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

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Reply 60
Original post by tazarooni89
I agree it’s a bit nonsensical for private schools to have charitable status. I think that’s really just the historical mechanism by which they’ve been given the tax break.

I would normally agree that private businesses selling luxuries that most people can’t afford don’t need to be getting tax breaks. I just think private schools are slightly different, in that the more people go to private school, the more of taxpayers’ money is being saved. So I just see a tax break as a way of encouraging and enabling that.

Rather than taxes just being a way of raising revenue, I think taxes and subsidies are also good ways to encourage or discourage certain behaviours. If the state really wants to tax the middle class and the rich more, I think inheritance tax is the place to start, as opposed to private school. Currently people can bequeath up to £1 million tax-free, which is rather a lot IMO. I think taxing this more heavily would actually help the economy, by encouraging people to work more (less reliance on money from parents) and also by encouraging people to spend money within their lifetimes rather than hoarding it for their kids.

"I just think private schools are slightly different, in that the more people go to private school, the more of taxpayers’ money is being saved. So I just see a tax break as a way of encouraging and enabling that."

There is quite a body of evidence that refutes this. Sure, initially, there is an overhead cost to educating private students in the state sector but 20% VAT isn't going to kill the private sector, just make it pay its way, so those who drop out of the private sector are being subsidised by that private sector. In addition, students who's parents care about their education generally improve the schools they go to. Enthusiastic parents are more likely to run Parent Associations that raise money for the school and extras and when you have motivated students in a school, peer pressure from them brings the standards of other students up. It becomes a race to the top. Plenty of good examples of this in many of the inner city schools in London.

This is why good comprehensive education works and state funded grammar schools do not. Putting all the good pupils in a grammar school is good for them, but the rest just languish and the schools that take the failed 11+ers. The argument that grammar schools benefit the poorest from society who have the opportunity to better themselves is also a farce because in reality, the middle classes fall over themselves to use their resources to game the system to get their kids into the local grammar e.g. private tutoring or moving into catchment etc. For example, if you want your kids to go to the Altringham Grammar Schools, you are looking at having for fork out £1 million+ to move into catchment.
Placing an additional 20% levy on private school payers will do nothing but deter investment away from a flourishing sector.

On a per-pupil basis the total funding allocated to schools for 5-16 year old pupils, in cash terms, in 2023-24 was £7,690 and currently an estimated 9.1 million students attend, averaging a total cost of nearly £70 billion per year (23/24).

It would be within the fiscal headroom for any government to increase by 50% the pupil premium from £7,690 per year in 23/24 (on average) to £11,535, thus increasing the total estimate cost from £70 billion to £105 billion and placing those in the state sector on par with privately educated students.

For the 11 years children remain in school, if a fee of £9,500 per year was levied over a period of 39 years post a student turning 21 years and on the basis that interest would only be payable at the age of 21, providing interest on the loan was set at 10.5%, the total yearly average interest generated over the 39 years would equal £8,500 (rounded per year).

Therefore meaning an additional £80 billion (rounded) would be generated, per year, to be spread across the 9.1 million students at the average payment, per student, would be £933.00 per month.

That would increase department of education funding from £116 billion per year, to £151 billion, an increase of 30% (before inflation).

Given there would be an additional £45 billion of headroom through this minor change in funding and the additional £35 billion of funding provided for 23/24, for the years 24/25, any government could reduce the department of education budget by £35 billion, in order to create an additional £80 billion of headroom which could be used to fund other services, or different elements of the department of education if they so wished.

In order to offset the increase due to the new funding model for the state sector, if central government was to subside council tax by 100%, that would incur a cost of £35 billion a year (allowing for £45 billion of headroom) and save families (on band C council tax) and average of £1800 per year, or £150.00 per month.

It is a general rule of thumb that increasing the income tax free allowance would incur a cost of £5 billion per £1000, therefore to increase the allowance from £12,570 to £20,000 would cost £40 billion and save per person tax payer on an income above £20,000 a year £1,450 per year while still leaving an additional £5 billion of headroom to contribute to the cost of funding additional school services, such as breakfast clubs and free school meals, all without having to impose any 20% levy on the independent sector.

Therefore, between council tax savings and income tax changes, families would save £3,250 a year, or £270 a month without having to a pay a single additional penny.

If people were to chose to save the £270 a month they saved, that would equal, without interest, total savings over the 11 years of £35,640, enough to clear the typical mortgage which had 20 years remaining, at a rate of 5.25% 6 years early.

Then once a student turns 21, providing the support was to continue and tax allowances increased by above inflation each year, the net payment would be £663 per month, or a saving of nearly £1,200 a month (6 years earlier) for someone who has a 25 year mortgage for £200,000 at 5.25%, meaning an average gain of £537 per month taking into consideration all the other measures. At the same time allowing for a 50% higher rate of funding for the pupil premium in the years 23/24 to ensure public sector schools were on par with the private sector in terms of money allocated per student and reduce the tax bills of parents who send their children to public schools by £270 a month.
(edited 2 months ago)
Original post by EmilyJade24
Placing an additional 20% levy on private school payers will do nothing but deter investment away from a flourishing sector.

On a per-pupil basis the total funding allocated to schools for 5-16 year old pupils, in cash terms, in 2023-24 was £7,690 and currently an estimated 9.1 million students attend, averaging a total cost of nearly £70 billion per year (23/24).

It would be within the fiscal headroom for any government to increase by 50% the pupil premium from £7,690 per year in 23/24 (on average) to £11,535, thus increasing the total estimate cost from £70 billion to £105 billion and placing those in the state sector on par with privately educated students.

For the 11 years children remain in school, if a fee of £9,500 per year was levied over a period of 39 years post a student turning 21 years and on the basis that interest would only be payable at the age of 21, providing interest on the loan was set at 10.5%, the total yearly average interest generated over the 39 years would equal £8,500 (rounded per year).

Therefore meaning an additional £80 billion (rounded) would be generated, per year, to be spread across the 9.1 million students at the average payment, per student, would be £933.00 per month.

That would increase department of education funding from £116 billion per year, to £151 billion, an increase of 30% (before inflation).

Given there would be an additional £45 billion of headroom through this minor change in funding and the additional £35 billion of funding provided for 23/24, for the years 24/25, any government could reduce the department of education budget by £35 billion, in order to create an additional £80 billion of headroom which could be used to fund other services, or different elements of the department of education if they so wished.

In order to offset the increase due to the new funding model for the state sector, if central government was to subside council tax by 100%, that would incur a cost of £35 billion a year (allowing for £45 billion of headroom) and save families (on band C council tax) and average of £1800 per year, or £150.00 per month.

It is a general rule of thumb that increasing the income tax free allowance would incur a cost of £5 billion per £1000, therefore to increase the allowance from £12,570 to £20,000 would cost £40 billion and save per person tax payer on an income above £20,000 a year £1,450 per year while still leaving an additional £5 billion of headroom to contribute to the cost of funding additional school services, such as breakfast clubs and free school meals, all without having to impose any 20% levy on the independent sector.

Therefore, between council tax savings and income tax changes, families would save £3,250 a year, or £270 a month without having to a pay a single additional penny.

If people were to chose to save the £270 a month they saved, that would equal, without interest, total savings over the 11 years of £35,640, enough to clear the typical mortgage which had 20 years remaining, at a rate of 5.25% 6 years early.

Then once a student turns 21, providing the support was to continue and tax allowances increased by above inflation each year, the net payment would be £663 per month, or a saving of nearly £1,200 a month (6 years earlier) for someone who has a 25 year mortgage for £200,000 at 5.25%, meaning an average gain of £537 per month taking into consideration all the other measures. At the same time allowing for a 50% higher rate of funding for the pupil premium in the years 23/24 to ensure public sector schools were on par with the private sector in terms of money allocated per student and reduce the tax bills of parents who send their children to public schools by £270 a month.

I'm diagnosing you with a severe case of written/non-verbal diarrhea.
Original post by BenRyan99
I'm diagnosing you with a severe case of written/non-verbal diarrhea.

Which part of my argument are you referring to?

I don't believe it would make good sense to only state:

"Placing an additional 20% levy on private school payers will do nothing but deter investment away from a flourishing sector"

Then provide no detail whatsoever to my assessment on why,
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.

In public, I am against it. However, secretly, I support it because it will be truly for the elite.

It needs to be made truly exclusive to ensure that only the wealthy can afford it.

Also, this nonsense about Oxbridge access is meaningless. Many people know that uni is a scam. It is not what you know that matters but who you know.

(I apologise if it sounds harsh, but being honest).
(edited 2 months ago)
Original post by SilverPebble
I'm happy with that. I think there should also be a law preventing any parent from paying for an educational advantage for their child, like buying books for them to read, or buying a house in a good/outstanding catchement area, or paying for private tutors, or just generally being interested in their kid's education. All the money that parents spend on cultural capital should be paid direct to the government as taxes. That would stop anyone ever buying a better start in life for their kids. So yeah, tax them out of existence!

I agree.

I am also against private healthcare. Imagine waiting months for a GP appointment and someone else can have better health outcomes by paying privately. To me, the system is rigged.

For the many, not the few!
Original post by Wired_1800
I agree.

I am also against private healthcare. Imagine waiting months for a GP appointment and someone else can have better health outcomes by paying privately. To me, the system is rigged.

For the many, not the few!

hmm yes as you say, 4 legs good, 2 legs baaaad
but um... how does someone else getting healthcare faster actually negatively impact YOU? Far fewer people would go into medicine if private healthcare was banned (many doctors take on both private and NHS work). Probably helps you at the end of the day. But labour are excellent at mobilising the politics of envy, so maybe private healthcare will be the next thing they attack. Except no, it definitely WON'T be, cos they know that would sink the NHS
Original post by ohyegodsmyroast
hmm yes as you say, 4 legs good, 2 legs baaaad
but um... how does someone else getting healthcare faster actually negatively impact YOU? Far fewer people would go into medicine if private healthcare was banned (many doctors take on both private and NHS work). Probably helps you at the end of the day. But labour are excellent at mobilising the politics of envy, so maybe private healthcare will be the next thing they attack. Except no, it definitely WON'T be, cos they know that would sink the NHS

It is the unfairness of the system that one can pay for better healthcare whilst majority of the nation continue to suffer the poor quality health service with delays and quality issues.

I hope Labour focuses on private healthcare. For example, isn't it incredible that we have a dental crisis? We pay taxes for dental students to get free education then they go private and charge us an arm and a leg for the dental care.
(edited 2 months ago)
Original post by EmilyJade24
Which part of my argument are you referring to?

I don't believe it would make good sense to only state:

"Placing an additional 20% levy on private school payers will do nothing but deter investment away from a flourishing sector"

Then provide no detail whatsoever to my assessment on why,

I'm arguing against its entirety and length.

First things first, I'm not sure you actually understand what 'fiscal headroom' means given you misused it several times. The policy would almost certainly breech the governments fiscal rules straight away given the front-loaded cost nature of the policy, with any potential supply-side benefits occuring way beyond the OBR's fiscal forecast time horizon.

Correct me if I'm misinterpreting what your policy proposal entails, but it seems as if you're suggesting charging children £9.5k a year to go to school for 11yrs, with a 10.5% annual interest rate once they turn 21. If this is indeed what you're arguing then that's pretty insane, breeches so many moral issues, and there's no way any government would ever introduce that.
(edited 2 months ago)
Original post by Wired_1800
It is the unfairness of the system that one can pay for better healthcare whilst majority of the nation continue to suffer the poor quality health service with delays and quality issues.

I hope Labour focuses on private healthcare. For example, isn't it incredible that we have a dental crisis? We pay taxes for dental students to get free education then they go private and charge us an arm and a leg for the dental care.

hmm yes - a shocking concept that the government should pay NHS doctors, dentists, nurses a competitive wage if they don't want them to go private
Original post by hotpud
"I just think private schools are slightly different, in that the more people go to private school, the more of taxpayers’ money is being saved. So I just see a tax break as a way of encouraging and enabling that."

There is quite a body of evidence that refutes this. Sure, initially, there is an overhead cost to educating private students in the state sector but 20% VAT isn't going to kill the private sector, just make it pay its way, so those who drop out of the private sector are being subsidised by that private sector. In addition, students who's parents care about their education generally improve the schools they go to. Enthusiastic parents are more likely to run Parent Associations that raise money for the school and extras and when you have motivated students in a school, peer pressure from them brings the standards of other students up. It becomes a race to the top. Plenty of good examples of this in many of the inner city schools in London.

This is why good comprehensive education works and state funded grammar schools do not. Putting all the good pupils in a grammar school is good for them, but the rest just languish and the schools that take the failed 11+ers. The argument that grammar schools benefit the poorest from society who have the opportunity to better themselves is also a farce because in reality, the middle classes fall over themselves to use their resources to game the system to get their kids into the local grammar e.g. private tutoring or moving into catchment etc. For example, if you want your kids to go to the Altringham Grammar Schools, you are looking at having for fork out £1 million+ to move into catchment.

I don't think "enthusiastic parents" will be more likely to run Parent Associations. I suspect they would be devastated at having to take their children out of the (generally) superior education provided by private schools and would instead invest in private tuition, to enable their children to maintain a competitive advantage. I know of a number of parents who took their children out of private school at sixth form and moved them to a State school so that they would not be affected by the private school "penatly" when applying to elite universities. The fees saved were used to fund a battery of private tutors to ensure that A level grades were maximised. I think you already acknowledge that this happens at grammar schools. Parents would far rather focus on directly helping their own children than notionally attempt to improve the quality of their local State school.

Any parent that priorities their children's educations and can afford to do so, will send their children to a private school rather than a Comprehensive, unless they have ideological objections to doing so. I sent both of my children to private school for this reason. As for my own education, I studied at State schoold before getting a scholarship to study at a private school - the qualitative difference in the eduction I received between the two was huge.

Education, as with many things, is a service and you really do get what you pay for.
(edited 2 months ago)
Original post by ohyegodsmyroast
hmm yes - a shocking concept that the government should pay NHS doctors, dentists, nurses a competitive wage if they don't want them to go private

I agree that they should be paid well but that’s a similar argument with independent schools.

I think the Government needs to look again at the way medical and dental schools are funded to ensure that they don't take free education and then refuse to give back in the NHS.

Private provisions should be abolished or heavily regulated whether it is private school, healthcare or whatever else.
Reply 72
Original post by katana1000
I don't think "enthusiastic parents" will be more likely to run Parent Associations. I suspect they would be devastated at having to take their children out of the (generally) superior education provided by private schools and would instead invest in private tuition, to enable their children to maintain a competitive advantage. I know of a number of parents who took their children out of private school at sixth form and moved them to a State school so that they would not be affected by the private school "penatly" when applying to elite universities. The fees saved were used to fund a battery of private tutors to ensure that A level grades were maximised. I think you already acknowledge that this happens at grammar schools. Parents would far rather focus on directly helping their own children than notionally attempt to improve the quality of their local State school.

Any parent that priorities their children's educations and can afford to do so, will send their children to a private school rather than a Comprehensive, unless they have ideological objections to doing so. I sent both of my children to private school for this reason. As for my own education, I studied at State schoold before getting a scholarship to study at a private school - the qualitative difference in the eduction I received between the two was huge.

Education, as with many things, is a service and you really do get what you pay for.

A good response although if our current batch of leading politicians (mostly privately educated) are anything to go by, I am not fully convinced.

I don't think the teaching is necessarily the differentiating factor, more the status, cultural capital and connections that private education gives.

If our education system were truly meritocratic, we wouldn't be seeing 30% of Oxbridge students coming from 7% of private students.
(edited 2 months ago)
Reply 73
Original post by Wired_1800
I agree.

I am also against private healthcare. Imagine waiting months for a GP appointment and someone else can have better health outcomes by paying privately. To me, the system is rigged.

For the many, not the few!

Well at the moment, private healthcare isn't VATable either. So what next? VAT on private hospitals?

The reality is life is never completely fair. Will charging VAT on private schools make life fairer? That's assuming that the money raised is then reinvested into the education system. But as has been pointed out there are many ways to game the system and the reality is middle class parents will still find a way to gain an advantage. The rich won't care.

Will it lead to more social mobility? You can argue the toss both ways but the reality is the rich are continuing to accumulate wealth far faster than any other segment of society. I'd rather the govt went after the obscenely rich but good luck with that.
Original post by AriTem
Well at the moment, private healthcare isn't VATable either. So what next? VAT on private hospitals?

The reality is life is never completely fair. Will charging VAT on private schools make life fairer? That's assuming that the money raised is then reinvested into the education system. But as has been pointed out there are many ways to game the system and the reality is middle class parents will still find a way to gain an advantage. The rich won't care.

Will it lead to more social mobility? You can argue the toss both ways but the reality is the rich are continuing to accumulate wealth far faster than any other segment of society. I'd rather the govt went after the obscenely rich but good luck with that.

We should close the loop holes to avoid parents gaming the system for good state schools. For example, a suggestion is to reform the catchment area scheme to avoid people buying properties in areas with better schools.
Original post by katana1000
I don't think "enthusiastic parents" will be more likely to run Parent Associations. I suspect they would be devastated at having to take their children out of the (generally) superior education provided by private schools and would instead invest in private tuition, to enable their children to maintain a competitive advantage. I know of a number of parents who took their children out of private school at sixth form and moved them to a State school so that they would not be affected by the private school "penatly" when applying to elite universities. The fees saved were used to fund a battery of private tutors to ensure that A level grades were maximised. I think you already acknowledge that this happens at grammar schools. Parents would far rather focus on directly helping their own children than notionally attempt to improve the quality of their local State school.

Any parent that priorities their children's educations and can afford to do so, will send their children to a private school rather than a Comprehensive, unless they have ideological objections to doing so. I sent both of my children to private school for this reason. As for my own education, I studied at State schoold before getting a scholarship to study at a private school - the qualitative difference in the eduction I received between the two was huge.

Education, as with many things, is a service and you really do get what you pay for.

this is until Labour ban paid private tutoring like China lol
Original post by ohyegodsmyroast
this is until Labour ban paid private tutoring like China lol

To be fair, that should be banned too. Private tutoring is a backdoor to private education.
Reply 77
Original post by Wired_1800
We should close the loop holes to avoid parents gaming the system for good state schools. For example, a suggestion is to reform the catchment area scheme to avoid people buying properties in areas with better schools.

You can never close all the loop holes. The basic inequality comes from the fact that some parents will just have more cash to spend on their children.
Reply 78
Original post by ohyegodsmyroast
this is until Labour ban paid private tutoring like China lol

So the Chinese political system is better?
Original post by Wired_1800
To be fair, that should be banned too. Private tutoring is a backdoor to private education.


What about kids who rely on private tutoring because they have poor quality teachers or special education needs or they as a student are just behind compared to the rest of the class in general?

If it wasn’t for my last minute tutoring for English, I would have failed the GCSE (the teachers were rubbish).

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