Treasury questions Labour’s proposed school fee VAT plans

  • 20th May 2024

Treasury analysis has analysed the situation should the Labour Party’s school fees VAT policy forced pupils out of private schools and into state education, The Telegraph has reported.

Treasury officials looked at the consequences if the extra cost of school fees led to either 5%, 11% or 17% of pupils leaving the independent sector. It was found found that if 17% – or 100,000 pupils – were forced out of private education. it would cost the state £650 million a year.

Estimates indicate the tax may raise as little as £1.35 billion a year, meaning almost half risks going straight out of the Treasury again to pay for pupils who have been taken out of private schools. Treasury analysis says Labour would only be able to afford three of the five education policies with the estimated £700 million that would be left.

Labour leader Sir Keir Starmer has said his 20% VAT proposal would raise £1.6 billion a year, money he has been earmarked for five separate education pledges, including a £2,400 golden hello for teachers and mental health staff in every school. Labour has said it will also use the money to recruit an extra 6,500 teachers and to fund early language interventions in every primary school.

Labour has hit back, claiming the findings are based on flawed data provided to the Treasury by Conservative political advisors. The party rejected the suggestion that there would be any cost to the state from fee-paying pupils leaving private education.

Craig Tracey, the deputy chairman of the Conservative Party, said: “Not only will Labour’s tax on aspiration punish families, but it doesn’t even add up. Once again Labour are spending money they don’t have, meaning more borrowing and higher taxes on working people to plug the gap.”

Labour also wants private schools to pay business rates, raising another £120 million a year.

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