Labour’s plan to impose VAT on private schools, starting January 1, 2025, could make private education unaffordable for some families, the Government has admitted. Treasury documents reveal that the new 20% tax is expected to drive some parents away from private schools, leading to potential increases in state school enrollments. Despite assurances that state schools have adequate space to accommodate these students, there are concerns that the VAT could result in a significant number of students transferring to the state sector.
The Treasury stated that local authorities would support families affected by the VAT increase, though no exemptions will be granted for military families or children of diplomats, contrary to some expectations. The impact on military families, currently benefiting from the Continuity of Education Allowance, will be monitored closely, with potential adjustments in future spending reviews.
The private school sector was reportedly surprised by the accelerated VAT timeline, which was initially expected to start in September 2025. The Government anticipates that schools will manage the cost by reducing surpluses, cutting non-essential expenditures, or slightly increasing fees, aiming to limit fee hikes to about 15%.
Julie Robinson, Chief Executive of the Independent Schools Council, criticised the lack of consultation with private schools and warned of potential disruptions to students' education. The Labour Government argues that ending tax breaks for private schools is essential for improving state education and addressing financial imbalances in the education sector.
Meanwhile, the Labour Party faces a £5 billion debt crisis from overspending on Special Educational Needs and Disability (SEND) services, a legacy of the previous government's inadequate funding. The SEND system introduced a decade ago, is now deemed broken and unaffordable due to overspending allowed under a "debt override" arrangement. A recent Local Government Association report highlights the system's dysfunction and calls for reform, including shifting SEND provision to mainstream schools and injecting £2.2 billion for improvements. Despite increased spending, educational outcomes have not improved. Education Secretary Bridget Phillipson has pledged a comprehensive overhaul but warns it will take time and collaboration.
Loveena Tandon, Spokesperson, Education Not Taxation said, “Introducing VAT without consulting those affected is regrettable. Doing so mid-term is detrimental. We regret that the Education Tax will force children out of their schools and worsen capacity issues in state schools. The Tax needs urgent scrutiny by the Office for Budget Responsibility (OBR) and an impact assessment at the local level, involving schools and parents. The OBR must also consider the cost of creating new school places and filling existing ones. We have written to the Prime Minister and await a reply.”
