Should we end tax breaks for private schools?

private schools are possibly the only charitable institutions that do actual social harm.

The Labour Party leader Keir Starmer recently attacked the Tories for their policy of allowing Private Schools to pay no V.A.T. on their fees.

Using Winchester College as an example, where the Prime Minister himself was privately educated, Starmer pointed out that with fees per pupil of £45 000 a year, allowing them to no pay 15% VAT amounted to £6 million in lost tax revenue, which could be used to better fund state schools.

Starmer directly asked whether that £6 million would be better spent on the rifle ranges of Winchester rather than providing additional support for the 40% of students in Southampton, Rishi Sunak’s home town, who failed either their English or Maths GCES last year.

This post is specifically about the issue of whether independent schools should have charitable status, but you might also like this more general post on the arguments for and mainly against private schools.

Should Westminster School have Charitable Status when it costs more than £30K a year per pupil…?

Arguments for making independent schools pay tax

The charitable status of Independent Schools allows them to pay no V.A.T on school fees. The Labour Party argue that ending this charitable status of independent schools and thus making them pay VAT on school fees, would lead result in these schools paying an additional £1.7 billion a year in taxes, money which could then be spent to better fund the state education sector.

NB the reason why independent schools have charitable status is because they supposedly partner with state schools, and thus confer some of their educational excellence on to them, but there is little evidence that the state sector gets back £1.7 billion worth of input.

Independent schools are basically businesses, not charities, and every other business providing a service in the UK pays VAT on the services it provides, so ending charitable status for independent schools would be fair and equal compared to all other businesses out there.

The existence of independent schools also reduces the life chances of those from the state sector – only 7% of students attend independent schools but privately educated students take up 30-40% of oxbridge university places, and higher percentages of the most elite jobs such as Doctors and Barristers, and they get these jobs not only because of their exam results but also because of the social and cultural capital that comes with being privately educated.

It would thus make sense to make parents who pay to have their children privately educated pay MORE because of the damage this does to bright children from poor backgrounds and to society as a whole because there is no way the best candidates are being selected for the best jobs because of this distortion.

Arguments against making Independent schools pay tax

The biased Independent Schools Council (ISC) – represents over 1300 private schools and argues that if we forced schools (and thus parents) to pay VAT on fees, there would be an immediate effect of overpricing as parents who are currently struggling to pay the fees would send their children to state schools.

They argue that 90 000 students would switch back to the state sector and that this would mean an additional cost to the treasury of £400 million a year, so assuming Starmer hadn’t factored this in, the net tax gain to the state from charging VAT would only be £1.4 billion per annum. However this 90 000 figure has been questioned and even if it did occur it wouldn’t happen overnight.

The ISC also argues that this would end partnership working, as independent schools axe this aspect of their agendas as it can’t afford it any more, but then again there’s little evidence of state schools benefitting from current partnerships already anyway.

They also argue ending the charitable tax status of private schools would increase polarisation because it would be the higher middle income parents who are only just earning six figure salaries between them and struggling to pay their fees who stop sending their kids to such schools, the super rich wouldn’t be harmed at all.

The Charitable Status of Private Schools: Conclusions

It’s obvious that the existence of private schools benefits the very wealthy at the expense of everyone else, and that there is zero net gain to be had by allowing them to carry on existing.

The fact that the state helps keep this system in place by effectively subsidising this sector of business is more a reflection of bias and power in politics than any sense of what’s best for individuals and society.

After all, the independently schooled are massively over-represented in government and so most of the Tory party (and many in the Labour party) benefitted themselves from independent schooling, and so they’ll probably carry on scratching the backs of the same schools they themselves attended a few decades earlier.

There is a very strong case for abolishing not only their charitable status but also independent schools themselves, in the interests of levelling the playing field and giving bright state school students the opportunity to compete on an equal footing with their currently hot-housed independently schools peers.

Signposting

This material is mainly relevant to the education topic, usually taught as part of A-level sociology, AQA specification.

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