Why the Labour Party's VAT on Independent School Fees is a Misguided Policy
Chief Operating Officer | Board Chairman | Trustee
June 6, 2024Until now I have only commented on others' posts on the potential for VAT to be applied to school fees in the UK, so I wanted to provide some context on this ideology, and what it means for the landscape of education in the UK.
The Labour Party’s proposal to apply VAT to independent school fees is fraught with unintended consequences that would ultimately harm our society, and whilst we have no real detail on the Labour Party's pledge to apply this tax, what we do know is that it's a real and present issue for the UK education sector, not just independent schools.
The tectonic plates of independent education in the UK are moving, and they are moving quickly. We have already seen that some schools have closed due to the nervousness of some parents withdrawing their children; there is more of this to come. The next few weeks will determine if this tax becomes a reality; the reasons I highlight here are, I hope, compelling enough to reaffirm that this tax is nothing other than short-sighted and will do more harm than good.
What we know is almost Rumsfeldian in nature, we have
'knowns', and we have
'unknown unknowns', but what is clear is that if Labour is elected, they will bring this tax upon the independent education sector, and have pledged to do it quickly. My only advice is that all independent schools should be preparing now, with contingency plans as to what they will do 'come the day' and if you have not yet started, you may be a little late!
Some factors that we should carefully consider are:
- Erosion of Social Mobility: Independent schools play a critical role in fostering social mobility by providing scholarships and bursaries to talented students from less affluent backgrounds. Applying VAT to school fees would reduce the funds available for these programs, limiting opportunities for deserving students and widening the gap between the wealthy and the less privileged.
- Exodus to State Schools: The additional financial burden on parents will force parents to move their children from independent to state schools. This influx of students will strain an already overburdened state education system, potentially leading to larger class sizes, reduced resources, and diminished educational outcomes for all students. The opposite of what the Labour Party manifesto says it will do.
Financial Effects of School Closures
- VAT on school fees will lead to the closure of some independent schools, the financial impact of which will be profound, not just for the individual schools, but locally for the pupils, parents, employees and suppliers to those schools. Parents will be forced to find places for their children in state schools, exacerbating the strain on state resources. The cost to the government of educating these additional students would far exceed the revenue generated from VAT.
- State Sector Overload: State schools will need substantial investment to accommodate the influx of students. This includes building new classrooms, hiring more teachers, and expanding support services. The increased expenditure could easily surpass the anticipated VAT revenue, making the policy financially counterproductive.
Negative Economic Ripple Effects:
- Suppliers: Independent schools significantly contribute to local economies, relying on a wide range of suppliers for services and goods. The financial squeeze resulting from VAT would likely lead to cutbacks, impacting businesses and their employees across various sectors.
- Communities: Schools are often at the heart of their communities, supporting local events, charities, and initiatives. Financial constraints could curtail these contributions, weakening community cohesion and support networks.
- Employment: Independent schools are substantial employers, providing jobs to teachers, support staff, and local contractors. Financial difficulties stemming from VAT will lead to job losses, and contract terminations, all of which will affect livelihoods and increase unemployment.
- Impact on Educational Diversity: A robust independent school sector enriches the educational landscape, offering diverse pedagogical approaches and fostering innovation. A weakened independent sector could stifle this diversity, reducing choices for parents and students and potentially lowering the overall standard of education.
- SEND. Children with Special Educational Needs and Disabilities (SEND) benefit from the careful nurture that specialist (and non-specialist) independent schools provide. This area of the sector is one in which the education tax will be most keenly felt, especially as many Local Authorities provide payment (some or all of the cost) for children who have an Education Health, and Care Plan (EHCP) attending independent schools.
- Military and FCDO. The UK military and FCDO (Foreign, Commonwealth and Diplomatic Office) are asked, sometimes at short notice, to deploy around the globe, and rightly there is provision for military and FCDO children to attend independent (boarding) schools. Removing this essential need will disproportionately affect those children and their parents.
Whilst the Labour Party’s intention to increase funding for state schools is commendable; applying VAT to independent school fees is a misguided approach that will have a detrimental effect on social mobility, the state education sector, local economies, employment, and ultimately consumer choice in being able to decide whether your child should attend a school that charges fees.
The policy could end up costing more than it generates due to the financial burden on the state sector from an influx of students and the broader economic fallout from independent school closures.
It's crucial to consider the broader implications of the Labour Party policies to ensure we foster an inclusive, high-quality education system for all long into the future, and not just a short-term attempt at winning over the electorate.
Feel free to share your thoughts and engage in the conversation. Let’s work together for a better future in education!
