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Labour’s private school VAT raid has already cost taxpayers £22m

Keir Starmer's VAT plans for private school fees
Keir Starmer's VAT plans for private school fees

Labour’s proposed VAT raid on private schools may have already cost the taxpayer approximately £22m, new figures suggest.

The Independent Schools Council (ISC) on Friday revealed that nearly 3,000 fewer pupils started at private schools this academic year compared to 12 months earlier.

The vast majority will have gone to state schools instead, where the average price of educating one pupil for a year is, according to government data, £7,460 - meaning a total cost of £21,924,940.

The ISC said the drop in the number of new pupils indicated that “the spectre of VAT is looming large in parents’ minds”.

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It comes amid an 8pc year-on-year increase in the cost of fees, with families now paying more than £6,000 a term on average, according to the ISC annual survey.

Average fees for boarders went up nearly 9pc and now stand at a record £42,459, while the average fee for a day school is now more than £18,000 a year.

Sir Keir Starmer has made ending tax breaks for independent schools a flagship policy, claiming it would generate as much as £1.7bn to spend on publicly funded education.

He has said Labour would immediately make private schools pay 20pc VAT, from which they are currently exempt, by removing their charitable status. However this would leave parents facing a major increase on their fee bills.

Julie Robinson, the ISC’s chief executive, said: “Independent schools save the taxpayer nearly £4.5bn  per year by educating students who would otherwise take up a place in the state sector.

“We know from headteachers that the spectre of VAT is looming large in parents’ minds – we are already seeing the impact on demand that has had.”

It follows expert warnings that a quarter of families could withdraw their children from the independent sector if Labour win power and fulfil their pledge.

Sir Keir Starmer announced his intention to retain the Corbyn era policy in 2022.

Labour has said that by taxing private schools they will ensure more spending on state education and Sir Keir has already announced that the extra money for the state sector would mean “mental health staff in every school, more expert teachers in the classroom, more creativity, speaking skills, confidence”.

However, headteachers said on Thursday that the figures showed middle-class parents were already being priced out of private education and said Labour’s plans would further concentrate the proportion of those who are able to afford to send their children to independent school.

The ISC, which represents almost 1,400 private schools, said a sharp rise in fees caused by the imposition of VAT risked an “acute shock to the system”.

Its report said the annual increase in fees was similar to inflation at the time schools set their fees for the coming academic year in Easter last year.

Silas Edmonds, headmaster of Ewell Castle School in Epsom, Surrey, said less wealthy parents were already struggling to afford private education and that Labour’s tax raid would make the problem worse.

He said: “Rising fees are polarising private school education to become even more elite and unobtainable.

“At my school, we have a lot of aspirational working-class and lower-middle-class families who are making huge sacrifices to get their kids here.

“But about 18pc of our incoming Year 7 starters have pulled out because parents are worried about the VAT hit.

The proportion of pupils in private education in England has fallen from 7pc in 2013 to 6.6pc today, according to separate Department for Education data.

The number of boarding school students fell by 1,429 – or 2.2pc – from 66,115 to 64,686, the ISC said.

There were 2,939 fewer new pupils joining private schools in 2023 compared to 2022, a decrease of 2.7pc, the steepest fall since the education body started collecting data in 2011.

A government source suggested that the extra £22m it would cost to provide education for these students was the equivalent of paying 400 teachers.

Gillian Keegan, Education Secretary said: “Labour are playing party politics with children’s education, and that comes at a very real price.

“This report lifts the lid on the damaging impact of Labour, with the early signs clearly showing they are already costing taxpayers £22m, putting unnecessary pressure on our schools.

“Yet again, Labour put ideology ahead of good policy – costing taxpayers, and damaging children’s education, in both private schools and state schools alike.”

In March, a report by the Adam Smith Institute (ASI), a free market think tank, suggested the policy could cost the taxpayer as much as £1.6bn a year.

On Thursday the institute’s director of research Maxwell Marlow said: “It is concerning to see a reduction in the number of students going to independent primary schools, which is likely a consequence of plans to levy VAT on independent school fees.

“This reduction will have knock-on effects for junior schools, including plans for employing new teachers and teaching assistants. These children who would have otherwise attended independent schools will enter state education at a cost to the taxpayer. We once again urge policymakers to exercise caution.”

The ISC annual census figures show a 0.1pc reduction in the overall number of pupils at private school, the first fall since 2013, excluding the pandemic.

Boarding school fees rose from £13,002 a term in the 2022-23 academic year to £14,153 in 2023-24, an 8.8pc rise. Day school fees rose by 8pc from £5,552 to £6,021 a term.

A record amount of financial help was offered to private school students in the current academic year, as parents turned to bursaries and scholarships to afford rising fees.

A total of 182,675 pupils currently receive help with their fees, representing 33.5pc of all pupils.

The value of this help hit a record £1.38bn this year, an increase of 10.2pc on last year.

A spokesman for Labour said: “Labour will invest in delivering a brilliant state education for all our children, funded by ending tax breaks for private schools.

“Independent schools have raised fees above inflation for well over a decade and do not have to pass Labour’s proposed change onto parents.

“Indeed, pupil numbers have not been affected despite yet another rise in fees.”