for state as a backup? That's probably the most significant uncertainty.

To me it seems a no-brainer to do that! But if the CAF numbers of those who applied to state but then go private averaged 3-3.6% in your area but about 6-7% of children go to private school (nationally and across all ages) we could make a very, very rough (strongly caveated) guess that about half of those who will end up in private apply to state as a backup. (I'd expect it to vary hugely by area, but it gives us something to work with).

That would suggest overall movement from private to state in your area at Year 7 of about 10%, as a very, very rough guess.

Given that Y7-Y11 is the stage that many parents consider the most impactfull,, you'd expect more change in prep and 6th form than Y7 entry. So overall change in say 5 years time would be higher than the Y7 entry change.

So whilst we certainly shouldn't draw too much from it, I'd say it does support an expectation that the policy is likely to be loss-making.

BBC is fact checking Labour government promises vs delivery at the one year in office mark. It looks like sleight of hand is already being used by Bridget Phillipson to cover up the failure of the VAT policy: https://www.bbc.co.uk/news/articles/crenvyrnv33o

‘Teacher targets and VAT on fees
Hazel Shearing
Education correspondent
@hazelshearing

Key pledges: A drive to recruit 6,500 new teachers in England, and to start charging VAT on private school fees to pay for it, among other things.
Status: The government hasn't met its teacher target, according to the latest official headcount - though that dates from November. VAT has been introduced on private school fees across the UK - and there are concerns about private school pupils leaving the sector as a result.

Analysis: Training teachers takes time. The number of new trainees rose by 6% this academic year, but remained below target.
The latest figures from November show the number of secondary school teachers rose 1,400 in a year, while teachers in special schools and pupil referral units were up by 900. However, primary school and nursery teachers fell by 2,900.
In May, Education Secretary Bridget Phillipson specified that the aim was to recruit 6,500 expert teachers "across secondary and special schools". That prompted fury from Conservative shadow education minister Neil O'Brien, who accused the government of "moving the goalposts" by excluding primary school numbers.
Labour said it planned to fund the recruitment drive by adding 20% VAT to private school fees. The Independent Schools Council said private school fees were 22.6% higher on average in January compared with a year ago - £7,382 per term for a day school, up from £6,021.
Figures out last month suggested the number of private school pupils fell by 11,000 in a year. The government said that was "within historical patterns", but private schools say more pupils are leaving than normal. There have been concerns that smaller private schools are being pushed towards closure and about the impact on students with scholarships, for example.
Given the controversy, there will be close scrutiny of whether the money raised will have the desired impact.
For many parents in the state sector, the need for more school staff is pressing. Government proposals to reform the Special Educational Needs and Disabilities (Send) system - which has 1.7 million pupils, up 5.6% since last year - are due this autumn and parents will want to know whether staffing will match demand.’

Latest from The Times:

“More than fifty private schools shut since Labour put VAT on fees”

www.thetimes.com/article/19ef1b08-929d-4962-b30e-449000a66a1f?shareToken=54b0b3b887517c510366db20ee495204

As the article itself says, 50 is the number of schools that went bust and closed on average every year before the policy, so there's been no real difference there. Surprised that more badly-managed, long term loss-making schools aren't going under tbh.

It also says that pupil numbers are down by 1.6%, not the 25% predicted by the ISC and various other right-wing "think tanks".

We're only half way through the year.

We are in the first year.
Government predicted 3K would leave in first year. So far 16K have left.
40 indy close in "normal" year but quoted figures always lump SEN specialist schools funded by taxpayer via EHCPs in the data
Here is actual data from DfE.

FYI court case it was stated by government KCs that they expect approx 53K to leave indy schools in total. That's pretty much the figure at which the policy brings in net £0 ie 10%.

The 16K kids who have already left are disproportionately SEND and children on fee assistance. So result is that independent schools become MORE elitist. Will you be happy with that outcome?

For numbers, the new school year hasn't started yet, let alone time for the time lag on school choices to bite.

10% of children who would have gone to private school instead going to state school is the break-even point where the policy starts to cost money rather than raise money.

Let's see what happens to the % educated in private rather than state in Reception, Year 7 and Year 12 in September. That should give an idea of long-term sustainably.

Then the ISC census next January will give another data point.

Should be interesting.

We've got another year to go until 2 out of 3 have natural breaks at 6/7 and 11/12. We will hang on until then. I would imagine many people will be seeing out last 2-3 years to minimise disruption.

Then the state can pay for my kids education! Yay! Love the VAT supporters hanging on to some random number and misinterpreting it.

I'm afraid you'll still be on the hook to pay for the policy failure - along with all the other Labour economic self-harm - in the Autumn Budget, @shambles123 !

But at least you'll be sharing those costs with the other 7 million or so net contributors in the country, rather than paying for your DC's entire education yourself in addition subsidising the non-net-contributing 60 million population.

Exactly. I will get something back rather than paying in and paying on top.

Please don't talk about the autumn budget!!

Mount St Mary's near Sheffield is closing with immediate effect.

how come MsM is closing with immediate effect?

Immediate closure is quite unusual. It had a negative inspection report not that long ago.

The Telegraph is reporting that monies held in Fees in Advance schemes rose from £121m in 2023 to £515m in 2024.

That’s around £80m of VAT that won’t be collected, then, that Labour was counting on. (Of course, there is the possibility that some schools won’t have set their schemes up properly, and HMRC will decide that VAT is due on some of those advance payments. But that’s to be a minority of cases, especially as a lot of schemes were pre-existing schemes, rather than hastily introduced ones).

Once again, Labour have completely underestimated what people will do to reduce their tax bills (and to ensure their children can remain at their school).

I've just seen that story @RockaLock, and as the article points out it's only the very wealthiest parents at the top schools who can afford this option, so the burden falls on the middle, many of whom will give up and smaller schools go to the wall.

It will be interesting to see how much money this policy eventually raises, but it's going to be a fraction of what they claim. Added to which they already announced that the revenue wasn't going to be ring fenced for education anyway.

Plus, of course, schools like Eton can now claim back millions for the VAT on capital improvements and building work.

Whatever your view on private education it's pretty much a masterclass on how to do fucked up politics.

And yet again many of us said this would happen but were shot down by the likes of some of the posters on here !
Every single thing I and others warned would happen 18 months ago, has happened. We were belittled, gaslight and called names.
This policy will ultimately cost the taxpayer money all whilst impacting the education of children
It's despicable! Especially as we know any money raised won't be going to state schools.

Brighton College did well raising prepayment funds so quickly. No surprise really - both the school and the parent group are driven alpha types ten steps ahead of Labour and their shenanigans.
These schools can invest the 50 million prepayment into bonds tax free and get a 4-5% return in this climate, They can then use that tax free revenue to support bursaries/help the parents who cannot afford the VAT. Nothing wrong with that, If prepaid before the July deadline and into a genuine repayment scheme, is HMRC really going to spend huge amounts in staffing time chasing this?
Most of those parents would have paid tax on deposits in bank accounts at 45%. So it is not just the VAT revenue lost. It is years and years of taxation as well on income.

Re MsM the head suggests they tried to find a buyer and were ultimately unsuccessful (I think the same was the case for Bishop Challenor). If schools cannot pay salaries and bills they are bust and have to close immediately and go through the prescribed insolvency process. There are legal obligations - they have no choice.
Hugely detrimental on staff, kids in exam years, the wider community.
Note MsM had to immediately close the holiday club too.

When will we find out the exact figures on how much money Labour have raised/lost with this policy? That will be the true reckoning. Will it be worth it - throwing all those kids with SEND under the bus, numerous jobs and kids in exam years? Do they still have a warm fuzzy feeling from sticking it to the rich?!

We won't. They will never admit that it will be a net cost to taxpayer

There have been some analysts who have estimated that far from raising £1 billion +, it could easily cost the Treasury that in lost revenue

Telling people to just shut up is becoming a major government strategy in all areas - net zero, immigration, planning, trans you name it.

Just shut up people!

Tbf, I’m not sure it is just the mega wealthy who have made advance payments.

We are not “wealthy”, just comfortably off, but we took advantage of our school’s FIA scheme to prepay our son’s 6th form fees.

It was fortunate that we had the money sitting around - we had been thinking of buying a swanky garden room/office, as DH at the time was still working 2 days a week at home. But we used the money to prepay school fees instead of buying the garden office - so that’s some VAT lost on that non-purchase right there.

And then DH’s company called everyone into the office 5 days a week from the start of this year, so now we won’t by buying the garden office at all, even though we once again have the funds available for it - so in fact we are quite grateful to Labour for saving us from wasting our money

If we hadn’t had 2 years of fees lying around, we might have considered taking out a loan to make the prepayment. After all, a loan at say 8% is better than VAT at 20%. And other parents may have done that too, especially if their DCs were towards the tail end of secondary school, when it is too difficult to move them.

@RockaLock presumay your school is now drawing down on that prepayment - has there been any issue with you getting the most recent two terms without VAT added?

Any payments to schools prior to end July 2024 are VAT exempt. Hence parents who could afford to pre-pay multiple years won't pay any VAT on those years. So the wealthy get preferential tax treatment but us normal earners get hammered with the VAT.

Thanks - my understanding was that this wasn't proven 'before the event' as there was no reason before VAT was announced to make a future service "VAT-proof"

Hence my interest in @RockaLock's experience in practice, which I would still like to hear.