Most private schools will be able to keep fee increases affordable for parents by absorbing a “significant proportion” of new VAT charges, the Government has said.
Treasury minister James Murray was heckled by opposition MPs as he defended the proposal to remove the VAT exemption and business rates relief for private schools from January to enable funding for 6,500 new teachers in state schools.
He said some schools have committed to absorbing the VAT liability entirely, while others are capping fee increases at 5% or 10%.
Shadow education secretary Damian Hinds (Peter Byrne/PA)
His remarks came after shadow education secretary Damian Hinds labelled the plan “destructive, disruptive and divisive”, as he pressed the Government to publish a full impact assessment to show the effects of the reform on independent schools and the state sector.
Mr Hinds suggested the January 2025 start date for the policy should be delayed and he also questioned if it might lead to the Treasury targeting private nurseries, music lessons and private tutoring.
Speaking during a Conservative-led Opposition Day Debate, Mr Hinds said: “Time is needed to adjust, and that is why our motion further calls for the Government to postpone imposition of the VAT charge for schools in areas where state schools … are on average almost full.
“This is a Government which barely has its feet under the table, and already it is a Government in chaos.
“A chaos exemplified by this destructive, disruptive and divisive education tax which will interrupt learning, create place demand where it cannot be accommodated, put further strain on the Send (Special Educational Needs and Disabilities) system … likely generate much lower revenue than anticipated, and quite possibly actually even end up at a net cost to the public purse in its headlong rush to make a political statement.”
Mr Hinds later said: “The principle of no tax on learning is a fast one. And once you loosen it, you don’t know where you’ll go.
“Where might the Treasury look next? Private nurseries perhaps. Music lessons. Private tutoring. What actually is the philosophical difference between independent school education and private tutoring?”
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Replying for the Government, Mr Murray said: “Whilst private schools will now be required to charge VAT on the education services and vocational training they provide, we expect most private schools will be able to absorb a significant proportion of this new VAT charge and keep fee increases affordable for most parents.
“They will be able to make efficiencies and recover the VAT they incur on the things they buy. These recovered costs can be used to offset increases to fee payers. We are already seeing that some schools have committed to absorbing the VAT liability entirely whilst others are choosing to cap fee increases at 5% or 10% to keep fees as low as possible for parents.”
Mr Murray also told MPs: “The Government recognises some pupils may subsequently move into the state education sector as a result of these policies.
“However, as set out in the technical note … the number of pupils who may switch schools as a result of these changes represent a very small proportion of the overall numbers in the state sector and the Government is therefore confident that the state sector will be able to accommodate any additional pupils that these policies will cause to move.”
Mr Murray said introducing the policy from January 1 was because the Government wants to “raise the funding we need as soon as possible to deliver our education priorities for state schools across the country”.
He said the Government has “carefully considered” the impact of the changes on pupils and their families in both the state and private sectors, adding: “The Government’s costing of these policies is currently being scrutinised by the independent Office for Budget Responsibility.
“The Chancellor will confirm our approach for these measures at the budget, where we will set out our assessment of the expected impact of this change in the normal way.”
Mr Murray said projections from the Institute for Fiscal Studies indicate the number of pupils who may switch schools as a result of the changes is “likely to represent a very small proportion of overall pupil numbers in the state sector, less than 0.5%, with any displacement expected to take place over several years”.