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.”

@Marchesman - those figures are quite shocking. My DCs go/went to grammar. Offers at the moment are still good, but they did say that grammars would be next.

It is all part of the anti elite rhetoric that has been going on for a while. I don’t think it will do anything to change the class system in Britain, far from it. It will just drive out some higher earners and economic migrants who came here and contributed loads. Good luck to us British in the future. It is like they want a top elite and a bottom. Nothing in the middle.

NZ fees are subject to goods and services tax. Main state supports are for students with higher learner needs.

https://www.education.govt.nz/school/funding-and-financials/resourcing/private-schools-resourcing-information/#:~:text=We%20provide%20grants%20to%20independent,New%20Zealand%20for%20the%20year.

The state supports on a per pupil basis according to this. Not just those with higher learning needs.

NZ state subsidy is equivalent to about £500 per year for junior pupils and £1000 per year for senior pupils.

https://www.education.govt.nz/our-work/publications/education-circulars/latest-circulars/circular-202309/

The GST pulls in more than is paid out in subsidy.

Indeed, NZ.... It's just a bit of a mouthful to say "no other country but NZ which offsets the VAT with a direct per-pupil subsidy, while also co-investing in private schools' fixed costs."

So unusually, the exception quite literally does prove the rule. NZ recognises the social benefit and taxpayer saving in private education by providing financial support alongside the GST.

not an education tax, state education is available

• A few years ago we had a "pasty tax" debate. I'm sticking with education tax.
• Indeed, the "availability" of state education at a cost of £8-12k is a good reason not to tax the alternative. Especially when, as has been all over the papers, there isn't "availability" in several councils.

Why are PS parents not more critical of the actual private schools for upping the fees so much? Lobby them, not the electorate

• we are, and we do, and it's not obvious why it's suddenly anyone else's business
• however the market dynamics are substantially a feature of a "variable" state system. Independent fees and catchment area house prices started taking off right when both parties closed most grammar schools and when Labour did away with DG and AP schemes.

Plus capex from time to time.

They do $48m of direct subsidy and receive $64m in tax revenue.

And the structure is different - the subsidy is fixed while the GST is obviously variable. So at the more affordable schools it's a wash, while all the net revenue comes from the top-end schools

It just doesn't seem particularly controversial, over there, to observe that the private schools save the state $$$$$$$$$$$$$.

Circular 2023/09 - Private School Subsidy Funding 2024 – Education in New Zealand
Govt can’t afford to stop funding private schools - yet (newsroom.co.nz)
Economic.Contribution.of.Independent.Schools.in.New.Zealand.pdf (martinjenkins.co.nz)

while also co-investing in private schools' fixed costs

Nope - that was a one off Covid funding grant, which by the admission of the guy that pushed it at the time should not have happened.

Nice try.

GST is only 15%, compared with the UK rate of 20%. Whilst it might bring in more than is paid out, it still costs parents a lot less than charging 20% with no state subsidy.

And yet it’s still a sales tax on private education.

You’ve picked pretty much the only country in the whole world which taxes private education. I’m pointing out that it is in no way comparable to the UK proposal.

Take average fees of £15k a year. Labour are proposing tax of around £3k a year, taking fees to around £18k. The equivalent fee using the NZ method would be around £16,100 (deducting the £1k subsidy and taxing at 15%). The extra cost using the model is just over £1k; around one third of the UK proposals. It’s in no way comparable.

Well maybe people will stop saying ‘no country in the world taxes education’ because it’s clearly untrue.

Which is rather why I (and others) have pointed it out.

But the argument was
Lots of countries have private schools.

None of them have an education tax.

It wasn't 'but none of them have a tax on private schools that is an absolute parallel with what we know of the proposed tax in Britain'. So if you want to characterise any tax on private schools as 'education' tax, then it's untrue that there's no tax on private schools anywhere else in the world.

An awful lot of this is immaterial anyway if Labour win their expected landslide seeing as the vast majority of people care far far less about this vat issue than cost of living and other issues.

@quantmum - they may not care now but some may be very angry come 1 March next year when their DC don’t get into their good local secondary or their DC don’t get into the preferred Sixth Form. At the moment there is this huge hope that everything will improve instantly with a new Government. When things then turn sour it won’t be a pretty picture. Just like after Brexit. Tories had a huge victory and now most people hate them.

I imagine most people don't think there'll be instant improvements. We'll have to see fuller details of the proposal in terms of how immediate the effect will be - I know some people hope it will be introduced in a phased way.

If I was a private school parent and was keen to keep sending my child to a specific school, I'd try to engage with the IFS and the school to lobby for specific plans to soften the impact of the tax - for example, increased class sizes, or cutting back on certain sports or facilities.

It doesn’t mean it’s not a bad policy with bad effects

Even if people fall for Labour

@Araminta1003
Comp numbers up year on year, private numbers down, but grammar numbers miraculously hovering unchanged. It looks as though the nomenklatura at Cambridge have been struggling with a dilemma. It guess it depends on whether the problem is framed in terms of state schools vs private schools, or comprehensives vs grammars.

According to left-wing taxonomies, grammar schools are in fact Bastions of Privilege and any right-thinking left-leaning academic should assist in rooting them out. Fortunately for grammar schools, the academics' bête noire is here to stay, and about to become a proper bastion of privilege; unfortunately for grammars, academic high achievers from poorer families leaving or not going into private education will make them more exclusive too. I guess Cambridge's dilemma is not going anywhere. In the meantime their manipulations are bound to contribute to the increasing exodus of such children from private education - which is presumably the point.

One wonders how skewed their results have to get before the good academics of Cambridge make their examinations more "accessible".

https://ifs.org.uk/sites/default/files/output_url_files/BN253-Characteristics-and-Incomes-Of-The-Top-1%252525.pdf

I think there are only 300,000 odd people in the top 1 per cent and their DC will be at private school in most cases. When they introduced the 50% additional rate tax bracket that would have been much cheaper than this tax if those people have 2-3 kids in private schools. Even then they backtracked quickly on that tax because people adjusted their behaviour and they ended up taking in less taxes.
So here you have a tax where they are essentially punishing high earners with DCs and potentially punishing those DCs themselves. What is more many of the parents are not in the 1%, plenty are in the top 5, 10 or even just 20%. So the tax does not make sense. Especially because those are people who can provide a good life for children so should be encouraged to have more kids, not less. Our Governments keep charging these people more and more and cutting all benefits for their DCs.
I think it looks far too punitive so I think there will be massive behavioural consequences and I worry both for our state schools and our income tax take as a result of this policy. I think that is essentially what a lot of people are saying.
I can only deduce from my own situation with DCs in grammar schools. If the Government said tomorrow that they would single my DCs out, I would be incredibly annoyed and adjust my behaviour immediately because it would feel discriminatory and I would just not stand for it. And I think here you are taking on a group with very sharp elbows and their DCs with that so the tiger parents will come out in full force. Therefore, I have concluded it is a really terrible idea. That is why MN is full of this and so is the press. It is just such a crazy anomaly. Not sure they can backtrack at this stage without looking stupid either way. They will win, but this policy needs much further analysis and thought.

@Marchesman - don’t clever private school kids just apply to Oxford instead if their chances there are better?! So Cambridge loses out to its own competitor?

My personal opinion is that the whole Oxbridge admissions system needs a complete rethink and revamp to be school blind like most of the private graduate recruitment sector and to get to underlying ability far more than this strange notion of passion for subject etc and social engineering. It’s not a question of whether you deserve to go there, rather more whether you will go there and thrive in the environment based on your inherent intellect and ability to learn and seize the opportunity. I am not sure how school or family background should have any place in that. Ambition/drive/intellect and ability are far more important, in my opinion.

@Araminta1003
For years that was the case, but Oxford have been closing the gap. I'm not sure there is much to choose between them from a private school's perspective - unless Cambridge still does the stupid pooling thing, from which no privately schooled child has probably ever been plucked.

Much more important to avoid the loony-left colleges in both if you lack the correct social credentials.

Fortunately for grammar schools, the academics' bête noire is here to stay, and about to become a proper bastion of privilege

Yeah but no - because the vast majority of the UK has no access to grammars.

That doesn’t mean it won’t be the case

And it also means that it will only affect a small proportion of children - 163 schools out of over 4000 UK secondaries.

That may be the case @SabrinaThwaite but it doesn’t stop pushy parents moving to grammar areas on purpose, does it. Or campaigning for more annexes.
Look the top 1-10 ambitious lot are going to make sure their DCs are well educated. By whatever means and whatever “show” any Government puts on to stop that, it won’t work. And to make it “personal” against such DC is just plain stupid especially if that is your cash cow and this group has the means and ability to adapt quickly because let’s face it, they are faster/quicker thinking and at the top of the food chain. They won’t be outwitted, the rest of us will be.