Labour’s plans for VAT on Private Schools

[Busydadof2]

The Labour Party has proposed introduction of VAT on private schools.

In the scheme of things the money they will bring in from this is tiny compared with total expenditure on state schools, while it will drive more burden on the state system as some parents leave private schools. I think this is a populist ploy to get traditional Labour voters to vote for what is in any other sense a centrist party.

Have you considered signing this petition to make sure the policy gets scrutinised and the weight of public sentiment against it is known?

Change.org petition: Stop Labour from adding 20% VAT to private school fees and forcing kids to change schools

www.change.org/p/stop-labour-from-adding-20-vat-to-private-school-fees-and-forcing-kids-to-change-schools

Various perspectives from the signatories of this vote come to mind and resonate with our own situation, including this: “I work in a state school with over 30 in a class and oversubscribed. My 2 kids went or go to private schools and we have sacrificed loads to do this. We are NOT wealthy, many of the kids at the school I work at live in bigger houses and have much more disposable income than we do. We chose to send our kids to private school rather than live in a bigger house instead of our semi detached on a main road. We holiday in the UK every year and I work full time. I buy my clothes on the high street or in charity shops. Many parents at the school my kids attend are in exactly the same situation. I agree there are some very wealthy parents there too and the addition of VAT will not even make an impact on them, they will pay it without batting an eyelid. All this will do is push the kids like ours back into an already oversubscribed state system, increase class sizes even more and create a bigger divide as private education will become truly elitist.”

Hello, yes it's reasonable to assume effective 15pc not 20pc, because around 25pc of expenditure is on VATable supplies (where VAT will be reclaimed).

Schools and families will respond to this in different ways...which as a supporter of private education I welcome...it's kinda the whole point.

But regarding the anecdote from your friend's school that says it will try to absorb the VAT in part, a few observations from me. You can read more on my blog here; please do subscribe if you're interested in this topic.

• Around 75pc of expenditure is headcount. And of the 25pc, it's pretty hard to make serious savings (repair bills, cleaning materials, energy, for example, are pretty much fixed costs, and let's assume here the school actually survives). So any meaningful savings WILL come from reducing headcount/payroll, which will affect the c£5.1bn of tax contribution from private schools themselves (around 3x the VAT Labour claim they will raise) and leave us with some redundant teachers and support staff.
• Note they then need a 15pc saving out of only 75pc of the cost-base. So that's actually 20pc off payroll (15/75).
• If schools lay off teachers, quality will suffer and there's a risk you get a family exodus anyway. Independent schools have to compete against "free" taxpayer-funded schools; they struggle to survive by being "a bit better", they have to be great.
• Where else they can make savings? Bursaries and partnerships. It would be reasonable to assume every bursary "saved" equals another high-potential less-wealthy child into the state system. Hopefully that child finds their way into a top state school, because....those all have places and none of them are oversubscribed....(ironic depressed laugh)
• Even if a school does absorb VAT by making savings and dismissing teachers, it's not a guide to what schools in general will do. Bridget Phillipson is happy boasting that one (1) school has so far indicated it will absorb all the VAT, and it's rumoured (yes I know, trust me on this or not) that the head teacher is trying to row back on that because he didn't have the approval of his governors for his "brave" financial commitment. But she won't engage with the finding that 96% of schools will increase fees and that 76% will do so by >10%...and that's for the VAT alone, and does not include any inflation-driven fee increases. And that's the quality of evidence and rigour that is informing this batty, divisive, class warfare policy.

@MisterChips @Mia85 Thanks for the information. My son is at a private school and I was just trying to work out how much the fees might go up.
I am probably just being hopeful they won't go up too much although he doesn't have long to go until he finishes. VAT on independent schools isn't too much of a worry unless we decide to send him to a private school for sixth form. I will try to get him into a grammar school first or another comprehensive nearby that has high entry requirements for sixth form.
Before I sent my son to private school, I sent him to a state secondary school. In fact, I moved into the catchment area in order to send him there. However, I ended up moving him to a private school for multiple reasons. He thinks the new school is much better and says it is so different in terms of behaviour and the work ethic of the students. He couldn't believe at first that the students were revising in the playground just before a test. He had never seen anything like that in the state school but went with it.

....is another evidence-free assertion from VAT advocates. Do you actually believe it? Or have you just "heard it somewhere?"

In the state system at the moment, how do you describe the behaviour of wealthy families? Do they (a) make damn sure they get into a good catchment area, possibly chucking a shoulder behind "their" school, and then spend their money on tutoring and piano lessons, pissing themselves with laughter when their children get favoured places at Oxford for being "under-privileged"?

Or do they (b) become tireless advocates of state schools in general, demanding improvements and volunteering time and energy to the benefit of all state schools, and ideally choosing special measures schools for their own children so they get the real experience?

It just doesn't stack up.

As for "countries where private education has been made difficult to access". Perhaps you could expand on that? Which country? If it's Finland (I bet it's Finland), you probably need to know (because private school abolitionists are being desperately economical with the truth) that

• private schools absolutely exist; there are significant numbers of state-funded private schools
• state education costs only a fraction more per pupil than in UK
• there are many, many differences between Finnish and British family life that means children starting primary school are much better socially prepared
• to the extent there is greater state investment in education, for example in a very long heavily-funded teacher training programme, it is funded not by "taxing the rich" but by taxing lower and middle-earners.
• there are also more expensive private schools that more closely resemble UK; around 2pc of pupils so about 1/3 the size of UK market.
• And the latter aren't subject to VAT, because (in Finland) it's not controversial to say (1) all education has social benefit and it's great if families invest in it willingly (2) all private education that replaces a state school place, saves the state several times more £££ than the value of the VAT exemption.

Tell me I'm wrong and why.

Good for your son.

Revising in the playground is obviously extremely expensive privileged behaviour and is an activity only available to the rich.

I am glad you have some decent options ahead of you. Many don't. Personally, I'm probably going to pay the VAT and grumble a lot, but through the Education Not Taxation campaign I'm coming across many families who won't be able to.

But additionally, I'm just a strong supporter of private education. If we had any imagination we'd be trying to make private education more affordable, not less. I would love there to be more Ford/Skoda private schools, but unfortunately the power of the state makes it almost impossible to open one as you have to compete against free taxpayer-funded schools of varying quality.

@MisterChips

You are factually wrong in many aspects. And one of your premises logically absurd. If I postulate that having no private education motivates all citizens to value education, you can't then use pointy elbowed middle class parents in state education as an example of behaviour. My overall point however, throughout this now zombiefied thread is that inequality in society creates poor education outcomes, not vice versa. If you'd ever been to the Nordic countries and spent time researching their approach, you would find that they consider this a basic category error on the part of our system. Better social and economic equity mean better schools. This is evidenced in social democracies in Northern Europe and in more economically equal states in more capitalist countries like the USA.

I'm in favour. Enough people will find the money to keep the good schools going, and in a few years it'll just be the new normal, except we'll have a bit more tax in the jar and some better raw material for state schools to work with.

If you're going to say I'm factually wrong, maybe say which fact is wrong and share what you think is accurate. Otherwise you seem a bit shouty.

If you "postulate" your (rather radical) claim that forcing private school families into the state system would make them all "care about" the state system in a different way then (1) it's on you to prove it, not me (2) it's obvious, and I definitely can use the example, that the current observed behaviour of rich people in state schools 100% contradicts your "postulate" as they generally do nothing for state education; if you are able to explain why private school families will become bigger supporters of state education than rich state school parents are today, please enlighten me and show that's a reasonable assumption. I am full of curiosity.

If, as I suspect, it's just a blind assertion, then great, you've asserted it. And I've shown it doesn't stack up. Maybe see if you can support your assertion better next time.

If you're going to claim expertise on the Nordic countries, as advocates of VAT on school fees typically do, you need to take account of (and not ignore because inconvenient) all the things I pointed out. They don't have VAT on private school fees (and they do have private schools). They have much higher taxation not just for "the rich" but for lower and middle earners. They get better schools by having a more effective state paid for by everyone not by "the rich"...and as a result, a greater number of "the rich" are content to opt into it. Finally they don't fart about with class warfare - the sole end and purpose of state apparatus is to deliver good outcomes to service users/taxpayers etc not to attack the rich and wage class warfare.

If the latter is where you think we should go, crack on. I can see the advantages. But you'd best tell the Labour Party because they're arguing for something quite different: levelling down, not up, and their dumb global outlier, divisive and destructive VAT policy is the way they're going about it. They aren't taking you to Finland, they're taking you to...the UK, but even more sh1t.

@MisterChips

This is a long response, but necessary because you've twice made false statements or partial truths, cast aspersions on my academic integrity and made assumptions about my personal politics. One misleading statement you made was suggesting that Finland have private schools operating as normal education providers - they don't, fee paying schools can't deliver state sanctioned qualifications. There are no fees paid for any schools delivering education from pre-school to university. Private institutions can deliver state sanctioned education but are state funded and can't charge for it, so your assertion that they have private schools as we know them is rather disingenuous. Another disingenuous claim you've made twice refers to low income earners in Finland paying high tax. In practice, low earners don't pay any income tax and their thresholds for lower incomes are higher than ours. I don't think Labour's plans are particularly exciting and, since Blair's time, they've bought into to the myth that education is a driver of social mobility. This is, as I said, a category error and the very notion of social mobility is equally unhelpful. During my doctoral research I spent time in Finland with teachers who were undertaking their doctoral research. Six out of twenty of them were engaged in some kind of comparative study, with the English system being the focus of their analysis. Amongst other conclusions they drew was that our governments were buying into: a narrow, dry curriculum, academic and vocational paths being overwhelmingly dictated by social class, a focus on teacher control above learner agency, an ideological determination to ignore evidence and a confusing notion of the type of person who we should be recruiting to teach. I personally was impressed by what I saw in schools but I appreciate that our culture is different - not to say we can't work on challenging that culture. I also visited Sweden, Germany, Ireland, the States and Japan. When in 2010 we decided to tear up the education system entirely and begin a process of de facto privatisation, we could instead have learnt from our European counterparts rather than attempting a strange hybrid of failed 'traditional' British approaches and unfunded mimicry of Far Eastern systems. Make some sort of inroads into inequality and education will improve and the advantages associated with private education will become less attractive.

fee paying schools can't deliver state sanctioned qualifications. There are no fees paid for any schools delivering education from pre-school to university. Private institutions can deliver state sanctioned education but are state funded and can't charge for it,

This is incorrect. Private schools in Finland can’t make a profit from the basic element of education. That element is funded by the state. Schools can charge for other things though. There are private, fee paying schools which offer state recognised qualifications (eg Finnish matriculation).

https://eurydice.eacea.ec.europa.eu/national-education-systems/finland/organisation-private-education

This is worth noting.

“The Ministry of Education and Culture may grant licences for private educational institutions to provide upper secondary education. The requirements are set out in the Act on General Upper Secondary Education and the Act on Vocational Education and Training.
The percentage of private general upper secondary schools was 9% in 2022.”

Helsinki private schools which are officially authorised.
https://www.hel.fi/en/childhood-and-education/basic-education/schools-in-helsinki/private-and-state-schools

Finland state subsidise authorised fee paying schools. I think a lot of UK private school families would be more than happy with the state subsidising part of their fees. There might be an argument for adding VAT to school fees if the basic element was state funded. There is no logic on adding VAT to education which is actually a legal requirement for children to have.

Oh dear. If that’s right it’s a bit embarrassing for the academic researcher poster who made the assertions.

"you've twice made false statements or partial truths, cast aspersions on my academic integrity and made assumptions about my personal politics."

If you can point me towards one thing I said that was false...always happy to learn. I've said nothing about your integrity or politics.

"One misleading statement you made was suggesting that Finland have private schools operating as normal education providers...There are no fees paid for any schools delivering education from pre-school to university." [my emphasis]

I didn't say "normal education providers", whatever "normal" means. I said they have private schools and they don't charge VAT. How's that misleading?

Private education is not prohibited in Finland (aacrao.org)
Finland - Education and Schools - Expat Focus lists a few private schools
Fee summary 2023-2024.pdf - Google Drive is the fee schedule for a private school in Helsinki, with fees, that doesn't charge VAT.

"Another disingenuous claim you've made twice refers to low income earners in Finland paying high tax. In practice, low earners don't pay any income tax and their thresholds for lower incomes are higher than ours"

Finland is a high tax country because it taxes everybody heavily (americanexperiment.org) "Finland doesn’t raise more tax revenue than the US by taxing the rich, it does it by taxing everybody as though they’re rich."
UK tax calculator and Finland tax examples (OECD); Finnish take-home pay is around £3k less on £30k gross income and £6.5k less on £45k, with further deductions for church taxes and broadcasting tax (strictly mandatory).

So back to where this started: you came up with (1) your radical statement that private school parents moving into state schools will suddenly care about the state system in a way that's not observable within the state system today, and you don't seem inclined to prove (2) your comparison with "other countries" where this happens, which turns out to be Finland, where (per above) there are many confounding factors which include the heavier rates of taxation on lower/middle incomes.

@WhatsTheUseOfWorrying

I'm not a researcher anymore, but that doesn't stop the comment you referred to being incorrect. There are some private schools in Finland but usually international or adult schools and can't deliver certain qualifications, as I said. My main point has been avoided in favour of nitpicking and that is that good education follows social and economic equality, not vice versa - but the thought of actually levelling up horrifies certain types.

eurydice.eacea.ec.europa.eu/national-education-systems/finland/funding-education#:~:text=In%20Finland%2C%20education%20is%20free,have%20fees%20in%20some%20cases.

eurydice.eacea.ec.europa.eu/national-education-systems/finland/organisation-private-education#:~:text=In%20Finland%20most%20private%20schools,Finnish%20National%20Agency%20for%20Education.

medium.com/@cailiansavage1/there-are-private-schools-in-finland-but-they-offer-the-same-education-based-on-the-national-4fe673d1b34a

www.independent.co.uk/news/education/schools/are-finnish-schools-the-best-in-the-world-2289083.html

okm.fi/en/frequently-asked-questions

@WhatsTheUseOfWorrying

To clarify, schools cannot charge fees to deliver basic education, so private schools that deliver state sanctioned education are state funded. So not comparable with private schools in the UK in any way, making their VAT status irrelevant.

In your opinion. So anyway, are you still happy with what you wrote "There are no fees paid for any schools delivering education from pre-school to university."

?

But more seriously, since you're now good enough to acknowledge there are both private state-funded schools and non-VATable full fee private schools in Finland; and I'm taking you now accept that lower and middle earners indeed pay higher taxes than UK and I wasn't being "disingenuous" (apology accepted, thank you)...

....let's move on. Who are the "certain types" who are horrified by levelling up? I'd love to see levelling-up! There's no greater actual supporter of state education in the UK than higher-earning private school families who pay for it multiple times over while not actually using it, and many of us, myself included, would love there both to be a great free taxpayer-funded choice, and we'd love more of our compatriots to get better education.

That still leaves us debating the issue at hand. Taxing private schools won't improve state schools. And your claim that smashing a bunch of private school families into state schools will automatically make them into stalwart state education advocates and somehow "level-up" the weaker state schools, doesn't hold water. They''ll be like other UK parents, or more so - they'll buy catchment areas, VAT-free tutoring (probably in the grey economy), and (I repeat themselves) LOL when their children get treated as less-privileged for uni entry.

If anyone was ambitious enough to tackle all the things required to copy Finnish education, that would at least be interesting....but they're not.

@MisterChips

Your definition of low income probably doesn't match mine. They have thresholds and deductibles making the income at which income tax is paid higher than the UK. They also get back much more for their tax. Apology accepted. As for your other rants, I don't care. Education in this country has been ruined to appease those who like seeing their kids in blazers and are happy to see the de facto privatisation of schools via the academy programme. Our curriculum is useless and the co-curricular opportunities offered by the private sector are as good a reason as any to send your kids private if you can afford it. There are ways around better off parents buying their way into the better state schools and catchments but I'm sure you're not interested in that.

You stated that

“fee paying schools can't deliver state sanctioned qualifications”. This is incorrect. See my link above.

You also stated that “There are no fees paid for any schools delivering education from pre-school to university.” This is also incorrect.

This isn’t “nitpicking”, as you describe it. It is pointing out that your statements phrased as fact are incorrect.

Sorry, I went for "low income" as 2/3 of median earnings because (1) that's the example presented on the OECD pages (2) it's the level used by the OECD to denote relative poverty (3) it's not far off the 60% level used by the Joseph Rowntree foundation. I also referred to "middle earners" at the outset, being the median income of £40-45k. What levels would you like to use?

The figures I presented are net of all deductibles, thresholds and allowances. I don't owe you an apology, you do because you called me "disingenuous" and it was trivially easy to prove myself right.

I completely agree the Finns get "much more" for their tax. That was precisely my point a few posts up. I'm not sure what you think your "gotcha" moment was there...?

Finnish state schools are better on average and at the lower end than UK ones. UK top state schools are exceptional, which is why we know it's unreasonable to expect affluent people magickly to improve the rest of them in ways other affluent people don't do today. That's precisely my point: if you want to say "let's be more like Finland" then make that argument. But you have to get there by taxing everyone, resolving numerous social issues that the UK Progressive Left prefers to ignore, and transforming the effectiveness of the state. That's levelling-up, and it's not what taxing education will achieve, noting that Finland, like every other country in the world, doesn't tax education.

And since you objected to my casting aspersions on your integrity (I didn't) and making assumptions about your politics (I didn't), perhaps you might kindly reflect on "ways around better off parents buying their way into the better state schools and catchments but I'm sure you're not interested in that." Is that "making assumptions about my politics"?

@MisterChips

I'll concede that my original comment about valuing state education was flippant and I shouldn't even have said, 'perhaps' because it is clear that our culture doesn't allow for shared ideals. I said you were disingenuous because you made a false equivalence between the private school sector in the UK and that in Finland. International schools and adult education are not comparable to a whole network of schools and, in some cases, universities with an established system of providing education for those that can afford it. It's disingenuous to compare the two based on whether fees are taxable as you cannot charge fees for a Finnish education. With regard to income, low earners in the UK pay tax, I don't know why you think they don't. As for politics, you've criticised, 'the progressive left' as if I'd claimed any affiliation with them. I haven't, but I will say that, certainly in terms of curriculum provision and lifelong learning, we were making progress prior to 2010 and Gove's destruction of the sector. If you're going to respond as you have before, by focusing on one aspect of what I've posted and ignoring others, such as my main point about social and economic equity, don't bother.

Jeez

"I said you were disingenuous because you made a false equivalence between the private school sector in the UK and that in Finland. " No you didn't! you said the following

"Another disingenuous claim you've made twice refers to low income earners in Finland paying high tax. In practice, low earners don't pay any income tax and their thresholds for lower incomes are higher than ours"...and it's been trivially easy to show you were "mistaken"; I've been polite enough to desist from more derogatory language.

"It's disingenuous to compare the two based on whether fees are taxable as you cannot charge fees for a Finnish education. " No it's not, and yes you can, I've even provided a school website with VAT-free fees.

"With regard to income, low earners in the UK pay tax, I don't know why you think they don't." Where on earth did you get that from? I just provided you with worked examples of how low earners (67pc of median income) in the UK pay tax!!!!!!!!!!!!! but significantly less than Finland.

"As for politics, you've criticised, 'the progressive left' as if I'd claimed any affiliation with them." I never said you claimed affiliation. What I did say is if you want for advocate for Finnish education, do so, but don't, like the progressive left, make a "false comparison" (the irony) between UK and Finland unless you're willing to embrace everything about Finnish society and economy, which means taxing lower and middle-earners.

"If you're going to respond as you have before, by focusing on one aspect of what I've posted". This post has seven aspects. the previous posts had five, and four respectively.

"ignoring others, such as my main point about social and economic equity, don't bother." I'm looking forward to you actually engaging, once, on my "main point" (to remind you): you can't reasonably assume private school parents forced to switch to state schools suddenly display massive pro-state school system behaviours which are completely different from other affluent families' behaviours in state schools today.

@MisterChips

"I'm looking forward to you actually engaging, once, on my "main point" (to remind you): you can't reasonably assume private school parents forced to switch to state schools suddenly display massive pro-state school system behaviours which are completely different from other affluent families' behaviours in state schools today."

My last post:

"I'll concede that my original comment about valuing state education was flippant and I shouldn't even have said, 'perhaps' because it is clear that our culture doesn't allow for shared ideals."

'Jeez' indeed.

My daughter left a private school last year and after speech day I somehow got into conversation with the chairman of the governors. He told me that the school knew for a fact that a large number of parents would not be able to afford the VAT increase and the school’s best chance of survival was if the other local private schools closed so they could “mop up” the displaced students and become “the last private school standing” in the area. Their strategy so far has been to increase the student roll as far as possible by becoming less selective - taking students who would otherwise have gone to the traditionally less academic local private schools. (This particularly applies to the 6th form which has swelled massively in the last couple of years.) These extra numbers would act as “padding” when the numbers started to drop off, he said. Delightful, isn’t it? So, if you’re considering going private: be very careful what school you choose.

@MisterChips

I am sure it has occurred to you that you are receiving in response only absurd ideological soundbites. In the interest of not "focusing on one aspect of what [Hobbi] posted and ignoring others", these are some of my favourites:

The elite will start to care about state provision if some of them have to consider using it.

Inequality in society creates poor education outcomes, not vice versa.

The myth that education is a driver of social mobility. This is, as I said, a category error and the very notion of social mobility is equally unhelpful.

The thought of actually levelling up horrifies certain types.

Education in this country has been ruined to appease those who like seeing their kids in blazers

It is clear that our culture doesn't allow for shared ideals.

In terms of curriculum provision and lifelong learning, we were making progress prior to 2010 and Gove's destruction of the sector.

If I were you I would call it a day. As an aside, following on from the hilarious notion that state educated students at Oxbridge had an underpriveleged secondary education that justified a lower bar for entry, internal research on their subsequent progress is a sidesplitter:

Analysis of student characteristics and attainment outcomes at the University of Cambridge. Dr Ekaterina Samoylova and Dr Laura Hall Academic and Financial Planning and Analysis April 2020.

I'm afraid that's just the market at work. One of the few actual "privileges" of private schools. They are free to expand and contract in response to demand; the flip side of which is they have to respond to demand.

What your anecdote does reinforce though, is what Bridget Phillipson claims won't happen: significant numbers of kids expected to leave; schools expected to close.

@MisterChips

So the proposed VAT on private school fees has been estimated by the Institute of Fiscal Studies (IFS) to raise £1.6 billion per year.

The IFS also estimated that this would cause 7% of private school pupils to leave and join state schools at an additional cost of £400 million.

However the IFS analysis did not take into account the general increase in the cost of living for example increases in energy bills etc. So there are many families for whom the 20% VAT would be the tipping point especially as it comes in one hit.

Also what has not been analysed by IFS is the drop in new pupils joining the private sector. So whilst many parents will try to keep their children already at private school there, for many they will not start out on that journey with younger children.

Of course this comes back to what is the actual objective of taxing private education. Is it to punish rich people and the perceived unfairness of paying for education or is it to raise money?

You're dead right on the last point. Labour say this is a pragmatic revenue-raiser. But nobody really believes it raises serious money and nobody is making a serious attempt to justify it with cost/benefit analysis.

As we can see on these pages, the real advocates of taxing education are motivated by punishing private school parents specifically (not "the rich" because there are better ways to tax "the rich" that could include people using state schools and people without children); it's about anger and envy and never mind the harm caused.

As you say, the only consequence the IFS explored was the cost of absorption into the state sector. There are lots of things they omitted:

1. Loss of strong social benefit when private sector invests in education
2. Loss of jobs in private sector
3. Impact on higher earners' motivation to work and pay higher rate taxes (if they start receiving schools fees free at taxpayers' expense)
4. International examples (obviously, there aren't many, because no country in the world taxes education; but there's Greece which I wrote about here; comments welcome please subsribe/share etc)
5. Comparison with other (less risky / less harmful / less divisive) ways to raise revenue if you want £1.5bn to spend on state schools
6. Impact on state schools when the competition for "good" state school places intensifies.
7. Competitive distortion when you tax identical services (tutoring, childcare) differently just because of different settings
8. (related to 7) colossal challenges of implementation, avoidance and enforcement

In making their estimates, the IFS relies heavily on historical evidence of demand. "the rich will pay they always do" etc. Speaking as an economist, this is rubbish. You can't extrapolate demand. You can't say "because you accepted a price hike from 10 to 11, therefore I can assume you'll accept a price hike from 14 to 15, let alone from 14 to 20". But that's exactly what the IFS do - this is an A-level fail as I cover in more detail here (please subscribe/share etc.)

To be fair to them their paper says the evidence is "old, thin and sparse" and there are risks and uncertainties. To be critical again, they don't see fit to mention any of the risks and uncertainties in their press releases; they're happy to keep it simple so it gets read as "this will happen" rather than "we don't really know what will happen".