Labour’s plan to impose VAT on private school fees has come under scrutiny after it emerged that a major report justifying the policy was written by a close friend of a government minister.
Matthew Pennycook, a minister in the Department for Settlement, Housing and Communities, was reported to be best man at the wedding of Luke Sibieta, who wrote the Institute for Fiscal Studies (IFS) paper backing Labour’s VAT proposal.
The report, which found Labour’s VAT policy would have little impact on state schools and could raise up to £1.5bn for the Treasury, was frequently cited by Sir Keir Starmer and other ministers to defend the measure. VAT on private school fees, along with the end of business rates relief for private schools, is expected to come into effect in January 2025.
Sibieta, an IFS research fellow with nearly 20 years of experience, noted that the policy would likely force about 20,000 to 40,000 pupils, or 3% to 7% of private school students, into the state sector. His report also predicted net gains of between £1.3 billion and £1.5 billion for public finances due to the removal of tax breaks.
However, critics have questioned the close personal relationship between Cepita and Pennycook, whose administration will be involved in implementing tax policy. Mr. Pennycook and Mr. Sibieta were reportedly living together, and Mr. Pennycook served as best man at Mr. Sibieta’s wedding, raising concerns about a potential conflict of interest.
Opponents of the VAT proposal, including the Independent Schools Council (ISC), have warned that the number of pupils leaving private schools could be much higher than Cebeta estimates, potentially generating much less revenue than expected. ISC figures show private school enrollments have already fallen by 10,000 pupils in September 2024, suggesting Labour’s forecasts may be overly optimistic.
Julie Robinson, chief executive of the ISC, said: “This data could not be clearer: parents are already moving their children out of independent schools as a result of the government’s plans to impose VAT on parents. This is just the tip of the iceberg, and many small schools are already vulnerable.” At risk of closure.
Sibieta defended his analysis, pointing to demographic factors such as a low birth rate that can also affect private school enrollment rates. He stressed that it is too early to draw firm conclusions and that the full impact of this policy may not be clear for another two years.
The Conservative Party is expected to use the Opposition Day debate to call for a postponement of the VAT policy until 2028 in areas where state schools are already approaching capacity. Damian Hinds, the shadow education secretary, said the policy could lead to a local crisis in school places, saying it would “reduce choice, increase class sizes and be disruptive for teachers and pupils”.
As debate rages over VAT policy, the government is facing calls from education unions and tax associations to delay its implementation until at least September 2025. The IFS has defended the integrity of its work, with a spokesman stating: “The IFS is a politically independent organisation. It is an independent research organization committed to the highest standards of empirical analysis.
Despite these assertions, revelations of the close personal relationship between Mr Sibieta and Mr Pennycook have raised concerns about the integrity of the report underpinning Labour’s tax plans, which could have major implications for private and state education in the UK.