The biggest grouping of independent schools in the UK has announced it is able to absorb part of the cost brought about by the introduction of VAT on school fees, without having to pass the full 20 per cent levy on to parents.
The Girls' Day School Trust (GDST), which runs 23 private schools and two academies across Britain, will raise fees by 12 per cent in January next year, when the new Labour government's policy of applying 20 per cent VAT to school fees comes into effect.
In a letter to parents this week, the Trust's chief executive Cheryl Giovannoni said it had been able to “mitigate the full financial impact of 20 per cent VAT and the removal of business rates relief by using the opportunities that our size and scale provide, and by passing on any benefit we may receive should we be able to reclaim VAT on other aspects of our running costs.”
GDST, which has schools in London's affluent areas of Kensington, South Hampstead and Blackheath, charges up to £25,000 a year for day pupils.
Meanwhile, Eton announced on Friday that it would be passing the 20 per cent VAT charge on in full to its fees, meaning the cost of sending a child to the world famous institution will go up from almost £53,000 to nearly £63,000 a year.
In a letter to parents, Eton said it was “continually reviewing our cost base to ensure we keep costs as low as possible, while not compromising the quality of the education we provide”.
Parents with sons on 100 per cent bursaries will not be affected, while those on partial bursaries will see them increased to cover the cost of VAT, Eton said.
The average annual fee for day pupils at private schools in the UK is £18,064, according to the Independent Schools Council. After VAT is applied that could rise to £21, 677.
The new Labour government said in its election manifesto that it would introduce VAT on school fees, which it calculates will raise £1.6 billion, part of which will be used to fund an extra 6,500 teaching posts in state-run schools. However, it was thought the VAT rise would take effect at the start of the school year in September 2025. It is now scheduled to begin on January 1 next year.
In addition, the government has taken measures to ensure wealthy parents do not evade VAT by paying school fees far in advance, before the tax takes effect.
However, large private schools and groups such GDST have the benefit of scale and can offset the VAT costs through a variety of measures, including budget freezes and enhancing cash flow efficiencies, but also by expanding activities abroad and attracting more foreign pupils, who are sometimes charged higher fees.
'Nothing against private schools'
Parents usually have to give a term's notice if they intend to withdraw their child from a school.
This normally would mean that, if they felt they could no longer afford the fees because of the VAT introduction on January 1, they would have to have given notice in July.
GSDT has extended that deadline because VAT is being levied on school fees halfway through the school year, and parents now have until September 8 to withdraw their children.
Prime Minister Keir Starmer, whose own children attend state school in north London, has repeatedly said he has “nothing against private schools”, which educate around 600,000 children, or 6.5 per cent of the country's pupils.
Many parents are now assessing whether to move their children from fee-paying private schools to state schools.
Some are planning changes such as postponing retirement, taking new jobs, cancelling holidays or asking children's grandparents for help to make ends meet. Others are considering moving home to be closer to a good state school.
“There is real anxiety,” said Tony Oulton, headmaster of Hulme School in Oldham in north-west England, which has 730 pupils aged between two and 18.
He feels the assumption the Labour Party has made that all private school parents are wealthy and can afford the 20 per cent fee rise as a result of VAT is misleading. He says his pupils' parents are “mostly working class, lower middle class, aspirational, hardworking”, with “many of them working two jobs in order to pay the fees”.
However, according to the UK Parliament, 75 per cent of children attending independent schools come from families in the “top three income deciles, and most of these from the top decile”.
Smaller schools more at risk
While some observers contend that the VAT imposed on private schools will lead to overcrowding in the state sector, the Institute for Fiscal Studies calculated that the number of children in state schools will actually fall by 2030 due to a forecast decline in the UK population.
It is generally accepted that the disparity between state and private schools widened significantly over the past decade, as government funding fell and fees rose.
“Fees have increased significantly in private schools, while spending in the state has been cut until last year,” said Harry Quilter-Pinner, interim director at the Institute for Public Policy Research (IPPR) charity.
“State schools over the last 10 to 15 years have had to be innovative about how they spend their money. And I think the Labour government is asking private schools to do the same thing,” he added.
Critics of the government's VAT policy on fees insist that the smaller independent schools will suffer most, rather than the well-known, large institutions such as Eton, Roedean and Harrow, pointing to the fact that two private schools in Scotland have already closed.
“It will not hit the famous big-name schools, but it will hit small-town schools, families of children with special educational needs and certain religious faiths,” said shadow education minister Damian Hinds.
“Most of all, in the biggest way, it will hit state schools. We do not know how big the displacement effect will be of families who can no longer afford to send their children to their independent school, and we cannot know because there is no precedent, but we know that it will be a material number.”
