Keir Starmer insists private schools 'won't close' under Labour's VAT plans

Party has pledged to include the tax in its first budget

Labour Party leader Keir Starmer during a visit to Whale Hill Primary School in Eston, Middlesbrough. PA

Labour leader Keir Starmer has said there is “no evidence” private schools will close under the party’s plans to add VAT to fees.

Mr Starmer, who polls widely predict will become the UK’s Prime Minister next week, said independent schools will be forced to adapt instead.

Speaking to Sky News, he said: "They've had lots of increases in costs over the last 14 years and they've accommodated it.

"There's no evidence to show these schools will close. They don't have to pass the cost on to parents."

Critics of the flagship Labour policy, first announced in the party's 2019 manifesto under Jeremy Corbyn's leadership, point out that VAT is a tax on the consumer, not the business - adding that staffing costs account for more than 75 per cent of schools’ budgets, leaving them little headroom to make cuts.

Unions have raised concerns about the plans, warning they could result in job losses, with Patrick Roach, general secretary of the NASUWT union, warning private schools could struggle to maintain footfall.

Two schools recently announced they will close this summer, and both cited the impact of the impending tax as a factor in the decision.

Mr Starmer called the decision to tax private school fees “a difficult choice”.

“But they’re businesses in the end and they’re very successful in the round.

“I want them to thrive. But we need to make this choice, because in the end, if I want teachers in our state secondary schools, I have to answer the question you would put to me, just how are you going to pay for that?

“You’re going to pay for that by getting rid of the tax breaks for private schools, and use it to invest in the teachers we need in our state secondaries.”

The policy is expected to lead to a drop in private pupils, with estimates ranging from 3 per cent to more than 20 per cent.

Around 600,000 children, about 6 per cent of UK pupils, are currently educated privately.

Two of three schools The National recently spoke to reported a 20 per cent fall in admissions for the next academic year.

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.

Campaigners against the policy, including members of the Education Not Taxation parent group, point out that Labour could have raised the money in other ways, such as by removing the 5 per cent tax break casinos and other betting sites receive, which is currently set at 15 per cent.

The group told The National there is little evidence of how adding VAT to fees will affect schools and children, pointing to Greece’s brief experiment, which led to the closure of private schools, as well as problems for the state sector.

“More importantly, there is no evidence schools won’t have to close. This education tax should not even be considered without a full impact assessment,” said the spokeswoman for the almost 9,000-strong parent group.

With proper industry engagement, Labour may observe thin operating margins and enrolment challenges that already reflect concerns about the tax, she added.

The policy is expected to come into force at some point next year, after shadow chancellor Rachel Reeves confirmed the plans would be included in Labour’s first budget in September. She did not, however, confirm a date for the implementation.

Alice Haine, personal finance analyst at online investment platform Bestinvest by Evelyn Partners, said schools are stepping up their correspondence to parents, explaining how the imposition of VAT, set at 20 per cent, will impact fees in the future.

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Ms Haine said: “When you consider the top boarding schools will have annual fee levels hovering around the £50,000-mark or higher next academic year, putting a five-year stint at a secondary boarding school at £250,000 for one child, private education will become a luxury only afforded by the ultra-wealthy, rather than the domain of aspirational professionals willing to make sacrifices elsewhere.”

Increasing numbers of parents may be forced to abandon their plans to educate their children privately, opting for a taxpayer-funded state education instead.

Ms Haine added: “For those with children already in the private system, the threat of further fee increases when they are already juggling higher household bills – a result of the cost-of-living crisis - and a much heavier tax regime, leaves parents with a difficult decision.”