The VAT threat to proprietor schools
All the talk of Labour’s VAT plans are of how they would affect charitable independent schools. Claires Court Schools’ James Wilding reveals how they will affect his proprietor school business
The threat to impose VAT on independent schools has long been with us, though never has it been quite as real as just now. Writing at a time when the prime minister has just sacked the chairman of his party for a “serious breach of the ministerial code”, the country has witnessed 40-plus months of Conservatives acting ‘ultra vires’, from the time of Boris Johnson’s proroguing of Parliament in September 2019.
It seems as though all of the pundits agree that the next administration at Westminster will be led by Labour, and, as indicated by Sir Keir Starmer in countless speeches, his party’s approach is to be focused on the removal of charitable status from independent schools, thus being able to remove some of the tax breaks, such as business rate relief, some elements of VAT relief and their profits from trading.
So far so good for this school proprietor, you might think. Being a regular business owner looking after our school, we’ve long been used to paying our taxes, managing our minibus usage under business rules, and paying business rates too. The ‘biggie’ threatened by the Labour Party’s proposals is to levy VAT on school fees too, essentially exposing our parents to tuition fees that are 20% higher than current rates, and affecting all independent schools, whether they are charities or not.
The number of independent schools that are not charities has been understated in press articles for years, permitting journalists to suggest:
- That independent schools are almost all charities, and
- That they all have huge revenue streams giving rise to large surpluses which don’t deserve to be untaxed, given the parlous nature of state education in UK
My brother Hugh and I lead one of the largest proprietorial schools in the country and have done so since 1988. It’s certainly tough to run any business in the 21st century, just a quick look at our fee rises over the past 20 years asks the big question: why have our fees risen by 140% since 2002? – a rise found across the board and far above the inflation rate which over the same period has caused prices to rise by 108%. From Claires Court Schools Ltd the picture is very clear: we are used to manage buying, selling, hiring, firing, project management and marketing using a small team of five, and school secretaries managed on three sites our first aid needs. Simply by way of example, we have the same number of school secretaries, but we now have six nurses, a finance team of five dedicated to that function, three in HR, a transport manager and admin, two in marketing etc. We believe we are as agile a business as we have always been, but the onward rush of government regulations inevitably means we are now covering all sorts of bases we could not have dreamed of at the turn of the century, requiring almost an army of independent verifiers that we are safe as an institution to trade, whether that is in air, fire or water!
The good news for private businesses is that we don’t have to trade with a requirement to generate high surpluses, indeed in many ways we are encouraged to run lean, mean and make as little profit as is good for the tax bill. Equally, if the VAT rules change, then we can choose to diversify more quickly into other areas of business activity associated with being a trading company in the Royal Borough of Windsor and Maidenhead (RBWM). We’ve a huge network locally of allied trades and businesses, we’ve 67 acres of prime land in one of the most desirable business and residential areas of the Home Counties, now freshly serviced of course by the Elizabeth line, so I imagine we could adjust quickly into the new, unfamiliar territory of being a business.
The trouble is, if the VAT rise is imposed by an incoming administration, and we’ve not had time to adjust and diversify, then the effect on our current parent population would be devastating. Our recent census numbers show 95% of our parents are both working, not just to pay school fees of course, but to cover some of the highest house prices and transport costs too. As a community, we may be large enough to sustain the significant impact such a price change would have on enrolment, but many of the smaller independent schools would quickly cease to be viable, reducing quickly the percentage educated in our sector in RBWM to well below 20%.
When the Ukrainian war meant we had families choosing to host mothers and their children, we reached out to look after as many as seemed necessary. We still have 15 such children in our school, many of whom had found it difficult, if not impossible, to find a local school nearby that would welcome them in. It’s not just this latest crisis driving ‘unwanted’ children through our admission portal.
Having closed their pupil referral units and special needs settings, or as appropriate, not expanded the latter to meet the rising population tide, let alone the growing number of children being identified with SEN or medical needs, we now find ourselves increasingly central to the needs management for our area. Indeed a brilliant new school, Beech Lodge, has opened to cater for children with social and emotional difficulties such as anxiety and school refusal due to developmental trauma and adverse childhood experiences, as well as communication and learning differences. The school is now full, almost all places fully funded by their sponsoring local authorities. Both my school and those others such as Beech Lodge find that our local authorities simply don’t have the available SEN budget to meet the growing need, and the same story is true of other services too, such as child and adolescent mental health and wider NHS children’s services.
So here is the caution to any incoming administration seeking to ‘milk’ our sector of the additional millions it needs to upgrade state education – the plan won’t work. If my town is a microcosm of UK plc more generally, we provide an incredible, valuable service to the families we serve and the community in which we are to be found. From the incoming ‘talented’ executives, military command and service leaders, we offer them a one-stop-shop for their children, whether native speakers or not. For those domiciled locally, many chose us for only one, not all of their children, because that child’s needs were not looked after elsewhere sufficiently. We currently have some of the country’s finest tennis players in school, funded by their parents but supporting the LTA’s wider mission to provide high-quality coaching environments which enable the best players from the regions to train regularly with each other. And our scholarship programmes look after many more sporting categories, and include the arts, drama, music and the most gifted academics too.
My final cautionary note is for all “to be careful what you wish for”. Introducing VAT into education is going to strike everyone, state and independent, and cause another expansion of non- productive administrators into school life. It’s incredible just how many ‘favours’ education per se is given being by its nature deemed ‘charitable’. Taking education into the VATable activities of the country will inevitably take money away from adults leading teaching and learning in schools, reduce still further the available workforce to meet our children’s needs now and reduce the skills base for the future success of our society. It might seem that ‘we’ are an easy target, but with 93% of the country educated by the state, it’s really not time to take further cash away from the classroom or increase the bureaucracy of schools still further.
James Wilding is co-proprietor, academic principal and head of senior boys of Claires Court Schools.