Private school : VAT : labour

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I have recently come across this petition. Not sure if many of you have seen this.

https://www.change.org/p/stop-labour-from-adding-20-vat-to-private-school-fees-and-forcing-kids-to-change-schools?recruiter=false&utmsource=shareepetition&utmcampaign=psffcomboshareeinitial&utmmedium=whatsapp&utmmcontent=washarecopy376858822en-GB%3Acv451328&recruiteddbyid=44b8f4b0-d22c-11ee-82d6-61cc5900aa84&shareebanditexp=initial-37685882-en-GB

Behind a pay wall- got as far as essentially schools refused to pay it. Plus it is the Torygraph so I can imagine how balanced it is.

The Economist said exactly the same thing. That was also pay-walled but you can read extracts at the back of the Adam Smith paper. "General mayhem", job losses, school closures and burden on the state system.

And, according to The Economist, those outcomes were "unsurprising"

I also wrote about it here.https://mrchips4schools.substack.com/p/not-learning-from-others-mistakes

And if you don't trust me, the Telegraph or The Economist, perhaps it will suffice to know that Greece doesn't do it any more.

Fortunately the Prime Minister has published his tax return, so we do know for sure that he at least a) earns millions b) pays a smaller proportion of that income in tax than teacher and nurses do.

https://assets.publishing.service.gov.uk/media/65c641159c5b7f000c951c44/Prime_Minister_Rishi_Sunak_s_schedule_of_taxable_sources_of_income_and_gains_2022_23.pdf

The income element was £432k, on which £163k income tax was due, giving an effective income tax rate of around 38%, far higher than the average worker. The figures are skewed by looking at a capital
gains figure and including that in the “income” calculation. That capital gains tax rate is that which is available to everyone if they make a capital gain.

The capital gains tax situation has changed over the years. Yes, it’s lower than the higher and additional rate of income tax, but experience has shown that the UK had to remain competitive when compared with other countries’ tax rates, or all that happens is that people making large capital gains leave the country (sometimes temporarily) in order to avoid UK CGT altogether. It’s better to have 20% of something than 0%.

Even using the capital gains tax figure (which heavily skews the figures to suit certain agendas), he paid an effective rate of 23%. Take a teacher earning £42k. They pay an effective rate of tax of less than 20%, and that includes the NIC due. On top of that, they will be eligible for things like child benefit, reducing their effective rate of tax even further. So, your comment in part b) of your comment is incorrect.

He still paid over half a million pounds in tax in a single year. If we want to keep the highest rate tax payers in the UK (and we probably do, given that the top 1% pay almost 30% of total income tax receipts), we have to remain competitive with the rest of the world. We cannot expect the top few percent to keep shouldering more of the burden. There comes a point where they say “enough is enough”.

Capital gains tax also comes after corporation tax on income. You're not comparing apples with apples.

Actually that's debatable...corporation tax falls on capital and labour and customers in some mix that varies by industry....but since left-wingers insist strident that corporation tax is paid by "rich companies" we can probably go with it..

What's also true: net present value of future corporation tax reduces the value of capital and therefore of capital gains.

For both reasons Rishi's capital gains tax understates the tax he has paid on his investments.

It's like this: you get taxed on your income. But now you get a pay rise so your NPV future lifetime income increased. Then I charge you 28pc of the increased NPV of your future income before you even start earning it. How do you like that?

There were over a million places in UK state schools in 2023 so I don't think it will overwhelm the state system ( maybe your dc will only get a place in a sink school but 'oh well')
Closure of some private schools will release teachers back into state schools.

What people should pay in tax is never easy to decide. if you put too much of a disincentive on people to work whether they are benefits claimants or mothers almost up to £100k £125k or the child benefit limit then they will work less including NHS consultants. At the moment there has never been such a high tax burden for 70 years in the UK which is likely to be one reason our productivity is low.

Anyway we won't solve that on this thread. I think if we penalise middle class parents for whom the extra VAT will hurt them that could lead to fewer of the can just about afford it families using private schools.

On the cakes issue I meant to say confectionery like chocolate as that has VAT on it as a luxury item - not that seems to make people turn to carrots instead!

maybe your dc will only get a place in a sink school but 'oh well')

Private school parents are extremely unlikely to move their child to a sink school. Many will struggle with fees until the next natural break points of 4/11/16 (by remortgaging etc) and then switch to state. At that point, they’ll be competing with everyone else. Those parents can afford tutors to have a better chance of getting a place at a selective school, and can afford houses in expensive catchments. It’s already happening; grammar heads have warned about this. Taking just one prep school in our area, applications to the nearest grammar have increased a lot this year and last year. Pretty much 100% of children pass the exam without any problems. Those children have now taken the place of someone else who could have gone. It’s not the private school children who will end up at a sink comp. It will push poorer families out even more.

Closure of some private schools will release teachers back into state schools.

Many private school teachers would not choose to return to the state sector. Even existing state school teachers are leaving in droves, such are the conditions in many schools. Those teachers are more likely to retire early or switch careers. In any case, what about non teaching staff? Cleaners, caterers, grounds people, plumbers? Shouldn’t we care about them? Many schools are the bedrock of their local economies; there are towns which would be decimated if those schools closed.

Grammar school tests in this area are purely on reasoning ability not classroom learning.After doing 2 practi e papers 80% of improvement is observed and after 5 no further Improvement. A pack of 5 practice papers costs a tenner.A great many private school school students do not make the grade beaten by kids from state schools without outside tutoring.i have 5 such kids!

It would be very easy t o reform the 11+ to make it even harder to tutor for, and to make sure the socio-economic intake reflected the Catchment
Comprehensive school could be decided by lottery, or be each taking a certain percentage fro each strata of society. You are very naive to believe Labour's quest for equity of opportunity will end at abolishing VAT and business rates exemptions.

No private parent I know would put their DC in a sink school, we wouldn't. Instead we would use the money to move to the catchment of good state schools and use tutors.

The grammar school system is bloody awful - as if the intelligence, potential and abilities of a child can be measured in any effective and accurate way through a few exam papers at age 10/11. And the fact that some parents pay for intensive tutoring in the run up says it all!

There's a lot that needs to be reformed in the education system but please let's completely do away with a system that skims off a few kids at age 10/11 on the basis of a few exam papers which they've been hot housed for is ludicrous. It shows a total lack of understanding about how children develop and how abilities are assessed.

https://www.ucl.ac.uk/ioe/news/2018/mar/children-wealthier-families-much-more-likely-secure-grammar-school-places

Families who can afford tutoring are more likely to secure a spot. Is that fair? No. There is nothing so far suggested by the Labour Party that they are going to do anything about that.

Comprehensive school could be decided by lottery

I’ve made this point on previous posts. It’s a much fairer system. I can’t imagine it’ll be particularly popular though so I don’t think they’ll ever propose it. Have the Labour Party proposed this? Many of the supporters of the VAT policy are those which have excellent state schools nearby and assume that the rest the country is the same. I suspect they’ll be the first to complain if their children got allocated an underperforming comp.

You are very naive to believe Labour's quest for equity of opportunity will end at abolishing VAT and business rates exemptions.

I don’t think it will end there. They’ll keep going with their policies to bring everyone down to the same low level. I wouldn’t be surprised if private healthcare will be on their list next. People are naive if they think that the Labour Party won’t try to squeeze even more out of the middle income bracket.

There's no decent state school near me.

Either I or Mrs Chips would ditch our job and home school, costing the public finances around £40k in payroll tax. We'll get by on one income. Pros and cons....we'd be sad to change schooling plans, we'd have to sort socialising, group activities and extracurricular somehow... but we'd have a much less stressful life. Somebody's going to explain how that makes the country a better place or helps the state school system.

"maybe your dc will only get a place in a sink school but 'oh well'". @ageratum1 apart from being one of the nastier remarks I've seen on any of these threads, again I'd love you to explain how putting more people through inadequate education makes the country a better place.

Also, even if there's actually evidence of "a million" places in state schools, (which I doubt, since the IFS paper refers to some hundreds of thousands by 2030, but I'm sure you wouldn't state such an eye-catching figure without knowing what you're talking about)...even the IFS is explicit that nobody can predict where demand will migrate and whether there's any reason to think it will match vacancies.

Today there are definitely vacancies in Cornwall, but that's not much use to the families who struggle to get just one place in Hampshire and Surrey.

I haven’t seen any recent Labour Party comment about this, or about how they plan to tackle the huge inequality across the state system. Some areas have selective schools, which cater for academic children, some don’t. Others are in areas where state funded schools are allowed to discriminate based on religion. It’s an absolute disgrace that vast swathes of the population simply cannot access a good state school.

Most parents aren’t paying for private education for the fun of it; those parents often feel that they have no choice to pay if they want their children to have a good education. It’s unfair that children who aren’t fortunate enough to be in a position where their parents can pay end up with a substandard education. Why no one is suggesting that the state system which serves 94% of children needs reforming is beyond me. They’re focussing on a sector which only 6% uses. VAT on school fees will have no effect on the inequality across the state system.

"Why no one is suggesting that the state system which serves 94% of children needs reforming is beyond me."

That's precisely what I just posted!
I think it needs reforming at a systemic level. But absolutely not in the direction of the grammar school system which purports to cater for the 'most academic' children on the basis of a few tests taken at age 10/11 which most kids seem to be hot housed for. It's not a great measure of intelligence or the potential to develop skills and abilities which will serve them well as fully rounded adults in the workplace. It's just another way of creating an elite.

I totally agree with you that the existing state system needs a huge overhaul. That is nothing to do with the VAT proposal though. The VAT proposal won’t help with that.

I know, I was responding really to the posters who said that if they couldn't afford private they'd move heaven and earth to live somewhere with selective schooling. I agree it's off at a slight tangent, but my point is that the way selective schools work is usually pretty crap imo, certainly if it's the 11+ style cramming for a narrow type of text.

*text = test

There are all sorts of reasons people choose private, and there will be all sorts of responses if they stop being able to afford it.

Some will home school and quit work. Some will be lucky and move to a decent local state school. Some will move house to find a decent state school, which is a deadweight cost when they could be doing something useful with their time. Some will move abroad. Some will find a less expensive private school.

What is "a decent state school" is coloured by what's available. some people might actually want selective. Others might prefer a honeypot catchment area, but that's not going to be easy to find.

But the good state schools will be full unless your child is entering year 7!

Either I or Mrs Chips would ditch our job and home school, costing the public finances around £40k in payroll tax.

The person who fills your job will be paying the same payroll tax.Ypu surely dint imagine you are irreplaceable!!

Last time I remember this being discussed the conclusion that was reached was that will not be necessary because the first person was being hugely overpaid.

It’s more nuanced than that. I’m a high earner and if I didn’t have school fees to pay I’d probably start working a 4 day week. That extra day attracts 45% tax which just disappears. My employer wouldn’t find someone to replace a single day each week.

I’d probably pay even more into a pension which again removes 45% of the additional contributions from the amount of tax I pay.

In short I need about 250k overall for fees which equates to around £1/2m of pre-tax earnings. I simply won’t bother earning and paying tax on that £1/2m if I don’t need it. I could earn it and put it all in a pension and retire earlier than planned. That leaves the Treasury with a 250k shortfall in that time.

The bottom line is that if I decide PS is no longer viable I’ll deprive the Treasury of at least 250k income tax plus the tax payer will have to find 100k to fund a state school place until my DS is 18. It doesn’t take many 350k swings to make the policy a net cost to the taxpayer.

@ageratum1 you really don’t seem to understand the labour market or basic economic principles. I feel like we’ve explained this to you a number of times/ways across threads, and I’m not really sure how to help you. High wage jobs really aren’t operating on a one in one out system.

Or at reception, or sixth form….. Many will struggle through paying fees (perhaps increasing their borrowing) and switch at natural transition points. The effect won’t be immediate, although it’s started happening already in areas with a grammar system. Those who were planning to go private have now taken a state grammar place because of the VAT threat.