Labour plans to add 20% VAT to Private School fees.

OP

You need to factor in that many private schools are planning ahead for the VAT increase, and aren't necessarily going to pass it all on to parents in the first instance. So there will mostly be a gradual rise in fees, not a sudden sharp increase as you're anticipating. Parents with kids in the upper years will probably see them through to the end of their GCSEs and A Levels, so again there won't be a mass exodus.

Fair point, if that’s the case. It would be interesting to see how many private schools don’t immediately vary their fees (much more so than they otherwise would have) following the introduction of this policy.

Also, if they don’t pass on the costs, the cuts would have to come somewhere. It would also be interesting to see where those are. (Unless they’re just holding huge cash reserves to absorb it with).

Reply 21

londonmyst

19

I disagree with Labour's plan.

I believe that all uk based secular schools where the majority of students are under 18 should be 100 tax exempt.
Same for the majority of licenced nurseries and registered childcare facilities that have no ties to any religious charities or groups.

Original post by tazarooni89

1.

I agree it's difficult to forecast. The drop in the number of private school pupils might not be particularly high, but it also might be far higher than we expect. I don't think we've had an equivalent situation take place before that we can compare it to (given that a sudden increase is different from a gradual one). So if nothing else I'd say we're risking a shock to the state sector even if not necessarily causing one.

2.

I don't really understand your point here. I'm not saying that this policy will cause a squeeze on house prices. I'm saying the private pupils who enter the state system will probably be entering the best and most competitive schools to get into rather than the worst ones (because they can afford the higher prices in those areas, can afford 11+ tuition etc.) So the issue I'm raising is more about displacing pupils who could have otherwise gone to better schools and now have to go to less good ones.

3.

The point about scholarships and bursaries isn't intended to be the most significant point here. It accounts for a minority of people attending private schools. However it's still better than nothing, and my point is that without any tax incentive even this will stop.

4.

I would expect private school class sizes to drop because there are fewer pupils, but not necessarily less funding per pupil (because the people who remain in private schools are those who can afford higher fees and maintain the same funding per pupil). I wasn't aware however, that the numbers of state school pupils are significantly dropping at the moment. Why would that be?

I think we've both made reasonable points, but I also think not everyone will be uniformly affected by this. The impacts we're describing may be more pronounced in some local authorities than others, for example. I don't find it hard to imagine that there will be at least some people ending up far worse off than they are now. The question is really, is there enough benefit to offset that.

(1) Okay, that's fair enough. But there's risk in every policy proposal, including keeping the status quo in place. Still, the expected drop in state school pupils over the next 5-10 years is much much bigger than any realistic drop in private school attendance so I really don't see how this is even risking a shock in state schools. To put it into perspective, between 2023 and 2030, state school pupils numbers are expected to drop by 100k per year (i.e. 700k), this is the same number of pupils as are in the entire private school system. So even if you had a 100% drop out rate from private schools over this period (which is completely over the top but just as an example), this would simply keep state school pupil numbers static.

(2) Sure, it's certainly an argument with merit in my opinion. I think the trade-off is that one of the reasons why there are poor quality schools is that certain groups don't have to send their kids to state schools, and therefore there's little political motivation for politicians to actually funnel enough money into them. But I think the issue of displacing certain pupils in the state sector is more of a moral issue really rather than a pragmatic one, but the distributional outcomes are still important. I just find it odd to make a distributional argument to keep a system that largely benefits just one part of the income distribution...

(3) Bursaries and scholarships don't just account for a minority of private school pupils, they account for barely any. And I see little merit in saying that because 1% of students of scholarship, this therefore underpins part of the argument why the private sector should get a massive tax break? I assume you wouldn't be in favour of putting VAT on all fees and using part of the revenue to just pay the private school fees for those who would've originally gotten scholarships, so it's not really about whether that 1% benefit or not is it?

(4) Again, private school class sizes would definitely not drop in the case haha. For example, if you had 100 pupils across 5 classes of 20, if the number of pupils drops to 80, you wouldn't have it so there's 5 classes of 16.... That would be ridiculous. You'd either just have 4 classes per year with 20, or because of the additional cost to the schools of the VAT (unlikely to pass 100% on, especially immediately), you might actually have 3 classes with 26 give or take. But this is just an abstract example, but I really don't understand why you think an extra cost burden means schools will respond by having a higher teacher to student ratio, if anything the opposite would happen. On state school pupils numbers are dropping, I'll refer to my above answer on the magnitude, which is pretty stark. For why, I'm sure you can Google it and there's probably many factors, but it's essentially a massive fall in the birth rate for various reasons.

(5) I completely agree, the impacts will vary across geographies, classes, ethnicities, and so on. But this is of course the case with any national policy, it's not like there's a tonne of policies out there that are mutually beneficial for everyone and we haven't done them yet. And given such a small percentage of households with kids send their kids to private, let alone households who are on middle incomes (as my previous post pointed out), I'm not sure they'll be a tonne of sympathy from broader society, especially given it's essentially a luxury service that people can choose.

Regarding whether there's enough benefit to make it worth it, this naturally just depends on what you as an individual value in society. Personally I value giving everyone a fairer crack of the whip when it comes to education as I'm quite a meritocratic person so it's about equality of opportunities, others are more than welcome to disagree if they value different things. In terms of the actual financials, the IFS (a reasonable body to take analysis from) find that combining estimated tax revenues and extra public spending needs on state education yields a £1.3-1.5bn boost to the medium term public finances, so it's positive but not huge.

(edited 2 months ago)

Reply 23

summerbummer

2

Original post by tazarooni89

I'm curious to know what people's thoughts are on TSR, about Labour's plans to start charging 20% VAT on private school fees. The idea is that this additional revenue would be invested into the state sector to improve the quality of schooling there.

At face value, it looks like a typical "tax the rich and spend it on the public good" sort of policy, but to me it looks like it's actually a plan that would harm the state sector, state educated pupils, and less wealthy people in general rather than helping them. For a few reasons:

1.

Fewer people will be able to afford to go to private school. They will need to go to state schools instead, which will increase the burden on those schools (many of which are already overpopulated). At present, private school parents help the state sector by paying tax towards it but not using it, but this would reduce.

2.

The students who would otherwise be going to private school are likely to be ahead of the competition in terms access to the best state schools (e.g. they can typically afford to buy houses in more expensive areas, tuition for 11+ exams etc.) which will make it more difficult for other students to access the best state schools.

3.

Private schools will no longer provide as many scholarships and bursaries to those who otherwise couldn't afford to go, nor will they do as much to help their local student communities. It will become less affordable to them, and they won't even need to in order to maintain their charitable status (as they no longer get a VAT exemption for it).

4.

Private school class sizes will reduce, whilst state school class sizes will increase, affecting the quality of teaching at both and increasing the gap between the two.

To me, this seems to limit people's access to the best education even more than it already is. But curious to hear your thoughts.

Unsure why people think private school automatically means your parents are 1% elitist aristocrats. My parents make less than £90k collectively a year. My dad is literally a dustman. They just work hard - it's not impossible.

Private school education is undeniably 10x better than that of state-school and that's just a fact.

Meritocracy, people... meritocracy...

Reply 24

TheStupidMoon

13

Original post by PQ

Good

I’d rather it was 100% or a complete ban. And a full removal of HMRC charitable status.

Do the same to universities because the arguments against public schools also applies to them.

Reply 25

PQ

Clearing and Applications Advisor

21

Original post by TheStupidMoon

Do the same to universities because the arguments against public schools also applies to them.

There’s a subsidised national loan scheme and additional funding provided directly to schools for high cost subjects for private school fees?

Reply 26

PQ

Clearing and Applications Advisor

21

Original post by summerbummer

Unsure why people think private school automatically means your parents are 1% elitist aristocrats. My parents make less than £90k collectively a year. My dad is literally a dustman. They just work hard - it's not impossible.

Private school education is undeniably 10x better than that of state-school and that's just a fact.

Meritocracy, people... meritocracy...

What do you think the median household income is in the UK?

(edited 2 months ago)

Reply 27

Muttley79

20

Original post by summerbummer

Unsure why people think private school automatically means your parents are 1% elitist aristocrats. My parents make less than £90k collectively a year. My dad is literally a dustman. They just work hard - it's not impossible.

Private school education is undeniably 10x better than that of state-school and that's just a fact.

Meritocracy, people... meritocracy...

So why does the outstanding state school where I teach get better GCSE and A levels results than most fee-paying schools?
If you check on Ofsted, there are a 100 inadequate Private secondary schools.

Original post by summerbummer

Unsure why people think private school automatically means your parents are 1% elitist aristocrats. My parents make less than £90k collectively a year. My dad is literally a dustman. They just work hard - it's not impossible.

Private school education is undeniably 10x better than that of state-school and that's just a fact.

Meritocracy, people... meritocracy...

^^^ Tell me you don't understand the UK household income distribution without telling me you don't understand the UK household income distribution.... You said below 90k, even if you said 80k, this would put a household in the top 9% of earners. Nobody's saying that everyone thinks only top 1% aristocrats go to private school, but people DO have a massive misunderstanding of how much private school attendance is skewed to the top of the income distribution and what little proportion of attendance middle income households actually make up.

I'm not quite sure I've ever heard of meritocracy being used as an argument in FAVOUR of the government subsidizing private school education. Surely in a meritocracy you'd want funding directed to those who are the most worthy (either the smartest or the most in need - depending on your political philosophy), rather than to provide a tax break for households who generally are in the top decile of household incomes?

(edited 2 months ago)

Reply 29

SilverPebble

14

Isn't it more the point that private schools offer loads of music, drama, sports, art, after-school, enrichment, chapels, debating, etc etc etc more than state schools? This is the cultural capital that helps academic success. Private schools can do this because each student has a much higher funding than they get in state schools. Parents of state school students can provide cultural capital and interest in other ways, often requiring additional expense too. The arts/culture aren't provided free any more ☹️ . It seriously isn't a debate between private and state schools - it's a debate between parents' relative ability to provide, maintain and sustain interest in their child's broader education/engagement with artistic/cultural/sports/etc opportunities.

(edited 2 months ago)

Reply 30

EmilyJade24

9

While I understandably recognise the anger by some parents who send their child(ren) to private schools and arguments concerning equality and fairness within our society, I do not agree with the policy of imposing VAT on such establishments.

Private schooling, in a similar way to healthcare, is often looked upon by a percentage of society as being part of the 'rich elite' or 'upper class'.

In the past, I have unfortunately had the pleasure of attending a private school in my local area for a period of a week as part of an induction; a horrible experience with both hindsight and at the time experience given the 'stereotypical' snobby and 'look on down' approach of others some students engaged in.

I personally hated it, although some don't.

Education is a benefit to our economy and our society.

Those who 'look down upon' the lower and sometimes middle classes at certain private schools (as took place during my induction), often go on to end up in roles which work with those in lower and middle society, whether as GP's, nurses, solicitors, barristers or state school teachers.

I understand the anger surrounding the private school argument and the many years of isolation so called 'rich kids' have from the real world (and maybe even longer depending on their parents wealth).

Although, any method of taking pressure off our NHS and state school system is a benefit in my mind and in fact, applying taxation to education and healthcare seems morally wrong, regardless of the individuals which sometimes don't deserve to be assessed based on 'moral' value.

I fully understand the arguments for applying VAT to private schools, although if some 'rich' snob wishes to send their kid to a private school at the cost of £30k plus a year so they can live in their own little cocoon, so be it. They hopefully will receive a good education and due to wealth, or otherwise, will benefit our economy far into the future.

It is sickening, I know, but look at the progress of humanity in the last 20 years even with the expansion of funding for the state school system.

I would rather our kids in the state sector achieve far more than those who receive private provision and in terms of the future outlook, forgetting those who were born into 'wealth', what is the benefit to both society and our economy in terms of 'bright spark' public section school students who went on to achieve great things?

I'm not against tax but education and health are two pillars which will ensure our country goes on successfully achieving far into the future.

On moral principle for me, as someone who was offered a place at a private school on a scholarship and declined, I would not support the imposition of VAT on private schools. 🙂

(edited 2 months ago)

Reply 31

hotpud

18

Original post by tazarooni89

I'm curious to know what people's thoughts are on TSR, about Labour's plans to start charging 20% VAT on private school fees. The idea is that this additional revenue would be invested into the state sector to improve the quality of schooling there.

At face value, it looks like a typical "tax the rich and spend it on the public good" sort of policy, but to me it looks like it's actually a plan that would harm the state sector, state educated pupils, and less wealthy people in general rather than helping them. For a few reasons:

1.

Fewer people will be able to afford to go to private school. They will need to go to state schools instead, which will increase the burden on those schools (many of which are already overpopulated). At present, private school parents help the state sector by paying tax towards it but not using it, but this would reduce.

2.

The students who would otherwise be going to private school are likely to be ahead of the competition in terms access to the best state schools (e.g. they can typically afford to buy houses in more expensive areas, tuition for 11+ exams etc.) which will make it more difficult for other students to access the best state schools.

3.

Private schools will no longer provide as many scholarships and bursaries to those who otherwise couldn't afford to go, nor will they do as much to help their local student communities. It will become less affordable to them, and they won't even need to in order to maintain their charitable status (as they no longer get a VAT exemption for it).

4.

Private school class sizes will reduce, whilst state school class sizes will increase, affecting the quality of teaching at both and increasing the gap between the two.

To me, this seems to limit people's access to the best education even more than it already is. But curious to hear your thoughts.

I agree with @EmilyJade24

Also, with regard to your first point. Sure, there will be an impact on the state sector as those who only just afford to go to private school are pushed out. But equally, if those parents care enough to want a private education, they will also care about their kids and the education they get under a state sector. The reason good state schools are good is usually a product of the parents of the kids who attend rather than the teaching staff. It is easy to teach kids who are supported by their parents and that ripples across to children of parents with fewer means. So I would argue that privately educated kids in state schools would actually benefit more people just by them being there.

I also don't buy the arguments about it putting a strain on the education system. Our education system is exceedingly resilient. In Manchester for example, we have watched a population spike of around 50,000 additional children come through the system and because people don't just appear out of no where, it is easy to plan for. Primary schools have been expanded and we have seen perhaps 10 additional secondary school built to accommodate the population growth. My own place has grown by 500 in the last two years and we are planning for another 500 by 2035.

The single reason for charging 20% VAT on private schools is that it is fair and therefore progressive. Given that VAT is applied to luxury or discretionary items, it is surely only fair that the wealthiest in society pay a tax on the fact their children are benefitting from higher staff to student ratios, being in a pool of the elite and the connections that brings and the extra curricular opportunities private education offers.

The rich often justify low taxation for the wealthy because if they are rich, there is a trickle down effect (which I am yet to see). This is one example of a trickle down effect that genuinely will make a difference to those lower down the social scale both in real terms and in the additional taxation bought in that can be redistributed in services mainly used by the lower half of society.

Good decision in my opinion as long as that funding is used to improve state schools (so not taxing for the sake of taxing).

Remove the charitable status as well.

Reply 33

Supermature

11

Article 2 of Protocol 1 of the European Convention on Human Rights (to which the UK is a signatory) guarantees the right to open and run private schools, but states do not have a positive obligation to subsidise private schools. It could be argued that not imposing VAT on school fees amounts to just such a subsidy, particularly at a time of great pressure on public expenditure and when education's share of public expenditure has fallen against a backdrop of rising demand.

The consequences of levying VAT on school fees are unlikely to be significant. The consensus is that this measure would only lead to a small reduction in the number of children attending private schools and that the net gain to public finances would be about £1.3 to £1.5 billion at July 2023 prices. The total for educational expenditure in England for 2022-2023 was £116 billion.

The issue is therefore essentially one of "fairness". Should the state be subsidising private educational provision when money is so tight?

Reply 34

tazarooni89

OP

20

Original post by Supermature

Article 2 of Protocol 1 of the European Convention on Human Rights (to which the UK is a signatory) guarantees the right to open and run private schools, but states do not have a positive obligation to subsidise private schools. It could be argued that not imposing VAT on school fees amounts to just such a subsidy, particularly at a time of great pressure on public expenditure and when education's share of public expenditure has fallen against a backdrop of rising demand.

The consequences of levying VAT on school fees are unlikely to be significant. The consensus is that this measure would only lead to a small reduction in the number of children attending private schools and that the net gain to public finances would be about £1.3 to £1.5 billion at July 2023 prices. The total for educational expenditure in England for 2022-2023 was £116 billion.

The issue is therefore essentially one of "fairness". Should the state be subsidising private educational provision when money is so tight?

I would argue that in return, private school parents are subsidising the state schools (by paying tax towards them and not using them).

I’d also argue that the point of government subsidies is to encourage / enable more people to do the thing that is being subsidised. Surely “fairness” involves making the best education accessible to more people, not fewer people.

Also it doesn’t make much sense to me that we’re removing a subsidy whilst at the same time hoping that nobody (or as few people as possible) stop using private schools. I wonder where forecasts have come from that suggest this is what would happen. (I wonder if it takes into account for example, how easy it is in practice to access cash-in-hand, VAT-free private tuition).

(edited 2 months ago)

Original post by tazarooni89

I would argue that in return, private school parents are subsidising the state schools (by paying tax towards them and not using them).

But are those parents sending their children to private schools to benefit and subsidise the state system? No, of course not, it's for personal gain. And given this is all about whether private school's should have Charitable Status (and thus exempt from VAT), think it's a difficult argument to make that they run like charities. A better system would be one where all parents and all politicians have a stake in the success of state education, rather than the rich having an opt out.

Given on average just 2% of private school students are there on scholarships, I personally find it difficult to justify it being given Charitable Status. It's not like if banks donated 2% of their profit to charities, people would be arguing that they should be exempt from all VAT.

Declining pupils numbers in state schools mean the state system can more than absorb any increase in students transferring from the private system.

Reply 36

hotpud

18

Original post by tazarooni89

I would argue that in return, private school parents are subsidising the state schools (by paying tax towards them and not using them).

I’d also argue that the point of government subsidies is to encourage / enable more people to do the thing that is being subsidised. Surely “fairness” involves making the best education accessible to more people, not fewer people.

Also it doesn’t make much sense to me that we’re removing a subsidy whilst at the same time hoping that nobody (or as few people as possible) stop using private schools. I wonder where forecasts have come from that suggest this is what would happen. (I wonder if it takes into account for example, how easy it is in practice to access cash-in-hand, VAT-free private tuition).

You may have a point. But then equally, it is well known that the wealthy are very adept at not paying tax if they don't have to. I note that Sunak has a tax rate of around 23% on his £2.2 million income last year.

Creating a progressive tax system that closes the loopholes is invariably difficult where as taxing discretionary spending is easy and very effective. There is no way around paying 20% VAT on school fees.
note

Good.

OP

Original post by hotpud

You may have a point. But then equally, it is well known that the wealthy are very adept at not paying tax if they don't have to. I note that Sunak has a tax rate of around 23% on his £2.2 million income last year.

Creating a progressive tax system that closes the loopholes is invariably difficult where as taxing discretionary spending is easy and very effective. There is no way around paying 20% VAT on school fees.
note

I don't really see what Rishi Sunak's tax affairs have got to do with it. The majority of people sending their kids to private schools (around 7% of all pupils in the country) aren't the Rishi Sunaks of the world. They're generally middle-class professionals (doctors, lawyers, teachers etc.) employed in the usual way and paying tax via PAYE like everyone else. The type of person you're describing is the tiniest of minorities.

Besides if you wanted to tax that sort of person more, 20% VAT on private school fees is hardly going to do much. They'd pay between around £3,000 and £10,000 extra tax per year, per child they have. Which is nothing compared to what you could get from someone like Rishi Sunak just by increasing corporation tax or inheritance tax etc. by a percent or two.

Reply 39

tazarooni89

OP

20

Original post by BenRyan99

But are those parents sending their children to private schools to benefit and subsidise the state system? No, of course not, it's for personal gain. And given this is all about whether private school's should have Charitable Status (and thus exempt from VAT), think it's a difficult argument to make that they run like charities. A better system would be one where all parents and all politicians have a stake in the success of state education, rather than the rich having an opt out.

Given on average just 2% of private school students are there on scholarships, I personally find it difficult to justify it being given Charitable Status. It's not like if banks donated 2% of their profit to charities, people would be arguing that they should be exempt from all VAT.

Declining pupils numbers in state schools mean the state system can more than absorb any increase in students transferring from the private system.

I don't really see why it matters why parents are sending their children to private schools. The result is that it benefits the state system and the taxpayer.

In my view, the purpose of making something VAT exempt is to encourage and enable more people to do that thing. I think it's in our interests for private education to have that exemption (whether they do anything charitable or not), because what they do is take the burden and cost away from the state from educating around 7% of all pupils. Surely that's not something worth discouraging by adding tax to it. I'm sure the state system could absorb an increase in pupils, but the question is what's the benefit in it? If you can have private schools removing some of the financial and operational burden of that, why not have it?

In theory I can see why one might think a good system would be one in which all parents and politicians have a stake in the success of state education. But I also think very rich people will always have an opt out. For example they can hire private tutors (who are typically paid with cash-in-hand, which is very hard to add VAT or any kind of tax to). They can also send their children to boarding schools abroad - including in countries which don't charge tax on that. Finally I also think that state monopolies have the best incentives or the best track records of being the best systems. Not in the UK anyway.

Labour plans to add 20% VAT to Private School fees.

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