Independent schools attack ‘counterproductive’ Labour VAT policy

Sir Keir Starmer renews his pledge to remove the VAT exemptions of some 1,300 schools in England – but critics argue it would increase the numbers enrolled in the state sector

The Independent Schools Council (ISC) has warned that removing charitable tax status from their members by the Labour party would prove counterproductive, forcing school closures and crowding already oversubscribed state schools.

The ISC said research it commissioned in 2018 showed that axing VAT exemption on independent school fees would cost the government “at least £416m” in its fifth year, once the cost of schooling displaced pupils and VAT recovery is taken into account. The policy would force closure upon small independent schools, which “operate on tight margins and without large endowments”, the ISC said.

The ISC research was commissioned in response to the policy of the Corbyn-led Labour party to axe the VAT exemption for independent schools. The Scottish National Party in Scotland has already removed this from schools north of the border. Starmer repeated the policy pledge in 2021.

The ISC chief executive Julie Robinson said the best way to aid the educational catch-up effort was “partnership – not punitive taxes”.

In a speech “setting out Labour’s vision to deliver a fresh start for Britain” on 11 July, party leader Sir Keir Starmer said a Labour government would increase investment in education, with funding raised “by closing the VAT loophole for private schools”.

Sir Keir argued the Conservative party leadership hopefuls were “tossing out tens of billions of unfunded spending commitments just to play to the gallery of Tory MPs and members”. Labour would, he contrasted, “be[…] honest about how we fund every single thing we promise”. He said his government would reject the “tired formula of deregulation and tax cuts” and do more than “redistribution and public sector investment”.

Independent schools want to support state schools by building upon partnership work with their friends and colleagues in the state sector
– Julie Robinson, ISC

Estimates suggest that the private sector – which educates 600,000 pupils – saves the Department for Education £3.5bn per annum. Approximately 1,300 independent schools in England are registered as charities, about half the number in the country.

Robinson said the policy would “have the greatest impact on the families who work the hardest to pay the fees”.

The ISC chief executive said the independent school sector wants “to see a well-funded state school system” but questioned the policy “in which the numbers simply do not stack up”.

“Instead of counterproductive tax rises on parents,” said Robinson, “independent schools want to support state schools by building upon partnership work with their friends and colleagues in the state sector. Thousands of these projects are underway, improving education for all, and strengthening bonds between schools. Partnership – not punitive taxes – is the best way for independent schools to contribute to catch-up efforts and create more learning opportunities for all pupils.”

In a statement in 2021, the chair of The Headmasters’ and Headmistresses’ Conference, Richard Backhouse, said: “100% of HMC schools are involved in partnerships with state schools, social organisations or nearby sports clubs and provide real, tangible benefits to their local communities. Whilst the cost of these activities is unquantifiable, the obligation to provide public benefit is often part of schools’ DNA.”

No official statistics exist on precisely how much money changing the charitable tax status of independent schools would generate. Mel Stride, treasury minister in 2017, said: “No estimates of the sum likely to accrue to the public purse from changing the charitable tax status of independent schools have been made. Also, no estimate of ending the charitable status of independent schools has been made. Data held on charitable tax relief costs cannot be broken down into specific sectors.”

Read more: James Cleverly appointed education secretary

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