First UK private school shuts 'due to Labour's impending VAT charge on fees'

Keir Starmer's party has pledged to introduce the tax 'right away' if it wins power

Labour leader Keir Starmer talks to pupils. He has pledged to introduce VAT on private school fees 'right away' if his party wins power on July 4. PA
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A private school in Hampshire has become the first to shut ahead of Labour’s proposed VAT on fees, which the party has promised to introduce “straight away” if it wins the general election in July.

Alton School, an £18,000-a-year ($22,800) Catholic school with 370 pupils, will close at the end of term, citing dwindling pupil numbers and “adverse political and economic factors”.

In a statement on the school’s website, it said: “This proposal is based on a continued decline in pupil numbers, to the extent that the school has now become unviable.

“This is due to a combination of adverse political and economic factors.”

Families of pupils at Alton School said Labour’s tax plan “clearly had a terrible impact on intake for September”.

One parent of two children at the school told The Telegraph: “It seems like it’s been the final nail in the coffin. It’s been a topic of conversation for quite some time, and with Labour looking more and more likely to get in, it’s become more relevant.

“I know a decent proportion of parents are now looking at the state sector.”

The decision follows the publication of the latest annual census from the Independent Schools Council earlier this month which said the number of pupils joining private schools has fallen by 2.7 per cent in the last year amid rising fees – the biggest fall since data was first collected in 2011.

The ISC census, based on a survey of 1,411 UK independent schools conducted in January, said the average fee for a day school – which the majority of ISC pupils attend – is now £6,021 per term or £18,064 per annum.

Boarding school fees are the highest at £14,153 a term on average, up 9 per cent last year, while day fees for boarding school are £7,975, up 8.8 per cent last year. Among day schools, the majority charge between £3,000 and £6,000 a term.

In a foreword to the report, ISC chairman Barnaby Lenon said Labour's plan to charge 20 per cent VAT on private fees is “looming large in parents' minds” and private schools are concerned about pupil recruitment and retention.

He said: “A pupil bulge has made its way through the school system, but independent school numbers have not been rising to the same extent, leading to a decline in the proportion of children educated in independent schools from 7 per cent to 6 per cent.”

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Labour leader Keir Starmer has pledged to introduce the tax “right away” if the party wins power, as is widely predicted, in the early July election.

He told the BBC Radio 4's Today programme the tax will be introduced “as soon as it can be done”.

“Obviously, there will have to be financial statements, etc,” he said. "It is a question of the timetable in Parliament. But these first steps are intended to be done straight away."

Labour claims charging VAT on independent school fees and imposing business rates would raise £1.3 billion.

However, a recent report from the Adam Smith Institute found that applying VAT to independent fees may raise no money at all – and could even end up costing the government £1.6 billion.

The policy is widely expected to result in a reduction of private school rolls but estimates vary.

The London-based Institute for Fiscal Studies predicts the policy could result in a reduction of only 3 to 7 per cent of pupils.

Most surveys have suggested the true number could be much higher, with several recent polls indicating up to a quarter of private school pupils could enter the state system as a result.

A recent survey of 2,000 people with investable assets of more than £250,000 by wealth manager Saltus predicts that about 21 per cent of parents will have to remove their children from private school as a result of the rising costs.

The only real-world example of a country applying VAT to private schools is Greece, which imposed a 23 per cent tax on school fees in 2015, resulting in "general mayhem", with smaller schools shutting and pressure building up on state schools, Maxwell Marlow, director of research at Adam Smith Institute, told The National.

Updated: May 28, 2024, 7:35 AM