Private School VAT solution?

[HappyCompromise]

I’m seeing a lot of these threads. The arguments getting very toxic.

An idea I had to make it fairer would be introduce the VAT on a rolling basis.

So from whichever date it’s Y7 which has to pay +VAT. The school is allowed to reclaim a 1/7th VAT spend (or whatever that is as a proportion of year groups they service).

Y2 - Years 7 & 8 are now paying. Schools reclaim 2/7ths of their VAT spend?
etc. etc.

So at least the current cohorts can finish their education unhindered.

Would both sides be happy with that?

The VAT position has absolutely nothing to do with charitable status. Around 50% of private schools don’t have charitable status. Schools don’t have to charge VAT on fees because of an exemption in the VAT legislation which exempts education. It’s the same part of the legislation which exempts university fees.

No they are exempt because under UK law education is exempt from VAT - to align with EU law. Charity status is not changing only the VAT exemption. Once stripped from private schools it opens the door for other exemptions to be removed. Be careful what you wish for:

"Under VAT law in the UK, the provision of education by an “eligible body” (which includes a registered independent school) is an “exempt” supply for VAT purposes. Goods and services that are closely related to education are also exempt from VAT eg catering, transport, school trips and boarding accommodation."

The reason is not because they are charities - there are two different issues. Some schools are charities, others not. They will all be subject to the same rules.

Labour had planned to make changes also to the charity status that applies to some schools - they abandoned them (with sole indications that the change was for to the associated risks of a successful and reputionally damaging legal challenge)

The current VAT rules apply to the provision of educational services, not schools / private schools / charities specifically. The proposal would single out private schools ... which is a reason why is proving n controversial and some have raised the consideration of a legal challenge.

I believe this is the case in Ireland (Republic of), a society much closer to the UK than India, and with arguably a better quality of education overall.

I'm from Poland. Private schools are VAT free and partly subsided by the government. State schools are very good and most people chose state education regardless of income.

State universities are free aswell and childcare is either fully or mostly subsided from one year old to school age wrap-around care. I'm mentioning that just to highlight the scale of government's spending for education system. Considering most people under 26 don't have to pay tax, income taxes are lower, no council tax , no inheritance tax etc.

I'm also wondering how does it work in one country and not the other. And what the differences are.

Poland’s population is roughly half that of the UK’s with a much lower population density. That’s why it works - because most Polish families with young children live abroad.

If you account for population differences, Poland has similar number of children as UK.

Education was funded similarly before open borders. There was even more funding for state schools in the 90' with free holiday clubs and wider range of extracurricular activities
I don't think it's about population. Less people - less pressure on state services, less need for private schools.

Also 42% of Poland is protected for nature compared to just over 3% in England. That means residential and urban areas actually are densely populated. You can't build schools or houses in national park.

Well said 👏👏👏

Many developed countries finance both public schools and private and religious schools with public funds, and they have done so for many years. The proportion of public expenditure used to subsidize private education amounts to 4 percent in the United States, 7 percent in Switzerland, 10 percent in Australia, and nearly 12 percent in France. In Belgium and the Netherlands, private education is entirely publicly funded; thus, the proportion of funding targeted to private-school students approximates the proportion of private-school students in the student population. The issue of public funding in many of these countries does not provoke the widespread controversy that it does in the United States. In return for the funding, the private and religious schools in some countries agree to honor government standards in matters of curriculum, class size, and the like; and their students must still pass the same national examinations as their public-school peers.

https://nces.ed.gov/pubs/eiip/eiip45s1.asp#:~:text=Many%20developed%20countries%20finance%20both%20public%20schools%20and,in%

The vast majority of people sending their kids to private school in the UK are not filthy rich. They DO have to sacrifice to put up with the fees..but they do whatever is needed, as education is the number one priority for them. The top performing private schools in the UK are generally made of middle class Asian parents. Most of these parents make unbelievable sacrifices to get their kids in. Additionally, it's not only the fees remember. You have to sit an exam to get it in...and of course the top private schools especially in London are in fact very difficult to get in. Mr Joe Blogg's son down the street is frankly not smart enough to even get in to the majority of private schools, regardless of the fees!!!! This is an escape goat tactic by labour to punish those parents and kids who go the extra mile for the pursuit of excellence.

Loads of sweeping generalisations here.

How do you know what the 'vast majority' incomes are?

Where I live, none of what you say is true.

If we exclude the truly elite schools, the majority of parents sending kids to private schools in London are middle-upper middle class. Doctors, dentists, accountants etc etc. This is certainly the case for NLCS, City and Habedashers where the majority of kids come from a south Asian background.

That is the reality of the situation, and most of these parents will have to go beyond their normal job hours to provide the education they want. The fees are only one aspect however. The entrance exams to the top 20 private schools are very difficult! Even if you have the money, your child has to be smart enough to actually get in. It's not automatic entry. This point is never actually mentioned anywhere!

Hang on a minute. You are saying that people in highly paid professions like doctors and accountants have to make huge sacrifices? These are higher rate tax payers. They are not ‘Mr Joe Bloggs’

You sound like the people on here who say they earn £70k and expect to get a bursary.

Again, your missing the point. Even the higher tax earners, ie those who just earn over the 100k mark will struggle. I'm not talking about the super rich here. 100k is frankly not a high enough salary to afford a london mortgage AND send your kids to private school. So yes, most of these parents will go above and beyond to send their kids to such schools. This is what's happening on the ground in the vast majority of london private schools. It is these people who the system will affect the most.

Again, you haven't responded to the comment about the private school entrance exams. Forget the fees, do you genuinely think the majority of local state school kids- ' Mr Joe Bloggs son/daughter,' are at an academic standard to even get in. Of course not, most don't stand a chance.

'You sound like the people on here who say they earn £70k and expect to get a bursary,' -your putting words in my mouth. Nobody reasonable thinks this and I certainly haven't said or implied this. Stick to the point.

Labours policy will make private schools more elite. It will make grammar schools even harder to get in. It will increase the house prices in catchment areas of good state primary and secondary schools. Please, tell me where the benefit is!!!

do you genuinely think the majority of local state school kids- ' Mr Joe Bloggs son/daughter,' are at an academic standard to even get in.

I bet they are. Back in the day those kids were getting grammar school places. Private education used to be used for not very bright kids who failed the 11+ and whose parents thought they were too good for the secondary modern.

I had a look at the accounts for the school my kids go to. 75% of cost is staff salaries and I assume pensions and other related costs. There's about 1000 kids between the secondary and prep. 2/3rds in secondary.

They're not allowed to be run for profit as a charity so in the boom years economically speaking they can increase the number of bursaries and scholarships. And presumably invest in infrastructure and building repairs which would have vatable costs. I'm not an accountant though. Quite prepared to be told some elements of resourcing is vatable?

So my working assumption is that a tiny portion can be offset and most of it will be passed on in due course.

Interestingly the Royal Ballet School will be impacted. Most of the kids are on bursaries so the school will need to find another 20% in fundraising every year or presumably reduce intake/subsidies.

I assume the same is true for other specialist schools that support our brightest and most talented kids (not mine 😂) so the long term impact on the arts, sporting success etc may well be huge.

Quite telling, imho, first couple of paragraphs that may explain why the policy of VAT on schools come what may

https://amp.theguardian.com/politics/article/2024/jun/23/rachel-reeves-changing-britain-shadow-chancellor-interview

That’s back in the day when the 11+ was standard. Private schools now have tougher entrance requirements - it’s not just about the academics, you also need to demonstrate aptitude and soft skills. If a state school pupil can only cram for entrance they won’t have time for the other stuff

There was no cramming then. You were taught to pass in the classroom then you were either bright enough or you weren’t. I don’t believe that an establishment which is basically a business and exists to make money has more stringent requirements than grammar schools used to have - they’re fishing in a smaller pool for one thing.

I went to an inner city primary, we were all immigrants or children of immigrants, in my class there was one girl whose parents were both English and she was a novelty. We were mainly Irish, 2nd group Polish then Italian, Spanish, Greek,Caribbean. There were 48 in my class and 23 of us went to grammar school. Never even heard of tutoring back then (early 60s)

Lots of professional careers and one boy from my class went on to be a Lord. Amazing what kids can achieve.

It depends on the area - in London, which is the area that I am familiar with, the top 20 private schools by results very much compete with top grammars, despite the limited number of them (eg Tiffin in SW London). Anecdotally, we know of children getting into the grammar but not one of those privates (the opposite is also true) or getting offers from both grammar and selective private (in some cases opting for the grammar, in others for the private).

This is excellent point.
How many poles are on benefits though? I'd imagine that Poland has much lower rate of economically inactive working age people than UK, so it allows to have lower tax rates for much broader base and still being able to provide decent public services.

What you mean is 'amazing what kids could achieve'.

The 60s aren't comparable with now. These days all children get tutored for GS so any child who sits the exams without tutoring is going to be at a disadvantage.