13 April 2017
When Gove and Corbyn agree: VAT on school fees
Have proponents really considered the consequences?
by Frank O’Nomics
What would the fate of Harry Potter have been if the Dursley’s could not have afforded the school fees? Would Billy Bunter have been as entertaining if, not only had the postal order not turned up, but also the school fees could not be found and he turned up at the local grammar? The proposal to extend VAT to private school fees is making some strange bedfellows and when an issue unites the likes of Michael Gove with Jeremy Corbyn there would seem to be just cause for proper consideration. Beyond their agreement that such a measure is merited, the two diverge in their views as to what should be done with the resultant revenue. This too should be carefully considered, given that the proposal could potentially raise a sum of the order of £1 billion.
On the face of it the lack of VAT on school fees seems strange. Why should the wealthiest be given a tax advantage in buying a service which, based on evidence of university attendance and top jobs, seems to give them a further advantage in society? Private schools are effectively state subsidized and, put like this, most of the tax-paying electorate is likely to have some objections. Over a 13-year period, the cost of educating a child at a private day school costs around £160,000, with boarding schools costing much more. Clearly these numbers go way beyond the incomes of most people, so why should those that can afford it be given a tax subsidy?
This however, is too simplistic; it overlooks key arguments for the support of private schools, as well as the consequences of forcing many families, who could not cope with the increase in costs, to take their children out of private education. While it may be true that the parental incomes of private school children are well above average, many two-income families are working very hard to find the fees to educate their children privately. Further, the data on fee levels overstates what the schools actually get, with one third of pupils on reduced fees. In 2015 bursaries and scholarships of over £850 million were offered to parents, with £700 million coming directly from schools fund. These sums are not dissimilar to the monies that could be raised from the VAT measure (the Labour Party estimates that £1.5 billion per annum would be raised, although the Fabian Society last had the number at £1 billion) particularly if you bear in mind the number of children that would leave for the state sector. Quite simply, the private school system is making efforts to pay back the effective subsidy, keen to ensure that they retain their charitable status.
The payback from private schools goes beyond pupil subsidy. There is also a great deal of collaboration with local state schools to offer support, particularly with languages and sciences, but also with university access, sport and music. Take for example, the City of London School for Girls (fees around £15,000 per annum), which has 25-30% of its pupils receiving a reduction in fees of anything from 25-100%. CLSG helped to form the East London Consortium of both independent and maintained schools to promote the exchange of good practice and give opportunities for curriculum enrichment. The school will also open a new primary academy, which will be free, non-selective and fully inclusive. If such schools can demonstrate that they are using their position for the greater benefit of the local community, shouldn’t they be incentivised to do so via the tax system?
Perhaps the biggest concern about the effect of putting VAT on private school fees is the consequences for the state system. The Independent Schools Council has said that many smaller schools would have to close, and even some of the larger ones would be likely to see a great many pupils leave for the state sector. This could potentially result in an additional 600,000 pupils having to be accommodated, very quickly, into our already exceptionally overstretched system. Even if the VAT revenue was allocated directly to trying to create greater space and the recruitment of more teachers, the pace with which this could be done would be too slow to prevent a great many from suffering a sub-standard service. Further, the money raised would not, if we adopt Mr Corbyn’s policy, be put into increasing capacity.
Jeremy Corbyn has said that a Labour Government would put the VAT revenue into providing free school meals for all primary school children. It is not rocket science to suggest that healthy eating would contribute to better outcomes, but the studies that Mr Corbyn cites (based on pilot schemes on Newham and Durham) stop short of drawing a strong correlation between free meals and attainment – the effects, they say, are slight and would need further examination. If these effects are not significant, they may struggle to counter the negative results of larger class sizes. The cost of rolling out a free school meals policy would be of the order of £1 billion, and would finish up benefiting a great many pupils from families that can easily afford to feed their children. In fact, it seems likely that Mr Corbyn’s policy would finish up giving a subsidy to many more of the middle classes than those who currently benefit from the VAT schools fees exemption.
Michael Gove’s arguments as to what to do with the money raised by the VAT have greater credibility. He suggests that the money goes towards helping the more vulnerable children by increasing the pupil premium, or to expanding Frontline, the scheme that recruits talented students into social work.
He also thinks that the money could be used to fund the abolition of employer national insurance contributions for care givers. All of these suggestions are laudable, but it may be much better to fund them another way. If private schools can demonstrate that they are working for the common good, spreading a culture of excellence and allowing state school class sizes to remain manageable, there seems little benefit in undermining them.
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