Labour has announced that it will levy VAT on school fees. I imagine few of my readers are directly affected – either as worried parents, or as worried heads or teachers. But heh, it is nice to look over the fence once in a while, especially when you can have a chuckle at a sector we are all too often envious of.
A car costing three times as much as a Ford or Vauxhall is a luxury car. Private schools often cost three times a state school’s funding level; they too meet the common-sense definition of a luxury good.
VAT on private schools is perfectly defensible – even if part of me dislikes the idea of taxing any form of education. (“First they came for the private schools, and I did nothing, because I did not work in one. Then they came for hardback books, and I did nothing because I always bought paperbacks. Then they came for school lunches, and I did nothing because I always made a packed lunch at home…” and so on.)
Private schools, however, are not waiting around for the arguments to be made. Many are already offering ‘pay-in-advance deals’ because the law says if you pay now, today’s VAT rate applies. This looks like a winner and a poke in the eye to HMRC and the Labour Party.
But not so fast. The government can (and surely will) say that this general principle doesn’t apply this time. It is called ‘anti-forestalling’ and is well-established. At that point parents – or the school – will have to find the VAT.
Even if the government does not do this, HMRC can take a school to court, arguing that it has created an artificial arrangement to avoid VAT. That seems plausible, particularly as the ‘pay now’ schemes look more like a loan than a purchase.
The price of schooling in three years’ time is not set now, for example, whereas it would be under a proper purchase agreement. Many schools are pushing ‘pay now’ this year and specifically mentioning the VAT saving, making it look like tax avoidance.
If HMRC pursue this, schools immediately have to pay HMRC the full VAT owed. They will get it back if HMRC loses, but a court case could take years.
That is democracy and we have to live with the decisions our politicians make
And HMRC have years to decide what to do. Imagine they decide to take action in five years’ time. If every parent had paid in advance, VAT at 20 per cent would mean an accumulated VAT liability equal to an entire year’s fees.
Of course not all parents will do this, but the liability could be large – enough, one would have thought, to worry an accountant in the intervening years about whether the school is a going concern.
There are times in our lives when bad stuff happens. State schools did not want the Theresa May cuts in real-terms funding. Indeed, they didn’t want austerity at all. But you know what? That is democracy and we have to live with the decisions our politicians make.
State schools, starting from much lower levels of funding, managed to make ends meet. Good, valuable things were scrapped. Quite remarkably (at least until Covid) our schools and our children coped. Outcomes remained strong, measured by GCSE results, PISA and comparison with other parts of the UK. Our state schools can be proud of what they have achieved in tough times.
It is time for private schools to show the same resilience. Fees have risen a lot in recent years. If parents won’t pay 20 per cent more, private schools need to make austerity work. No more fancy new buildings. Hire out that swimming pool in the evenings. Maybe – whisper it quietly – close the pool altogether.
And if they struggle to do that, perhaps they should approach their local state schools to ask how to cut costs without cutting standards. I am sure for the right fee our state school leaders, many of whom really are outstanding, would be willing to impart their wisdom.
No doubt they’d find a lot of savings to make. In fact, I’d bet a bottle of luxury sparkling wine on it.
Ah, another man with zero knowledge of the complex variety of independent schools in England who chooses to share his opinion. Which would be interesting if it were valid and he’d bothered to research the different types of private school out there.
Slightly too smug, not least because so many MATs actually run as ‘for profit’ whereas most independent schools do not. You also cherry pick the PISA data too easily to support your argument, it is known that the UK’s position is heavily inflated at the moment because of how few UK schools took part post COVID and of those only mostly higher performing schools did so.
Most independent schools already support their local communities by making their facilities available, and also support local state schools through their charitable status. Those are the savings that will be made first.
The issue not being addressed is the equality issue. Ignore all the money arguments, established evidence is that at best this policy will break even or raise such a small amount money (in national terms) to be largely irrelevant.
It is not arguable that Independent schools entrench social inequality, they clearly do, and so for moral reasons the policy is easy to get behind. However, at the moment the biggest reason for this Inequality is how poor the public education and early help sectors have become, which has re-entrenched deprivation at the basic level. In my opinion, put the funding back in to these sectors for 5-7 years first, then change the independent sector’s status when the difference in standards has been brought closer together.
It’s easy to be smug about private schools. The reality is that the state school system doesn’t deliver consistently, and further, parents who put their kids in private schools don’t burden the state schools.
In Germany you get a tax discount if you send your kids to private school, since you don’t occupy a spot in a state school. So yes, I think VAT on private schools can work, but I then would like an equal tax break to compensate for not using state resources. I’m already paying double for my kids to go through school, the way it is set up now.