The good & bad of Labour’s plans to introduce VAT on private school fees with thoughts from the Headmaster

Dante B. Lower Sixth

Sir Keir Starmer announced in late 2022 his party’s plans to introduce value added tax (VAT) on private school fees. It is not just Labour and Starmer who are backing this idea. Levelling Up Secretary and Conservative MP Michael Gove spoke on the issue in 2017 stating that exemption from VAT has meant that the wealthiest have gained a 20% discount and this has led to rising inequality.

Currently, private schools are labelled as charitable institutions by the government, meaning they are exempt from VAT and corporation tax. This may shock many, as VAT for most consumer goods and services is 20%, which, considering the price of private school tuition would be an incredible hike in price. This idea was originally developed during Labour’s 2017 general election campaign. However, it was not a clear policy promise. Labour was not specifically saying they would introduce this law, as long as partnerships between state institutions and private institutions increased. Partnerships can come in many different forms, including the sharing of facilities or expertise, invitations to events or even sponsoring academies. Caterham School has many partnership schemes with local state schools. For example, the London Academy of Excellence, which sees its pupils invited to Caterham run networking events. Although it would appear that Caterham’s partnerships are thriving the same cannot be said for other schemes. In 2017, there were more than 10,000 partnerships between private and public schools, but, in 2021, it was recorded by the Independent Schools Council (ISC) that only 6,900 remained. This has angered the Labour Party, who believe the current Conservative government has failed in this department. However, this decrease may also be down to the teachers, caretakers, and owners, which may be detrimental to local economies in the long term. Another possible problem is the movement of private school pupils to state run schools. The ISC has reported that an introduction of VAT could result in 25% of private school pupils switching to state schools.

Covid-19 pandemic, which meant that school mixing was strictly prohibited. Due to this major decrease, Starmer has re-launched the Labour Party’s tax on private school fees campaign. With the end to the financial benefits that private schools receive, over £1.7 billion could be gained. This is a huge amount of money and could be used to fund welfare, pensions and health care, increasing equality in our society. Additionally, the Labour Party has insinuated that much of this money will be re-invested into state run education. This could solve the problem of large class sizes and improve academic results. It would increase equality of opportunity, which is the idea of creating a fairer society, in order to allow a greater number of people to fulfil their potential.

Being both a Labour Party member and a private school student makes this topic an interesting one to research. Having been a student at Caterham for over five years now and have really enjoyed my time here. Yet I firmly believe in increasing tax and redistributing, therefore producing an interesting conundrum.

The main negative of this scheme will be the closure of smaller independent schools. These schools may not be able to afford the increase in tax. The Daily Mail reported that Labour’s plans may result in the closure of around 200 schools. Closure will cause a loss of jobs and stable incoming for many people including

“If VAT comes in at 20%” the Headmaster responded, “it will have a significant impact”. He argued that it could be disastrous for some smaller independent schools and may even hinder “their ability to operate”. Affording independent school fees is “already challenging for lots of families” and the introduction of VAT is likely to result in “a significant number of families being unable to afford school fees”. Mr Jones believes this will likely lead to “a significant number of people leaving the independent sector and moving to the maintained sector” leading “some schools in some parts of the country to go bust”. Raising an interesting point that I had not quite considered, the Headmaster said “parents of children in independent schools are already paying tax towards the maintained sector”, therefore, “why shouldn’t they have a choice to spend their own income on independent education”. Finally, he argued that 25-30% of pupils leaving independent schools would “simply move the problem from one place to another as additional funding and capacity would need to be found in the state sector for these pupils”.

What impacts could Caterham experience and how may they be dealt with?

“I think it is too early to say” as there are just “so many unknowns at the moment” but “of course we are thinking about it”. As the idea has not been transformed into policy as yet and the Labour Party’s 2024 manifesto has not been released, all the School can rightly do is “think about what the impact might be and try to assess what we can do”. It may be a difficult situation due to the school’s desire to “keep school fees as low as possible and as affordable as possible for as many people as possible”. School funding may be stretched, challenging the Headmaster and Board’s strong belief in “breadth, in excellence, in a co-curricular programme that is vibrant which is what makes [Caterham] special”. “It will make things tougher for everyone for sure” but “we are not at risk from not existing anymore”.

What contribution do you think private schools have on education in the UK?

Having worked in the maintained sector and having attended a comprehensive school Mr Jones believes that “the independent sector makes a huge contribution to the educational landscape of the UK, as does the maintained sector”. In the independent sector, schools can be “more innovative and try new things out” the wealth of extra-curricular activities is able to be more vast with opportunities in music, drama, art and sport. The independent system therefore makes a huge contribution to “creativity, to innovation, to broader conversation about wellbeing and welfare”. Mr Jones noted “We also do an awful lot of work with maintained schools, for example, the East Surrey Learning Partnership and our sponsorship of the London Academy of Excellence (which is both financial and in kind), because we are a charity that happens to be a school with a clear purpose about the role education should play in wider society”. Despite the claim that partnerships between independent schools and public schools have decreased, Mr Jones rightly spoke out, saying “during COVID we actually increased out partnership work, such as the laptops for lockdown scheme”.

Do you think this plan is achievable in a four-year Parliamentary Term?

“It is eminently achievable. They could do it day one”. However, whether it makes it into a manifesto remains to be seen, if it does…it is not going to take a long-protracted period of Parliamentary activity. Although, there will be challenge to it, for sure”.

What impacts do you think the state sector would experience?

Despite the idea that this policy would “create a pot of money that can be used to improve education in state schools” The Headmaster argued that it would be more likely that “in terms of the job that needs to be done, £1.7 billion would not touch the sides of the problem that a lack of investment has created. All of us involved in education agree that there has been underinvestment in state education for too long. The solution to this is not to diminish one thriving sector in the hope it will improve state education – simply put, the problem for state schools is not independent schools, it has been government choices. Not only is the £1.7 billion figure contested, even if it were accurate the positive impacts on state schools will be negligible. This is an ideological choice which, sadly, will not improve state schools to the extent promised and will focus attention on the wrong issue if we are really serious about improving education for everyone”. It is just a matter of time before we see an announcement on this policy from the Labour Party, with an upcoming manifesto in the next year we will be much clearer on how this may impact everyone and if it will even go ahead.