In a newspaper article five years ago, Michael Gove singled out the tax exemptions enjoyed by private schools thanks to their charitable status as one of the ‘burning injustices’ of our time. He took it for granted that scrapping these benefits would raise money and proposed spending it on children in care instead. ‘How can this be justified?’ he said of the exemptions. ‘I ask the question in genuine, honest inquiry.’
Answer came there none, and Keir Starmer has now said that private schools will be treated like any other commercial business if Labour wins the next election. Since that looks quite likely, I thought I’d take up Michael’s challenge and say why I think that’s a bad idea. The ‘genuine, honest’ answer is that ending private schools’ tax benefits will lose the Treasury money, harm social mobility and won’t make our education system any fairer.
Starmer claims adding VAT to private school fees will raise £1.6 billion a year, while making the schools fully liable for business rates will raise another £104 million, and he has pledged to spend this bounty on a ‘catch-up’ programme for children who fell behind during the pandemic. A worthy cause, to be sure, but the Labour leader will have to find the money from somewhere else because his sums don’t add up.
To arrive at the £1.6 billion figure, Starmer has assumed the total amount parents spend on private school fees in England and Wales won’t change as a result of this policy and multiplied the current total by 20 per cent. But according to an analysis by Baines Cutler, a consultancy that provides financial advice to the independent schools sector, that’s way off the mark.
To begin with, if private schools become liable for VAT they will be able to claim it back on supplies, such as building materials and transport, which means their costs will fall and they can afford to drop their fees a little before adding VAT.