Any other Heads publicly worrying about VAT?

[JustanotherBerkshiremum]

DCs at an independent school. The Head is obsessed by the proposed VAT implementation. Since October he has raised this issue in all public correspondence, ie newsletters, the school magazine and the end of term letter.

Are any other Heads out there publicly worrying about the future to their parents or is it just ours? You don’t need to name the school.

I get that it’s an issue but the school can finally claim back VAT. And if they get decent tax advice then they can cushion it a bit more. And it will only happen after the next election if (because nothing set in stone) Labour get in which is two years away.

I’d rather the Head kept his thoughts to himself at the moment. Am I being too harsh?

Meanwhile, back in the private sector, a school I know well had a ‘giving tree’ where to get a gold leaf, you needed to donate £10,000 (a mere £1,000 for a silver leaf). The millions raised (in total it was millions) went towards yet another flashy building designed by a famous architect.

While I am sure such schools exist, it is also true that vast majority of independent schools are not in a position to raise millions from parents, nor do they have 'flashy building designed by a famous architect'

I visited around 10 independent schools in London two years ago when my daughter was doing eleven plus. DD now goes to one such school. The schools I visited are nothing like the one you described. None of them had flashy buildings designed by famous architects or anything like the kind of funds mentioned (I read their financial report available in charity commission website). Bulk of their annual revenue was spent on wages.

But plural of anecdeote is not data. My experience of those ten or so schools is not representative of the entire private sector. Just like your experience of that one school with a 'giving tree' is not representative of the entire sector. Choosing extreme outliers to describe a sector does not help the debate.

Part of the problem within the state sector is the opting out of a large section of the middle classes who could, if they got involved, make a transformative difference to them.

Opponents of private schools frequently say this, but my experience is quite the opposite.

DD went to a state primary that switched between Ofsted rating 'Inadequate' and 'Requires Improvement' for the seven years she was in. For most of that time we and several other parents we know had serious cocerns about very low academic ambition of the school. We could do absolutely nothing about it. I have never felt more powerless in my adult life than when dealing with the school. Then came Covid and the appalling teaching during lockdown finally convinced us to go private for senior school.

This idea that pushy middle classes can 'make a transformative difference' to schools is not realistic.

Schools, like any large government institutions immune from competition, are resistant to change and have an inertia of their own. Only those with power over them can force them to change and improve.

Parents, middle class or not, can make no difference whatsoever, beause the worse we can do is take our children elsewhere, which for a state school is of no significance.

But also thinking about it, a desire/request for former private school parents to donate money for the school they are at is double standards in the extreme.

paying - transferring funds in exchange for private education - giving my own child (and those also there by bursary) a better education experience - apparently terrible to do so

when say we will move to state, above thread says sure we’ll be happy to donate to the school where we’ll be - giving my own child and those also there a better educational experience - entirely desirable and it would be unreasonable of us not to do so having done the above previously

same transfer of funds from my account - one under a contract and one as a voluntary act . Different views on desirability of it apparently.

I have a meeting with our Labour candidate next week to discuss this. FYI he knows nothing more than the OFS report so what does that tell you?
If anyone is genuinely worried then I suggest you contact your local Labour candidate for a conversation ASAP, this is the only way they will listen.

Of course this wouldn’t happen, and you know that. You are saying this to be inflammatory.
The parents will spend their own hard earned money on themselves- for their kids tutors, for extracurriculars, holidays, paying off mortgages earlier.

in private education , they were giving money in exchange for the service.
Using a state school involves that service funded by government.
Of course they’ll keep their money but may give £10 a month to the school fund.

Hadn’t seen any analysis but a PP mentioned Institute of Fiscal Studies: they estimate that the change would only slightly reduce the number of fee paying pupils in the short term -3-7% https://ifs.org.uk/news/removing-tax-exemptions-private-schools-likely-have-little-effect-numbers-private-sector

IIFS argue that fee payers accepted high inflation in the last 20 years and don’t want to move DC within a phase of education or to treat siblings differently. But that the reduction in fee paying pupils could be more in the longer term; and that evidence evidence on determinants of demand for private schooling is limited.

I suspect that with other economic events the numbers moving may be more, even in the short term.

In the webinar Bridget Phillipson said that that was the research they were basing their policy on. It sounds as if they haven’t done their own research.

Well that’s one paper - which itself says there is very limited evidence. It uses an elasticity analysis done back in 2010. The paper is clear about the limits of its ability to research this. Shame that those using it didn’t read it properly. For example it says that schools are generally operating on a 3% surplus. Starmer suggests it’s 20% if he’s expecting schools not to pass on the vat costs.

That doesn't really happen.

What does happen is that those parents fund extras outside school and they will be the ones signing up for the skiing trips, French trips and if child is lagging in a subject then they'll pay for outside tutoring.

I know a lot of parents who remortgaged to afford school fees, or who aren't paying into pension pots. So fee money will go towards those instead.

DD's comprehensive has some 'household name' parents but nobody is giving thousands or even hundreds a year to the school. Other than trips, I've never even been asked to donate to anything.

Why does everyone get so irate about private education, but not about private healthcare (which is currently also VAT-free)? Arguably, there's more at stake (ie your life) if you can pay for private healthcare but you don't see anyone campaigning for greater taxation of that.

Yup. And there’s an option just to use state for that too. Same for dentistry. May not get what you want, where you want it but in theory there is a service there.

Parents didn't complain as much about the TPS change because that merely raised the actual cost of providing the service. If, hypothetically, Labour were to raise teachers' wages in the state sector by 69%, that would force independent schools to match and, therefore, raise tuitions, but you wouldn't be getting the same complaints.

a one off increase due to VAT is considered shocking

You might get slightly fewer complaints if the change were phased in over, say, 5 years. An analogy can be drawn with the increase to the state pension age: it has to be done, but it would be kind of harsh to say that someone will have to work five more years before they can receive a pension because they were born one day later.

Won’t the really wealthy just pay using a fees -in-advance scheme, thereby avoiding future tax charge? Can VAT be retroactively applied?

1. Extra giving at private schools is not spread evenly among parents (or alumni). A small fraction give most of the funds. And the ones who can afford to give the large sums are the least likely to move to the state sector.

2. Even amongst the private school parents who give smaller amounts, one of the incentives is that many or most of the other parents are giving something as well, so your giving has a larger benefit for your child. If, in a hypothetical scenario, half the parents at an independent school give £100 and half give nothing, the givers' children benefit from an average of £50 of extra resources. If, in another hypothetical scenario, 1% of the parents at a state school give £100 and the rest give nothing (and many posters have pointed out how the migration is estimated to add no more than 1% to state school rolls), the givers' kids would benefit from an average of £1 of extra resources.

3. To mashup two PP, "back in the real world" "when we move to state, my focus will be on supporting my kids"

Most schools don’t do this, if they do they expect you to pay the difference each year so you may as well hold onto your money

Correction - they didn’t do this previously.

I would expect they are all currently sorting out such payment methods as we speak!

That is precisely what will happen and is something which some parents are already considering. It can work depending on how the fees are charged and how the invoice is set out.

This is something I can’t get my head around. People don’t seem to think there’s a problem with the wealthier being able to access earlier cancer treatment and better drugs for example. Apparently that doesn’t make an individual privileged or improve their life chances……

It's taking a gamble isn't it. Say the school closes will you get the tens of thousands you've paid in advance back. How would it work if a child got expelled? What if child is unhappy and you want to change schools. Lots of things to consider.

Yes our school has offered for years the ability to pay 7 years up front which of course is attractive to fee paying grandparents. It’s inflation proof as well. So I agree that the only ones left will be the thoroughly solvent and not the people who are paying out of a combo of in income / remortgaging and reducing pension payments like us.

There is a lot to consider and I’m sure many schools are already looking into it. Different schools run different schemes at the moment - some entitle you to refunds if your child leaves.

Yes it is a gamble in circumstances where a number of smaller/less flush schools are expected to fold.
I discussed it with a tax partner this morning and he reckoned if a lot of parents did try to avoid the VAT by paying up front before it’s introduced, that a Labour gov would legislate to close the loophole.

I suspect that schools are taking legal advice on how to structure it carefully. In any case, whatever happens, the potential cost to the government of legal challenges is huge.

Won’t this mean VAT will next be charged on uni fees?