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

Yes maybe. A family member who is a fellow at an Oxford college spends a lot of her time dealing with over supported public school boys who crumble with self directed study when their scaffolding is taken away.

Still it is galling to see your child struggling when the private school cohort have their NEAs all submitted much earlier and they have received far more teacher input into those NEAs. Hey ho character building I guess!

It’s a legal requirement to educate your child, not a choice. For many, the state alternative has failed them. Spending your money on educating your children is hardly the same as deciding to spend your money on a pair of designer shoes or a trip to a fancy restaurant.

There seems little logic in taxing a single family thousands of pounds more a year on a basic human right like education, rather than adding a few more pounds on purchase of luxury clothes for example, which would raise a huge amount more tax.

Don't even go there. I work with children who not only have additional needs but are living in the poorest 5% of postcodes in the uk. For them- no matter what their parents did, they would NEVER be able to go to a private school. Also the idea that private schools some how cater better for children with real, genuine additional needs is so insulting to staff in the state sector.

1% generic increase in VAT would also have a potentially negative impact on sectors that generally have the lowest paid workers, such as hospitality, leading to businesses closing, redundancies and lower wages keeping the poorest poor.

And this is precisely why we need policies which help the state sector in a meaningful way, not the current proposal.

Unfortunately a 20% hike in school fees will affect these industries too. Parents who suddenly have to find thousands of pounds more a year are very likely to cut back on spending on things like eating out.

Only 4% of children are in private schools and sure when they all return to the state sector the parents will have buckets more to spend eating out 😜

Russian students don't go home each holiday. They have a professional guardian who looks after them in the UK.

And the only reason there aren't more Chinese students in UK schools is that the schools realise it's off-putting for UK students.

There’s actually 20% of sixth formers in private education. Overall, it’s 7%. Nothing like the figure you’ve stated.

As I’ve said before, the shift to state is likely to happen at natural transition points (4,11,16). Those already in the system will struggle through until then by making cutbacks in other areas of their life.

It's utterly beyond me why we are still issuing visas to citizens of a country that we are effectively at war with.

Charities have to prove a public good, if private schools can provide ample evidence of this they can remain charities. Unfortunately most so call private school charities provide services to the wealthy not a public good, they are businesses pure and simple. It's pure speculation at present how the legislation will be written so we simply don't know what the exemptions will be. I would also add that if you are a business you can claim back vat paid so the net cost to schools of the changes would not be 20%!

The charitable status and VAT position are entirely separate.

That's interesting. I recall reading some research from and about Oxford which appeared to indicate that the school a student attended had no bearing on their degree grade.

Some Russian students do go home each holiday. The decline in the number of Chinese students is more to do with changes in Chinese government policy, particularly around where you can work depending upon which university you attended.

q1 As it says in the Adam Smith paper, income tax, or a "sin tax". I like the following two paragraphs.

If the Exchequer needs money, a conventional approach would be to tax a negative externality. £1.4bn equates to a 3% increase on existing alcohol expenditure, including duty and VAT, of £47bn. Alternatively, if the tax is considered to be a proxy for “taxing the rich”, it would be simpler, less harmful and more effective to “tax the rich”, operating within much smaller margins of extremely well-researched tax levers with existing collection and enforcement mechanisms. £1.4bn is 0.32% of the UK’s £440bn income tax and NIC bill and could be targeted to suit distribution objectives, including contributions from affluent families tending to find the best of state education, if that is indeed the aim. Taxes such as these offer more certain revenue, fewer distortions and fewer avoidance opportunities. Both have the advantage of being well understood by the Treasury and use existing HMRC mechanisms, and are very broadly-based.

Wishing to raise money, few economists would instinctively recommend (1) a new tax offering (2) highly uncertain net revenue potential (3) on a positive externality, that (4) distorts competition and (5) disrupts the education of (in the IFS’ optimistic scenario) some tens of thousands of children, (6) shifting their demand onto a state-obligated supplier; that (7) poses hard-to-quantify risks to the labour supply, value creation and taxes of higher earners, and that (8) requires new legislation, presenting many avoidance opportunities and enforcement challenges and (9) has only one international precedent, said to have caused “general mayhem”.

q2 private schools are and should remain exempt because they deliver education, all of education is exempt from VAT because schools and other providers have social benefit and save ££££s for taxpayers. Part 1 of the above paper lays it out in good detail. And please, just stop saying "subsidised fees". I know it's Labour Party rhetoric but that doesn't mean it's correct. And it's not correct.

The financial crisis is irrelevant. Due to quantitative easing there was little effect on anyone's finances and virtually none on higher earners / asset holders. And, before you ask, I (as an economist) was and remain opposed to quantitative easing and bank bailouts. There's a good subject for you and I to agree on if you're opposed to privilege and the special interests of "the rich".

I went back to my Oxford college for a 4 hour tutorial with my Economics prof, to talk about VAT on education. His account was completely different to yours and was exactly as he described it in the 1990s, when I studied the economics of education and labour markets:

• Oxford dons only want, and have incentives, to recruit the people most likely to get a first or at worst a 2:1 There's maybe 1% of dons that are inveterate snobs and 1% who are Marxists, but 98% play for academic merit
• all of them wanted in the 1990s, when they had near-complete discretion, and still want today, when they have substantial pressure to "conform"... to identify and recruit high-potential but "lower-graded" performers from special measures state schools or whatever
• in his 35-year experience, those "less-obvious" candidates have been way over-index on their tendency to drop out i.e., waste their place. Statistically, they haven't been able to cope with the rigour.
• High-grade candidates from top state schools and top independent schools have performed both to expectation and against each other.
• The only intervention he strongly supported was encouraging as many applicants as possible from across all schools. The "unfair advantage" he observed was that top schools (state and private) were experienced at encouraging the Oxbridge ambition.

My lovely family member is not a don her anecdotal take is that the students that do struggle are either as I described from a top public school who have never had to cope without the support they are used to or at the other end students from deprived state schools for whom the leap is just too great for them to deal with. Most students are absolutely fine that said !

Ah the problem is that you are talking sense from a position of knowledge.
The majority of people are speaking from a gut reaction of "let's take the old boys down a peg or 2".
@Janedoe82 I would be genuinely intetested in your reply to @MisterChips.

I believe Labour are also planning to end business rates exemptionnascwell as imposed vat.

There's a really good chance that the VAT added to private school fees, if passed on to parents, will only widen the privilege gap rather than reduce it. The middle classes, who are stretching themselves financially to pay the fees, will eventually (maybe as intended) put their children into state schools. They may have the funds to 'buy' into areas that have better state schools.

The established wealthy (inherited or newer wealth- it doesn't matter), for whom a 20% increase may not be significant, will continue to send their children to private schools. There will be a reversion to a much darker period in history, where they are the elite, the decision makers of society with far less mediation. A situation may well be created where there is far greater polarisation within society and where the pool of decision-makers and the powerful actually becomes even more elitist. This is based on some of the arguments earlier in the thread that have called out injustices around those attending independent schools being disproportionately in control of many of the mechanisms of society.

@Lonxy so having fewer people going to private school will lead to a more stratified and class-ridden society? This seems...unlikely. If you look at countries where very, very few go to private schools they tend to be much more egalitarian than the UK. Whereas we still have governments that are absolutely infested with old Etonians etc.

I was suggesting that unless independent schools are entirely disbanded, then the introduction of the VAT could potentially create greater polarisation, or a wider gap between the elite and everyone else. Potentially the 'infestation' that you note may become even more pronounced.

Actually it is entirely sensible. The VAT policy won't touch the truly wealthy but will impact massively on more average earners. That means that private schools will become more elitist as time goes on.

Connections open many doors that otherwise would be closed to you.

I would say this reflects the situation most people I speak to who privately educate their children are in.

We have chosen to privately educate our child. Following Covid, a change of circumstances meant that our child is now on a bursary and we also pay fees.

The bursary comes from a charity (not the school) and is decreasing this year, fees are going up (by £160 p/mth) and of course now we have VAT looming - I believe Labour will win the election.

I don’t expect anyone to feel sorry for us, but I am dreading pulling my child out of their school. Dreading the whole thing really. My child going to state school won’t benefit anyone. It won’t close any class gap - we were trying to do that with this private education! The irony…

The extra money - there won’t be much because like I said there is a bursary - I will probably just work less NHS shifts to be honest. That will be the one nice thing.