Apologies in advance for the moan. Labour will win the election, and Bridget Phillipson will implement her VAT plan. It's popular with voters on the grounds of fairness, not economics (apparently).
https://inews.co.uk/news/politics/voter ... ct-3102933
So what could be wrong with it?
1. It's being rolled out in a stupid way. Some people are paying fees several years in advance, with many schools offering such schemes. While there's a theoretical risk the government or HMRC stops this,
a) they're paying before Labour gets elected,
b) Labour has said nothing to discourage them, and
c) the shadow cabinet seems unable to even describe the policy consistently.
I have no faith that such people will be pursued. Across all schools, I'd guess that hundreds of millions of GBP of fees are being prepaid in this way. (£10bn is spent each year, if just 1% of parents prepay 3 years' fees each that's c. £300m).
If the public wants "fairness", this isn't it.
2. They're applying all 20% at once! Several negative consequences:
a) School bursars do not have enough time to reduce costs efficiently & effectively. Their main cost is staff, and redundancy rounds are painful and expensive. It's most efficient to wait for people to retire or move on, but that takes time. Ditto switching pension scheme, or selling property, or other things they might do. So they either burn cash to ease the transition, or give parents a massive fee hike (on top of what they've already had last year).
b) Labour has sown panic and alienated many (most?) fee paying parents before they've even won the election. Is this clever? I know we're only 6% of parents but really?
c) Many/most parents won't realistically be able to find decent state school places at short notice. We looked at a local comprehensive, rated outstanding. I took my son there for an assessment morning. The teachers were fine (albeit stressed by badly behaved children) and most children behaved fine. But within the space of 3 hours, several children (probably from the same primary school) had started calling other children p*ki, making other racist comments, and calling out other children for their weight. That's at age 11 - they'll likely graduate to worse things in time, making life miserable for many other children...unsurprisingly, I'll be stumping up the VAT to keep my son in private school.
The impact on children moved from private to state will be seriously damaging in many cases. Very sad.
d) To add to the ridiculousness, Labour is refusing to deny that VAT might happen mid year. Will schools' finance systems be ready to collect VAT by then? I doubt it (smaller schools mightn't have decent systems and of course they've never had to charge VAT on fees before).
3. It's based on a seriously flaky paper from the IFS:
a) apparently 3-7% of children will move out of the independent sector. This seems seriously doubtful. Enrolments are down 2.7% this academic year, and subsequent years will only see bigger numbers. We don't know how big, because it's all being done suddenly.
b) it assumes parents saving money on school fees will spend the savings on VAT-able goods in the UK. No foreign holidays, no spending on food (which is zero-rated for VAT), no saving the money or paying down pensions, and no using it to buy property (taxed much less than 20%). If any of these things happen, the tax won't raise what the IFS thinks it might.
c) it ignores things like disincentives to work for parents who move to the state sector, and reduces the attractiveness of the UK as a place for high earners to come (big cost to HMRC as 28% of all income tax is paid by the top 1%).
Moan over. If you got this far, then thank you for putting up with this!
In fairness, some things I agree with:
i. Private schools could probably make considerable savings over time. Some of the fees are spent in daft ways, and they've gone up a lot. In the past, parents probably weren't brave enough to challenge this. No more.
ii. The state system needs more money. I'm not sure this tax will generate any, not least as it seems to be based on a flaky IFS paper, but I understand the theory. Better to put up income tax or whatever.
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