Labour has said it would change VAT rules on private schools (Jonathan Brady/PA)
By Joseph Hook, PA | 6:36 - June 12, 2024

Fact check: VAT on private school fees unlikely to increase state class sizes

After Labour announced its policy to add VAT to private school fees on June 10, Labour’s shadow attorney general Emily Thornberry was asked on GB News how the party would deal with “injecting what is predicted to be up to 40,000 private school pupils into state schools” and replied: “If we have to, in the short term, have larger classes, we have larger classes.”

Later that day, Labour leader Sir Keir Starmer denied state school class sizes would increase, while shadow education secretary Bridget Phillipson said the claim “just wasn’t right”, both referencing research by the Institute for Fiscal Studies (IFS).

Evaluation

Although the impact of adding VAT to private school fees – also known as independent schools – is unknown, the IFS estimates that the tax could cause a 3-7% reduction in private school attendance – about 17,000 to 40,000 children.

However, the IFS report also says that pupil numbers across England are due to decline by at least 100,000 per year on average up to 2030, due to falling birth rates. This figure is broadly supported by Government education statistics, which show an expected drop of more than 625,000 pupils between 2023 and 2030 in state primary and secondary schools – only slightly below the total number of private school pupils.

Therefore, it is unlikely that state school class sizes will increase as a result of adding VAT to private school fees.

The facts

Labour first announced that it planned to abolish private schools’ charitable status, and with it their exemption from VAT, ahead of the 2019 general election. It included the plan in its 10 Labour policies to change Britain document, published online on May 27 2024.

After Ms Thornberry said larger classes at state schools may be required in the short term to cope with any influx of children whose parents can no longer afford a 20% increase in school fees , Sir Keir contradicted her,  saying: “We’ve had the analysis by the IFS on this, which says that there’ll be a negligible impact, so we’re very confident about that.”

Meanwhile, on Times Radio, Ms Phillipson said in reference to the claim: “Well I’m afraid that just wasn’t right, and actually what we’re seeing, across the state sector, is a falling number of pupils because of the falling birth rate. There are fewer young people arriving at schools.”

In its report, the IFS says that as a new tax, the full impact of adding VAT to private school fees on numbers in independent education is unknown. But in recent years, it says fees across the UK have increased by about 20% since 2010 in real terms, and 55% since 2003 (without VAT), but pupil numbers have remained consistent, at around 6-7% of the school population over the last 20 years, or about 560,000-570,000 pupils in the UK.

The IFS also says “it would be reasonable to assume that an effective VAT rate of 15% would lead to a 3–7% reduction in private school attendance”. This would amount to around 17,000 to 40,000 children leaving private schools.

Official government projections show that pupil numbers in state schools are expected to have peaked in 2023, and are projected to decline in the coming years. There are expected to be 430,000 fewer pupils by 2028, and 625,000 fewer by 2030 – more than the total number of children currently in private education.

Charities, which must be for the “public benefit”, are eligible for some tax exemptions and reliefs, including being exempt from VAT which is currently at 20%.

In 2022, the Government said around half of independent schools in England were registered as charities.

Links

GB News – Emily Thornberry (archived)

PA news agency – Sir Keir Starmer (archived)

Times Radio – Bridget Phillipson (archived)

The IFS – Tax, private school fees and state school spending (archived)

Gov.uk – projected pupil numbers (downloads as .zip file) (archived)

10 Labour policies to change Britain (archived)

UK Parliament question on private schools’ charitable status  (archived)

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