Labour repeatedly uses the expression “tax breaks” about the fact there is no Value Added Tax (VAT) on education, including independent education. In a recent Commons debate on this, I was very clear as to my view on VAT on fees:
“These repeated references to ‘tax breaks’… simply just paying extra tax on top of people’s income tax that they have already paid… is a very misleading description.”
Labour’s plans for the independent education sector under Keir Starmer are not as draconian and undemocratic (and indeed questionable in law) as they were in the Corbyn period – when it looked like they were trying to abolish the sector altogether – but they are still very worrying indeed. With Labour so far ahead in the opinion polls the sector is, overall, probably more rightly concerned than they were towards the end of 2019.
Inherently charitable
Politicians often speak or write about “long held principles” in national life, but sometimes these prove not to be as rooted in antiquity as expected. However, the principle of education as being an inherently charitable act has stood for a very long time indeed. Perhaps as far back as the 1547 Chantries Act which provisioned for “the keeping of grammar schools”. Certainly since 1601, with the passing of the Charitable Uses Act which explicitly specified for the first time what constitutes charitable activity. This included “schools of learning” and “free schools and Universities”.
“The principle of education as an inherently charitable act has stood for a very long time.”
This language was also adopted over two hundred years later in the Mortmain and Charitable Uses Act of 1888. Indeed, the ethos of charity runs through the veins of many independent schools such as Winchester College, for example, which was established to “educate poor scholars intent on school studies suffering from want of money and poverty.”
Tax applied to the goods and services we buy is of course a much more recent idea, with the precursor to VAT, the Purchase Tax on luxury goods dating from 1940, rooted in the wartime need to marshal resources efficiently.
School fees were of course excluded from this from the very beginning. Under the terms of the 1988 Taxes Act, registered charities – such as many independent schools – do not pay a range of taxes; they are entitled to relief on their business rates and are not subject to capital gains tax or VAT.
The most significant recent change in this areas was in 2006 with the Charities Act, from which point schools were no longer automatically entitled to charitable status but had to actively demonstrate “public benefit”.
Serious implications
Labour’s plan has serious implications for all schools and for society more broadly. Of course, independent schools – and the organisations that speak for them – will want to shout out about all the public benefit that independent schools provide. They are right to do so, even though I believe no amount of reasoned argument is going to dissuade them from their proposed course of action if they win the General Election in 2024.
Compelling financial arguments
I don’t believe the compelling financial arguments of the Baines Cutler Report will change their minds, even though it proved that VAT on school fees will ultimately cost the taxpayer more, close historic schools and damage state educational provision.
Nor do I think the legal minefield of trying to apply VAT to one form of education and not to others will shift them. Nor the risk to the partnership work undertaken with the state sector that the vast, vast majority of independent schools engage in (well documented in the Independent Schools Council’s annual Celebrating Partnerships report) .
“I don’t believe the compelling financial arguments of the Baines Cutler Report will change their minds.”
No, Labour is not listening and what this will mean is that excellent schools – those that survive the new tax burden – will not be able to offer access to their academic excellence to as many bright young people from less advantaged backgrounds through their bursary programmes as they now do.
People like Keir Starmer, in fact, the son of a nurse and a toolmaker who benefitted from an independent school charity: he attended what became an independent school following a previous Labour attack on social mobility with the abolition of direct grant grammar schools in the 1970s. This was followed by the abolition of the Assisted Places Scheme, one of New Labour’s Pledge Card items, in 1997. See the pattern here?
The right thing to do
I visit many independent schools and I know that, where they can, most will move heaven and earth to continue to do the good work they do, even if they lose charitable status and, I would argue more seriously still, if they are forced to charge VAT on school fees. They do this work because it is the right thing to do, not just to tick a “charity” box or achieve some sort of vague “feel good factor”.
“Most will move heaven and earth to continue to do the good work they do.”
This is evidenced by similar work that many proprietorial, profit making, schools do too without the same legal obligation. However, with VAT on fees, some will not only cease doing this work, they will close altogether and others will be forced to choose between bursaries and partnership work and keeping fees at as an affordable level as possible for the “squeezed middle”. (The middle in this context is defined as those on decent but not stratospheric incomes who already make great sacrifices for their children’s education, and thereby relieve pressure on state schools and thus improve provision there too).
Tin foil hat
This may seem to some to be reaching for the tin foil hat but nevertheless I see a subtext to Labour’s plans for independent schools that is not mere conspiracy theory. I think their plans are designed to make independent education ever more elite, thereby making it harder for politicians, such as myself, to advocate for.
I often use the analogy of a jacuzzi in the back garden versus a private jet in this context. You may never have a jacuzzi in your garden, but many of us would probably be able to afford to install one if we chose to do so. A private jet, on the other hand, is, for virtually everyone, an unobtainable fantasy for a distant elite with no connection to our lives. That is what Labour wants independent education to be: the private jet not the jacuzzi.
“For virtually everyone, a private jet is an unobtainable fantasy for a distant elite.”
Thereby people are ever more dependent on the state and feel that for them – and for virtually everyone they know – no realistic alternative exists. Gone will be the comfort of knowing independent education is there, providing a comparator and a yardstick, even if you never use it yourself. That is bad for society and bad for state schools themselves; they will no longer have other kinds of schools to be compared to nor the chance to learn from the freedom to innovate that independent schools possess and which the wider school system can subsequently adopt – or reject.
Digging deep
It would suit the argument of those opposed, like me, to Labour’s planned assault upon independent education to assert that their imposition of VAT on fees will lead to immediate catastrophe for the sector. I fear that, although there will be some schools that close right away, the real impact will take longer to be felt but will be no less severe for that.
Even though many are already digging deep, I think most of the parents of children already in the independent system, especially in Year 10 and above at the time Labour legislates, will not wish to disrupt the education of their sons and daughters and will go from already large sacrifices to Herculean ones to see them through. Instead, the damage become evident later on.
“The real impact will take longer to be felt but will be no less severe for that.”
It will be the parents of prospective Year 5s who had hoped to educate their children independently who see fees rise out of their reach. It will be the parents of future Year 8s who were going to pay for Years 9 through to 13 who decide just to pay for the Sixth Form instead, or not at all.
Value and strength
The sector must continue to tell all who are prepared to listen about the value and strength they provide to the educational ecosystem of this country. Alas, I fear those who are simply not going to listen are those who, if elected, will be able to cause great harm to independent schools the length and breadth of this land.
Their actions will do the most damage of all, paradoxically, to those schools which are the most accessible and the least “elite”. There can be no doubt that every school in the independent sector must have Labour’s educational policies at the very top of their risk registers and should already be preparing for how to cope should they come to power.
This article will appear in the latest edition of Independent School Management Plus Magazine, available online on Monday, May 1.