As a small company closely tied to the private sector, we understand the potential impacts of the UK Labour Party’s proposal to add VAT to private school fees. Private education provides significant benefits to our economy, offering educational choices, fostering competition, and attracting international students. However, there is a genuine debate to be had – VAT is most effective when applied broadly. There’s a strong argument that private schools should not be exempt.
Applying VAT to private school fees should be viewed as a revenue-raising measure rather than a judgment on the value of private education. This issue has been kicked around like a political football in the lead up to the 2024 general election. We recognise the need for a more ambitious and comprehensive approach, including economic and social reforms alongside educational policy changes, as being vital in tackling deep-rooted societal and education inequalities. In this blog, we explore the issue in a balanced way.
Arguments For Adding VAT to Private School Fees
Revenue Generation:
- Increased Funding for Public Education: Labour’s proposal could generate £1.5 billion annually, potentially improving state education facilities, resources, and teacher salaries.
- Redistribution of Wealth: Private school students are disproportionately represented in top universities and high-earning professions, as noted by The Sutton Trust. This proposal aims to ensure wealthier families contribute more to public funds, helping reduce economic inequality.
Fairness and Equity:
- Levelling the Playing Field: Private schools’ benefit from tax breaks that provide them with an unfair advantage over state schools. Adding VAT could help level the playing field. The Fair Education Alliance argues that reducing these disparities is crucial for a fair education system.
- Social Justice: Private schools often perpetuate social inequality by offering superior opportunities to children from affluent backgrounds. The Social Mobility Commission emphasizes addressing educational inequalities to improve social mobility.
Educational Standards:
- Investment in State Schools: Additional funds from VAT will be invested in state schools, potentially raising their standards and making high-quality education accessible to more children. Research by the Education Policy Institute advocates for increased investment in state schools to improve student performance and outcomes.
Arguments Against Adding VAT to Private School Fees
Impact on Private School Enrolment:
- Reduced Affordability: Adding VAT will increase the cost of private education, making it less affordable for middle-income families. The Independent Schools Council (ISC) warns this could lead to a significant decline in private school enrolment.
- Increased Pressure on State Schools: With fewer families able to afford private schooling, more students might shift to the state system. The National Association of Head Teachers has raised concerns that this could strain public resources, leading to overcrowded classrooms and diminished educational quality.
Economic Considerations:
- Potential Loss of Jobs: The private education sector employs many people. A decline in private school enrolment could lead to job losses in teaching and support roles. A report by Oxford Economics highlights the economic contributions of private schools, noting that significant changes could impact local economies.
- Economic Impact on Private Schools: Smaller or financially vulnerable private schools might struggle to remain viable, leading to closures. This would disrupt students’ education and negatively affect local economies. The Centre for Market Reform of Education notes the potential for significant upheaval in the sector.
Choice and Diversity in Education:
- Parental Choice: The proposal could reduce parental choice in education. Higher costs might force families to opt for state schools, regardless of their preference. Parents’ rights groups argue that maintaining choice is vital for a diverse and responsive education system.
- Diversity of Educational Approaches: Private schools often offer unique teaching methods and curriculums. Reducing the number of private schools might limit educational diversity and innovation. The National Education Union highlights the importance of maintaining a variety of educational approaches to cater to different learning needs.
The UK’s Class Problem and Educational Inequality
The UK has a significant class problem reflected in its unequal education system. This is blatantly unfair. Research indicates that children from disadvantaged backgrounds consistently perform worse compared to their more affluent peers. A study by the IFS found a substantial and persistent gap in educational attainment between rich and poor students throughout their school years and into adulthood.
Children eligible for free school meals are significantly less likely to achieve key educational milestones compared to their wealthier peers. At age 11, there is a 14-percentage point gap in attainment, widening to a 22.5 percentage point gap by age 19. This gap translates into long-term inequalities, affecting university graduation rates and subsequent earning potential.
Funding disparities exacerbate these inequalities. Per-pupil funding for state schools has declined in real terms, while private schools continue to benefit from significant resources. This funding gap has more than doubled in the past decade, further entrenching educational and social inequalities.
Lumos Education’s Perspective
As a company working closely with the private sector, we see the merits and drawbacks of both sides of the argument. On one hand, we understand the need for increased funding for state education and the pursuit of a more equitable system. On the other hand, we recognize the potential disruptions and economic impacts that adding VAT to private school fees could cause.
Historically, private school fees have outpaced inflation. For example, in 1997, the average annual fee for a day student was £4,182, which would be just under £8,000 today if adjusted for inflation. However, fees have more than doubled in real terms, increasing by 24% between 2009 and 2019. Despite these increases, the proportion of British children attending private schools has remained stable, indicating inelastic demand.
Introducing a targeted taxation policy that focuses on wealthier private schools, such as Harrow and Eton, could be an effective way to address educational inequality without unduly burdening smaller, specialist institutions. These more elite schools, which benefit from substantial resources and higher tuition fees, could contribute more to public funds, thereby supporting underfunded state schools and reducing the overall disparity in educational opportunities. However, applying the same tax to smaller, specialist private schools, particularly those catering to students with special educational needs (SEN), presents significant challenges.
The state sector is in dire need of increased investment, and we hope any incoming government post the general election prioritises the sector. We believe the legislation should be properly scrutinised to ensure there are safety nets in place for these more specialist, institutions with reduced budgets.
Conclusion
The debate over adding VAT to private school fees highlights the complex interplay between education, economics, and social justice. While increased investment in state education is necessary, the potential negative impacts on private schools and the broader economy cannot be ignored. It is essential to strive for policies that promote fairness, equity and overall improvement of the education system for all children.
Simplifying the VAT system could enhance revenue and efficiency in the UK. However, addressing broader societal inequalities that influence educational outcomes is crucial. The education system alone cannot compensate for vast differences in family resources and early life opportunities.
The need for a more ambitious and comprehensive approach, including economic and social reforms alongside educational policy changes, is vital in tackling these deep-rooted inequalities.
We are experienced in assisting families with entry into both private and state/public education in the UK. For more information and supported applications, please CONTACT US.
