Arguments against imposing VAT on independent schools

  • 11th July 2023

Andrew Maiden

The sector may be under siege once again, but a coalition of voices is helping to undermine the weak argument for the imposition of VAT on fees. Andrew Maiden reports


he threat of VAT on fees has a wide-ranging series of deleterious effects on the sector, as noted in other commentaries in this magazine. Apart from those views based on accounting, legal and estate issues, there are wider opinions voiced from interested bodies outside the independent sector too.

Sir Peter Lampl of the Sutton Trust, a champion of social mobility, has been an advocate of the reintroduction of direct grants (which were dropped by Labour in 1976, and the assisted places scheme in 1997). He has previously lobbied the Department for Education to reopen the scheme that offered places at an independent school to pupils from lower- income backgrounds in its catchment area for the same per-pupil payment from government as the state school equivalent (£5,600). While the response from the Department has been muted thus far, he has nonetheless managed to get 80 independent schools to sign up for any potential scheme. Ultimately, he hopes to see 70% of the sector taking part. Since those independent schools would only receive the state school equivalent funding, there would be no impact on the public purse. However, it would demonstrate the sector’s support for social mobility, particularly in those schools that aren’t in a position to build bursary funds to offer a similar option.

The union

Another informed commentator, Geoff Barton, general secretary of the Association of School and College Leaders (ASCL), revealed some interesting findings from his independent school members that he reported in a blog in June last year.

ASCL sent a survey to 505 independent school heads in England, and received 195 responses, virtually all from schools with charitable status. When asked about the impact on their school if charitable status was removed, the three most common responses were:

  • “An increase in school fees leading to some pupils being withdrawn and again being displaced into the state sector.”
  • “Cuts to bursary-assisted places for pupils.”
  • “Cuts to partnership working with local state schools.”

Other significant observations included:

  • “The increase in costs and decrease in pupil [numbers] would probably mean the school is no longer viable. Hence, over 100 people would be unemployed and hundreds of children would need to find other schools.”
  • “The school could close and the bursaries we offer a substantial number of pupils would have to be withdrawn with immediate effect which would be devastating for them.”
  • “We break even. Our fees, which we retain as low as possible, would simply have to increase to cover the additional costs. 95% of our parents both work to send their children here, foregoing cars and holidays in order to do so. A significant number of these would move their children and place them into the maintained sector.”

Any pupil having to change schools, particularly at short notice, would find the switch stressful, likewise for the staff who would lose their jobs.Barton concludes his blog by writing “the state would have to pick up the cost for each pupil displaced into a maintained school. The total bill could become very large very quickly. Whether it would entirely wipe out the ‘dividend’ from ending tax exemptions is difficult to say, but it would clearly make a sizeable dent. It seems extremely unlikely that there would be enough money left to pay for an army of teachers and careers advisors.”

The dissenter
The Labour Party has closed ranks around the policy. However, the Daily Mail has reported on a dissenting voice in Darren Jones MP, the business committee chairman, who allegedly told pupils at Redmaids’ High School in his constituency that he opposed the party’s plans to scrap charitable status. In response to the question “Why do Labour hate private schools?”, he told pupils that he is not “convinced by the numbers” and that the policy would not bring in the £1.7 billion claimed by his party.

The newspaper’s source added: “He said he was concerned about students who couldn’t afford private schools anymore and where they’d go and what it would cost state schools.”

Crunching the numbers
In a report produced for the Independent Schools Council, consultants Baines Cutler and accountants KPMG estimate that a VAT on fees policy could cost approximately £415 million by its fifth year and, therefore, will not provide the spending for other pledges made for education by Labour, leading to more than 90,000 pupils having left the sector, with another 53,700 leaving as bursary places become unsustainable for schools to continue to offer.

Some independent schools will close; many others would need to “scale-back their educational offer, whether by merging classes, stopping certain subjects, limiting curriculum choices, dropping co-curricular activities or reducing the pastoral care they provide.

”The potential strain on the state sector may lead to pressure to build new schools and/or classrooms in order to absorb influx pupils. Problematically, it would also be extremely difficult to predict the towns or regions where these pressures would emerge.

Andrew Maiden, is editor of Independent School Management





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