Labour says middle classes back 20% vat on private school fees

Middle-class parents have welcomed the government’s move to impose a 20 per cent value-added tax on private school fees, according to Education Secretary Bridget Phillipson.

Speaking ahead of the policy’s launch on Wednesday, Phillipson says many families are being “locked out” of independent education due to rising costs, and now want a stronger government system instead.

Although some boarding schools charge more than £50,000 a year, and the average private school fees now stand at £18,000, Phillipson believes that “middle-class parents” can no longer cover these expenses. It claims this supports Labour’s position that ending tax credits for private schools will generate an estimated £460m in 2024-25 – rising to £1.7bn by 2029-30 – to fund 6,500 new state teachers and additional mental health support for pupils.

Despite concerns about private schools, whose fees have risen by 75 percent in real terms since 2000, officials at the Ministry of Education expected that the VAT increase would reduce private school enrollment by only 6 percent, as most of these pupils transfer to Government education. Phillipson dismisses warnings of widespread lockdowns as “panic-mongering”, pointing out that state schools have recently taken in large numbers of pupils from Ukraine and Hong Kong “without negative results”.

Private institutions respond in different ways. Some schools, including Eton and Westminster, pass on the full 20 per cent fees to parents, while others, such as Queen Ethelburga School near York, limit fee increases to 3 per cent. Schools are technically able to reclaim VAT on items such as capital projects and educational supplies, leaving their net VAT liability at around 15 per cent. Phillipson says many have “no good reason” to impose the full increase on parents.

The Independent Schools Council argues that the tax, coupled with increased National Insurance for employers and the loss of charitable rates relief, leaves schools in a “very difficult position”. For example, Cardus School in Oxfordshire will close its doors next July, due to these increasing financial pressures. However, Phillipson insists that the influx of new funding is key to strengthening the UK’s state schools, and represents, she says, a “badge of honour” if they raise standards for children across the country.