Should Private School Fees Include VAT?

Posted on June, 2024

This blog addresses the proposal for VAT on private school fees.

I went to a private school, so I know how expensive it can be.

Back when I was young, however, the fees were significantly less than they are now (though still significant).

Recently, there has been more serious discussion amongst the political left about levelling VAT on private schools.

Why is this?

As usual, the government needs money.

Aside from the fact that our public services are stretched and crumbling, “current estimates of the total cost of government Covid-19 measures range from about £310 billion to £410 billion“.

The government is desperate to find money under every sofa it can, and the middle class and the upper class, who send their children to private schools are being raided by stealth.

Moreover, taxing private schools is a way for the government to look progressive as VAT on private schools will look progressive to voters.

A Private Sector Experiencing Difficulties

The private schools will have to raise their school fees significantly to continue operating.

In fact, private school fees have risen 8% since 2023.

Many private schools are going through some challenging times economically at present as student numbers are falling and yet more schools are entering the private sector.

I imagine that many schools that are struggling may attempt to raise their fees, but absorb some of the cost burden on parents. This underpricing, however, is likely to affect margins negatively.

The knock-on impact of underpricing services could affect teacher-student ratios, reinvestment, and staffing generally.

The fact is that the top private schools such as Eton, Harrow, etc, are unlikely to be affected much by this change – many of their clients are too wealthy to care.

The private schools which cater to the middle classes, however, will be negatively affected by this change.

Some ultra-wealthy people are also often able to claim back their VAT on their tax return if their child’s schooling is expensed through a business.

Why are there falling student numbers in private schools?

First, there appear to be more people looking for a more inclusive educational experience – many private schools cater for single-sex education.

Secondly, as inflation has been allowed to run out of control over the past year and a half, many people’s budgets have been squeezed.

The aspirational middle classes have been particularly affected by this as wages have not kept pace with inflation.

My Experiences Talking with Parents

Recently, I’ve been having conversations with parents who are looking to send their children to private schools or already attend them about this prospect of VAT being added in.

Many of the parents who already send their children to school are committed to keeping their children there in a stable environment. They are determined to preserve this status quo, as moving to school can sometimes be quite challenging and stressful.

Interestingly, there has not been a huge pushback from wealthy parents. Many parents seem to welcome the move – two-thirds believe it is right that VAT should be added.

Having spoken to parents applying for private schools I have noticed that they have cooled their interest since Labour has been considering the proposal.

The Failure of the Private Schools

In my opinion, whilst there are many positive aspects to private school education for the pupils able to attend, there has been a definite failure to keep costs proportional.

Although a private school is a private enterprise, they enjoy charity status, and in their governance have a responsibility to their local community.

Many private schools charge exorbitant fees simply because they can – but this doesn’t mean they ought to.

Should there not be a moral obligation for private schools to attempt to keep their fees affordable?

Furthermore, do private schools do enough for the local community to justify their charity status and avoid VAT?

Conclusion

The proposal to levy VAT on private school fees underscores the government’s need for revenue amid substantial Covid-19 expenditures.

While aiming to address public service funding, this move could significantly impact middle-tier private schools, which already face economic challenges and declining student numbers.

Parents are divided on the issue: some support the tax for equity, while others worry about affordability and stability for their children.

Ultimately, it is up to people to make their own decisions about whether private schools are providing enough overall value to justify them paying VAT. Parents who pay the fees also need to consider whether the extra outlay is worth it over the long term.

 

 

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