Could Labour's VAT raid on private education spell trouble for state schools?

Video report by Political Correspondent Simon Harris

Article by Programme and Digital Editor Chris Howse

A rise in school fees is not just giving parents of private school pupils something to worry about - the impact could be felt in state schools too.

Some students could be priced out of independent education after Labour decided to start charging VAT.

The new charge will apply from January and the cost could prove too much for some families who may have to switch to state education.

That is a problem in counties like Surrey where there is a squeeze on places. At Cranleigh parents pay almost £50,000-a-year and the school's head said some may face a tough choice.

"I suspect there will be a number of students who may feel that as they get to a transition point, either from our prep school up to the senior school at 13, they may decide to go state then, or possibly at 16 for sixth form," said Samantha Price, Head at Cranleigh.

"Obviously we hope that that's not going to be the case and we're doing everything that we can in terms of how we manage our own budgets and looking at commercial income to try to mitigate against that as much as possible," she explained.

Cranleigh is a leading co-educational independent school in Surrey which offers boarding and day education for pupils aged 13 to 18. Its prep school also accommodates children between the ages of 7 and 13.

Among the school's notable recent past pupils are English professional cricketer Ollie Pope and former Editor in Chief of the Guardian Alan Rusbridger.

But the school's reach extends far beyond its boundaries. Cranleigh is a big employer and creates hundreds of jobs in the area.

"If these schools were to go under, then of course unemployment within these areas is going to rise as well, affecting people's livelihoods and the stability of their jobs and in some cases generations of jobs that have gone right through their families," Samantha Price added.

On average, the Government expects private school fees to increase by around 10% as a result of the introduction of VAT.

Nationally, Labour has predicted 35,000 pupils will move into UK state schools over time, and a further 2,000 will leave private schools to be educated in schools abroad or at home.

But Samantha Price said the introduction of VAT in January could prove particularly disruptive, adding: "Parents who can't manage that [VAT] uplift, having to move mid-year is incredibly disruptive.

"Moving schools for any child at any age is hard. You've got to establish yourself within new friendship groups, get to know a new school, new teachers and this isn't the fault of the children.

"I think we also forget that all parents are making that choice to send their children to independent schools - that is a financial sacrifice.

"They're turning down a state paid place in the state sector to do that and of course releasing more funding for the state schools. Parents, all of us, should have that opportunity to choose.

"That doesn't mean to say that we shouldn't have a very, very good state sector. Nobody is challenging that whatsoever.

"I just wish the government would sit down with the independent sector with the same appetite that we've got as a sector to really try to work towards improving the state sector.

"I understand the challenge in terms of wanting to ensure that every child in this country has access to an outstanding education that is morally absolutely right.

"But I don't believe that penalising the independent sector is going to achieve that goal."

A spokesperson for the Treasury said the Government had made "difficult decisions" on tax now to "fix the foundations" and "increase investment in public services and the economy, to rebuild Britain and unlock long-term growth".A statement added: "We want to ensure all children have the best chance in life to succeed.

"Ending tax breaks on private schools will help to raise the revenue needed to break down the barriers of opportunity for children and young people across the country."

Among the parents re-examining their finances are Ian Cook, a former soldier who now works as financial adviser. He has cut his pension contributions so his 11-year-old son can stay at another of Surrey's private schools.

"I'm now saving less for my future, which means I'm going to need to retire later than I anticipated and in addition to that, I've had to restructure my mortgage payments to make sure I can maintain the monthly commitment," Ian said.

Ian said pupils in the private sector provided a "relief valve" for the state sector and he was concerned taxing independent schools would overwhelm state education.

He said: "People like myself who are middle earners, we're paying our taxes, we're paying our dues.

"I'm actually paying for my son's educational place at school and it's a place that's given up in lieu of somebody else that may be more in need - or perhaps that money's being deployed in the area of special educational needs.

"My gut feeling is this particular policy is going to make the private sector much more elitist because more people are going to elect not to move in the private sector.

"I'd like Keir Starmer to think about long term impacts on families like my own and other families that attend the school that we attend.

"Parents are having sleepless nights and thinking, well, how are we going to be able to afford these fees?"

Chancellor Rachel Reeves confirmed in the Budget that 20% VAT would be applied to private schools in the UK from January 2025.

The Government has estimated the policy will raise £460 million next year, rising to £1.7 billion by 2029/30.

The Education Secretary Bridget Phillipson suggested that state schools which had faced funding pressures could provide advice to private schools on how to manage budgets “more effectively”.

Surrey is one of the most affluent parts of the UK with a high number of children in private education and relatively few free state school places.

But the Conservative MP for Runnymede and Weybridge, Ben Spencer, said the entire policy was frustrating and would cause problems for all schools. He said it would ultimately mean fewer places in state education.

At Cranleigh, the Head predicted smaller independent schools may struggle to keep going.

"Surrey as a county is overpopulated and there's a huge pressure already on the state sector," Samantha Price said.

"So if smaller independent schools lose pupils into the state sector, that's where the pressure is really going to be felt and we know that from our state school colleagues and the concerns that they've got in that regard," she added.

Tory leader Kemi Badenoch said she was committed to reversing VAT on private schools if she came to power, describing it as a “tax on aspiration” that would not raise money.

When it was suggested that this would involve taking money from state schools, she said: “At the moment, certainly up until Labour came in, we didn’t have this tax, so it’s not taking money away from state schools.”

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