Private schools to go bust in the coming recession

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The mother of all recessions is coming in my view. The world economy is pushing towards a large scale and deep debt crises. This follows the explosion of government deficits, borrowing, and leverage in recent decades and now that debt is growing due to high interests. Governments are in eye watering debt, individuals are in debt and so are private schools.
In the last 5 years private schools have been on spending sprees with new builds and new facilities mostly for marketing appeal rather than need. But it’s all been funded on debt. I work for a building service solution company and the number of private schools in the last 5 years have exploded on our books all funded by debt.

I know of one boarding school now in trouble and they have sold off their build and it will be converted to flats.

Be careful folks out there. Times are not as good as these schools portray.

Yes, they are subsidised, i.e. made exempt from VAT, for various reasons. But most of those things are more essential than private education, obviously (flights imo should lose the subsidy).

The latest is sanitary products. The VAT used to go to the treasury, now it does not and the consumer pays a lower price.

All governments choose what to make exempt from tax, the impact of which subsidises either the company or the individual.

Thanks for your views - for all is worth, I see them as the same (private providers complementing the public provision) although, as you say, people do not see it as 'as dreadful' (whatever 'dreadful might mean). I was indeed pointing to the inconsistency of arguments - I have seen many instances of people using private health providers for their family to avoid 'inconvenience of waiting' whilst, in the same breadth stating that all private schools should close down!

No one is suggesting private school should be scrapped.

They should just be free market, not subsidised by way of VAT exemption.

Exactly. I can’t understand the logic of saying that private schools are subsidised by the state. They don’t cost the state anything. Each pupil at private school actually saves the government several thousand pounds a year.

But what VAT exemption are you talking about? Private schools pay VAT. Do you mean the fact that all educational services are exempt for VAT?

All of those services don’t incur vat. Once you start charging it for private school it makes the rest targets

FFS they are not 'subsidised'. They are not costing the state any money - if anything, they are providing a benefit by the state not having to provide education for those who are in the private sector.

EU law states all education is VAT exempt. Private schools are providing education and therefore fall into this category. If they are to start charging VAT and use the premise it is a luxury, then where to draw the line with things like afterschool clubs, tutoring, wraparound care and many other educational add-ons parents use.

Do you consider fresh food to be 'subsidised' by the government because it does not attract VAT? Not attracting VAT due to the nature of the good/service is not the same as a subsidy

It is fair that people who are in a low income or other priority group (disability, SEN) should have additional resources directed towards their education.

The fact some want to prevent additional educational support going to the percentage with the worst educational outcomes in the country is pretty grim.

Agree entirely about all the other investment needed. When there's a lot to do, the best thing is to start.

Out of all the illogical stuff coming out of this policy the ‘subsidy’ one is the most irritating

The fact some want to prevent additional educational support going to the percentage with the worst educational outcomes in the country is pretty grim

@MidnightOnceMore, care to explain exactly who is preventing educational support going to those with the worst outcomes? Absolutely no-one disagrees that education needs more funding and the gap between rich and poor is widening. Charging VAT on school fees for the very small minority will not raise a drop in the ocean of what is required to address this issue. In the long term, it will cost the government a lot more money. And that is something they need to open their eyes to

When there's a lot to do, the best thing is to start

By ensuring some independents close and more children than usual are tipped into the state system? How will that help? You're just going to overnight increase house prices in close proximity to schools widely regarded as good. You're going to put some kids with additional needs into the state sector where they will struggle and potentially impact other people's learning.

And you open a can of worms that will potentially be VAT on all kinds of education, university through to nursery.

The starting point should be recognising that the system is broken. And no one seems prepared to admit that.

I love how out of touch some posters are about politicians!

You do realise that (as with the general population) MPs come from all walks of life. Most that were elected recently went to state school and send their kids to state school.

Such an old fashioned trope!

What is clear is the small group of parents who currently benefit from 0% VAT on school fees would prefer their fees stay lower than the VAT that could be raised be used to benefit priority groups in the state sector.

I understand this self interest. It is logical to want to keep your money for yourself. I am not thrilled when my own costs go up.

What I notice, on all these threads, is the VAT increase is both:
a) going to result in both huge price increases for families and
b) going to raise almost no money

I guess we'll see how it goes if enacted. Politics is what it is, not every policy survives. I think it is the correct thing to do, I think VAT should be levied on private school fees.

It’s both because many will switch sector.

I’m not even self interested on this we use state, I just can’t bear illogical conclusions and poor ideological policy.

It will also damage the sector, as any 20% increase would.

“By ensuring some independents close and more children than usual are tipped into the state system? How will that help? You're just going to overnight increase house prices in close proximity to schools widely regarded as good. You're going to put some kids with additional needs into the state sector where they will struggle and potentially impact other people's learning. “

When the Labour Party originally got rid of most grammar schools, the far left said clearly that they need to abolish private schools. Because they did not do that, the abolition of most grammar schools directly led to a massive boom in private education.

The Labour Party can only implement this VAT policy on private schools if in parallel, they make sure they address the injustice of a catchment based system. At least, amend the Admissions Code to make sure all schools have to give priority to DCs with significant SEN and pupil premium and free school meals. Otherwise the policy is a farce and the cash will move from private schools into catchment areas and it will translate to zero tax take long term but actually cost money and house price increases are exempt from CGT. All disadvantaged kids should automatically be able to get into the best schools. It is quite easy to implement too - it becomes mandatory for every school to have to take up to 20 per cent of children with the disadvantage rating. Done.

It is an ideology based policy not a cash driven one so at least make sure it actually translates to something in the real world.

MidnightOnceMore surely you can see that if lots of people leave the private sector it will simultaneously be expensive for the families that remain AND increase the cost for the state that now has to fund their education. There is a tipping point at which the cost to the state in educating increasing numbers is greater than the revenue raised by the tax. Whether that tipping point is reached is the crux of the question of whether the tax will work.

Like the PP my main concern is that the way this policy is being persued does not reflect well on Labour. It looks ill thought out and ideaological. I would be more convinced if they said this was an aim and that they would be doing the ground work on when they are in government. Saying that they will do it immediately but admitting that they've done no work on it and have no contingency plans looks extremely poor. It seems vindictive to do so immediately when it has the potential to disrupt so many children at crucial stages in their education.

I guess we'll see if enacted.

Private school parents should just be honest about caring about their own kids and bank balances, as is understandable, but also understand it is logical the rest of the electorate are not going to prioritise that group.

“Private school parents should just be honest about caring about their own kids and bank balances, as is understandable, but also understand it is logical the rest of the electorate are not going to prioritise that group.”

I do not think it is as simple as that. It is a pretty emotive subject for many private schools parents I have directly spoken to as it is not just about cash, it is about principle and feeling directly attacked, undervalued etc. It also creates worries for the 1 in 6 or 7 teachers in the private sector.

I live in an area of London close to significant teaching hospitals so a lot of the families on my street are double consultant doctor couples with DCs in private schools. They are really upset as they only just about make the fees. A few are Asian and I think they will move abroad, that is really not just another cliche. It is a fact on the ground. Remember they are already subject to being foreign and have the Covid trauma and now this.

They've been explicit to give clarity to the sector presumably.

The numbers touted as leaving are being talked up by self-interested private school parents and lobby groups. I understand why the affected parents/schools want to keep their costs low, but they're not unbiased sources of info.

The IFS are independent, their research is much less apocalyptic.

Anyway, I'm not the spokesperson for the policy, I just think it's fair enough to pay VAT on non-essential services.

And by “subject to being foreign” I mean the direct increase in xenophobia that is clearly documented post Brexit.

presumably if schools lose their charitable status they'll lose their 80% business rates reduction, i don't see this being mentioned anywhere - does anyone know if that will be the case?

No it’s just a really poor policy to paper over the fact there is no extra funding.

That’s it. And it is a really bad idea.

I want better policies than the grubby end of appealing to bringing dc down. It’s maddening and my bank balance won’t be impacted.

Charitable status is staying, it’s just VAT

@Handsnotwands - it is too complicated legally to strip private schools of charitable status. So only the VAT policy is still on the table. So that is 20 per cent of VAT on school fees. But there is a lot of uncertainty of whether it will apply to extras such as school trips. I mean how can it apply to private school trips but not state school ones etc and also if private schools will narrow their offerings subject to VAT and buy in small outside provider services more (under the VAT threshold) for extras. That may lead to staff redundancies. Also, the private schools may all leave the teacher pension scheme overnight to cut costs which could have terrible ramifications for Central Government because in percentage terms the amount of private school teaching staff is high.

They're no longer going to lose charitable status.

I am not sure what is happening about business rates? Private schools in Scotland already pay those.