Labour says it no longer intends to strip private schools of charitable status

Opposition previously said it opposed fee-paying schools avoiding tax by operating as charities

Pupils at Eton College. Getty Images

Labour has said it will no longer strip private schools of charitable status – but will force them to pay VAT, after apparently backtracking on the plans.

The opposition, which is tipped to win the next general election, previously said it was opposed to fee-paying schools avoiding tax by operating as charities.

It said the move was no longer needed to fulfil its commitment to charge 20 per cent VAT on fees and make independent schools start paying business rates.

Labour leader Keir Starmer has insisted he is not launching an attack on private schools with the plan.

He said he does not believe the institutions are an obstacle to opportunity, but he wants to ensure state schools are "just as good".

"We have to do something about the appalling state of our schools," he told the BBC's Political Thinking with Nick Robinson podcast.

"It is not an attack on private schools. It's just saying an exemption you have had is going to go."

He also said private schools do not have to pass the additional costs on to parents in the form of increased fees.

"The school doesn't have to pass this on to the parents in fees. And each of the schools is going to have to ask themselves whether that's what they want to do," he said.

The decision not to strip private school of their charitable status means they retain some of the current perks.

They include being able to claim gift aid on donations and not paying tax on annual profits, which must be reinvested in education.

Party sources said they only ever intended to remove the VAT and business rates perks, saying charitable status was used more as shorthand for the policy.

A Labour spokesman said: "Our policy remains. We will remove the unfair tax breaks that private schools benefit from, to fund desperately needed teachers and mental health counselling in every secondary school.

"This doesn't require removing charitable status. However, driving high and rising standards for every child against the backdrop of a broken economy requires political choices. Labour isn't afraid to make them."

Julie Robinson, chief executive of the Independent Schools Council, is critical of the policy.

She said: "If Labour takes away the tax relief associated with charitable status for independent schools, the policy would create a two-tier system within the charity sector, setting a worrying precedent that any charity seen as not reflecting the political ideology of the day could be subject to additional taxes.

"We would love to work with Labour to build more effective ways to achieve our shared goal of improving education for all young people."

Labour's policy costings only ever took into account charging VAT on school fees and ending the business rates exemption, rather than the other tax breaks.

But shadow education secretary Bridget Phillipson had spoken of "scrapping charitable tax status for private schools to fund the most ambitious state school improvement plan in a generation".

Chief Secretary to the Treasury John Glen said: "Labour has been forced to U-turn on one of their major policies – this time admitting that their schools tax hike just doesn't work."

Also in the interview, Mr Starmer discussed his concerns for his children, 12 and 15, if he does manage to become prime minister, and how he will try to maintain their privacy.

"That is probably the single thing that does keep me awake – how we will protect them through this," he said.

"Now, the moment we're in the stage, 'Let's take each day as it comes'. So we don't do the great planning or anything like that.

"That would be, you know, presumptuous. But we do try to protect them."