10,000 fewer children in private schools ahead of Labour’s VAT policy, warns sector

The number of children in special education has fallen by 10,000 over the past year, as parents expect VAT to be introduced on school fees in January, according to the Independent Schools Council (ISC).

The organization estimates that the move could cost the government an additional £93 million to educate these students in state schools.

An ISC survey of nearly 1,200 fee-paying schools revealed an enrollment decline of 1.7%, with the largest drop – 4.6% – occurring in Year 7, the first year of secondary education. This data compares pupil numbers from September 2022 to September 2023.

The government’s decision to add a 20% VAT to private school fees is due to come into force in January 2025, a move Labor claims will generate £1.5bn of additional funding for state education and teachers. While ministers have suggested that schools will not have to pass on the full cost of VAT to parents, few schools have committed to absorbing these fees.

Wales was worst affected, with private school enrollment falling by 5.2%, followed by Yorkshire by 2.6%, and the southwest of England by 2.4%. The International Study Center noted that this decline particularly affects small schools and schools with low fees.

Small schools with fewer than 300 students saw their pupil numbers fall by 3.2%, three times the rate seen by larger institutions. In addition, schools with fees 10% below average saw an average drop of 7.5 pupils per school, compared with 5 pupils at institutions with higher fees.

The International Study Center has raised concerns about the impact of the VAT policy on small schools, faith schools and pupils with special educational needs and disabilities (SEND). Julie Robinson, general secretary of the ISC, said: “Parents are already taking their children out of independent schools as a result of the government’s plans to introduce VAT. This is just the tip of the iceberg, as many small schools are already at risk of closure.

The ISC is considering filing a case with the Supreme Court to delay the implementation of VAT on school fees. A separate legal action is also being pursued by law firm Sinclairs on behalf of the mother of a child with special needs.

The government has pledged that pupils with an Education, Health and Care Plan (EHCP) will not have to pay VAT on school fees. However, many children with special needs who do not have an EHCP will be subject to additional fees. This year’s ISC census revealed that 20% of children in private schools have special needs or disabilities.

As the population growth of secondary school-aged children is expected to peak in 2029, the VAT policy may increase pressure on private and public schools. A government spokesman said: “Ending tax breaks on private schools will help raise the revenue needed to fund our education priorities.”

The Government’s full analysis of VAT policy and its expected impacts, based on Office of Budget Responsibility (OBR) costs, is expected to be published in the next Budget.