Will Labour add VAT to school fees?

The Labour Party has confirmed its intention to implement a policy (originally announced in its 2019 manifesto) to remove the exemption from VAT on independent school fees.

Labour’s proposals for school fees in 2024 include several key education policy measures aimed at reforming both private and state education sectors in England. The most significant of these proposals is the plan to scrap the tax exemption status currently enjoyed by private schools. This change means that private schools would be required to pay VAT and business rates, a policy expected to raise £1.7 billion annually for the public purse, which Labour intends to reinvest in the state education system.

Labour has outlined an ambitious education agenda that includes:

• Implementing a ‘National Excellence Programme’ to increase the number of ‘outstanding’ schools and improve the educational outcomes for all children.
• Establishing a £347 million teacher recruitment fund to address vacancies and skills gaps in the education sector.
• Allocating £210 million to ensure teachers have the right to 35 hours of Continuing Professional Development (CPD) annually.
• Reforming Ofsted to play a more supportive role in improving schools.
• Providing access to extracurricular activities for all children, with a focus on ensuring opportunities for learning musical instruments or visiting the seaside by the age of 10.
• Reforming the citizenship curriculum to include practical life skills like financial literacy.
• Making digital skills a mandatory component across the curriculum and renewing the 1.3 million devices distributed during the pandemic with a £33 million fund.
• Introducing two weeks of compulsory work experience for young people and ensuring every school has access to professional careers advice weekly.

Labour intends to implement these changes immediately if it wins power, without phasing them over several academic years. The party’s focus on removing the charitable status from independent schools and imposing VAT on private school fees is positioned as a move to ensure fair taxes and invest in raising standards within state schools【10†source】.

This comprehensive approach aims to address various aspects of the education system, from teacher recruitment and development to student access to quality education and skills for the future.

Opponents of Labour’s proposals to add VAT to private school fees and to scrap the tax exemption status of private schools have several arguments. Critics, including some from within the private education sector and political opposition, argue that these measures could have unintended consequences:

• Financial Viability of Smaller Private Schools: Some argue that the removal of tax exemptions could threaten the financial viability of smaller, less wealthy private schools that operate with tight budgets. They fear that these schools might struggle to absorb the additional costs without significantly raising fees or potentially facing closure.
• Increased Pressure on State Schools: If some private schools were to close as a result of the policy, there could be an increased demand for state school places. This sudden influx could put additional pressure on state schools, potentially affecting class sizes and the allocation of resources.
• Impact on Scholarships and Bursaries: Private schools often offer scholarships and bursaries to students from less affluent backgrounds. Critics worry that the financial strain caused by VAT and the loss of business rates relief might force schools to reduce these offerings, thereby limiting opportunities for talented students who cannot afford full fees.
• Questioning Revenue Estimates: Some opponents question Labour’s estimate that the policy would raise £1.7 billion annually. They argue that the actual figure might be lower, especially if some schools close or reduce their operations, and if the policy leads to a decrease in the overall number of fee-paying students.
• Broader Economic Impacts: There are concerns about the broader economic impact, including potential job losses within the private education sector and related industries, which could offset some of the financial gains from the proposed tax changes.
• Equity and Choice in Education: Opponents also argue that the proposals could limit parental choice and the diversity of the education system. They believe that parents should have the freedom to choose the type of education that best suits their child, and that private schools play an important role in offering alternatives to state education.

These arguments reflect a broader debate about the role of private education in society, the best ways to fund and improve public education, and how to ensure equity across the education system. While Labour’s proposals aim to redirect resources to state schools and address inequalities, the opposition underscores the complexity of education funding and the potential for unintended side effects.