The cost of UK private schools could rise by about 15 per cent under a Labour government, according to a new report.
Labour has pledged to remove the charitable status of paid schools and impose VAT on fees in an attempt to break what it calls the “class ceiling”.
The move is predicted to raise around £1.6 billion in VAT and £100 million in business rates – almost £1 billion of which will be used to improve the state education sector.
The cost to parents
School fees have risen at an average of 7 per cent every year between 2000 and 2010, and 4 per cent annually between 2010 and 2019.
The addition of VAT will be more on top.
The report, from the communications firm the DRD Partnership, claims schools are unlikely to pass the full 20 per cent cost on to parents.
“Schools would, like any other business, be able to offset the VAT paid on goods and services supplied to them for business purposes (such as utility bills, maintenance costs or professionals’ fees),” said the report.
“VAT charged on capital expenditure, like new buildings or other major projects, may also be recoverable. Schools are therefore unlikely to be forced to pass on a full 20 per cent VAT increase to fees.”
A rise of around 15 per cent seems likely, it said. Labour has said the cost increase could be more like 10 per cent.
Knock on effect
Experts have the cost rise will prompt some parents to pull their children out of private schools.
Around 615,000 children, or 7 per cent of all British school-age children currently attend private school in the UK.
The Institute of Fiscal Studies estimates that up to 40,000 pupils would join the state sector as a result of the changes, at a cost of up to £300m per year to the taxpayer.
When the policy could come into force
It is not yet clear when the policy would be introduced. But if the party wins the next election, the policy could appear in its first King’s Speech in autumn 2024, said the report.
Even then the changes would not be introduced immediately, and they may not even take effect until late 2026.
“The timing of its implementation will depend on whether the measures are included in a Finance Bill following a first Labour Budget, in which case the changes could be enacted by the spring of 2025, coming into force in the autumn,” said the report.
“Secondary legislation (i.e. using amending regulations to bring about the reforms) would be another fast track that would imply a similar timeline. Alternatively, if the party used primary legislation, the changes might have to wait until late 2026 to take effect.”