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Sir Keir Starmer speaking into a microphone while surrounded by school children in uniform in Kettering.27 June 2024 (updated 17 July 2024)

Despite opposition from families, schools and teachers, the UK’s Labour Party plans to end private schools’ exemption from paying VAT and full business rates. Having won the general election on 5 July 2024, it is now highly likely that Labour will implement its plans. We answer your questions and attempt to understand what the future of school fees may look like. 

Will my school fees go up by 20 per cent in September 2024?

School fees will go up – they do so every year – but probably not by 20 per cent (the standard rate of VAT). The new Labour government will be unlikely to make the changes necessary to impose VAT on private school fees in time to affect them this coming September. Speaking to business executives at The Times CEO summit last week, shadow chancellor Rachel Reeves indicated that Spring term 2025 is the earliest that VAT could be introduced, with policy experts stating that a delay till the following September the most likely turn of events. 

It is also improbable that fees go up by 20 per cent if and when VAT has been levied. Should schools’ tax status change such that fees become VAT-eligible, they will also be able to reclaim VAT they are charged when purchasing goods and services. This is something they cannot do under current tax arrangements. The Institute of Fiscal Studies, whose report forms the basis of Labour's policy, estimates this deduction means that private schools will face a 15 per cent rather than 20 per cent increase in costs. And schools may be able to cut costs even further elsewhere to reduce what is passed on to parents. 

When will VAT be applied to school fees?

There is still some uncertainty on this issue. At the State Opening of Parliament on 17 July 2024, the King's Speech included mention of Labour's plans to introduce their proposed VAT changes. This implies that the legislation will be introduced during the parliamentary session, or in other words, within the next 12 months.

Prior to the election, shadow education secretary, Bridget Phillipson had said in a interview with LBC, that Labour will ‘seek to legislate as soon as possible but it [VAT on school fees] is subject to wider considerations around the parliamentary timetable and any decisions that will be taken as part of the budget process.’ In the same interview, she refused to rule out an introduction mid-academic year. Phillipson also made clear her belief that as VAT had been Labour policy for a number of years, no parent could sign up for private school unaware of the likelihood of VAT on fees and the impending related increases. 

Labour has been coy with details so far. Specifics to do with when VAT will be introduced, whether there will be a staggered introduction and who may be exempt from paying have yet to be revealed. 

Will my school be able to absorb some of the increase?

This is the million-dollar question. The total on invoices to parents would be fees plus the additional VAT. However, schools may be able to cut their outgoings and therefore reduce their fees, resulting a smaller overall increase for parents after VAT is added. It is an issue for each school to address on its own terms. We know of some schools that expect to absorb a significant part of the increase in this way through reducing staff, activities and bursarial support, but there are other schools which operate on paper-thin margins for whom the imposition of VAT will be a harsh blow.  

If your school is yet to communicate with you its early thoughts on how it is likely to deal with changes to the tax regime, you - as customers and fundamental stakeholders - are within your rights to start asking questions. Don’t expect the school to have all the answers quite yet but a willingness to engage with parents at this stage is essential. 

Can I pay fees upfront?

If you have the financial reserves to be able to do this, you should ask your school if it is an option. The Financial Times reported in May that in anticipation of a Labour government, many private schools had started to promote their advance payment options to parents. Such schemes would allow for multiple years of fees to be paid up-front, possibly at a small discount. This might, in theory, enable parents to avoid paying VAT but in the long term it may not work. According to Dan Neidle at Tax Policy Associates, any Labour VAT legislation is likely to have ‘anti-forestalling’ measures baked in. This would mean that payments made between the date legislation is announced and when it is enacted would also be subject to VAT. Neidle also suggests that Labour may look to retrospectively apply VAT to all advance fee payments by changing the ‘time of supply’ rules. Should this happen, then schools will have   to ask those parents who paid up-front for more money to cover the VAT bill. From what The Good Schools Guide has seen from school communications, such a scenario has been taken into account and set out as a condition of the advance payment schemes currently being offered by schools. 

Are schools offering any financial help to parents?

No school wants to see a child forced to find a new school. However, this may be the reality for families who are unable to pay fees after the introduction of VAT. Any parents with genuine concerns should speak to their school. There may be ways to spread costs or bursaries and hardship funds might be made available. 

My child has special educational needs. How will our fees be affected?

Sir Keir Starmer clarified Labour’s position in relation to children with an EHCP in a phone-in on LBC in June. ‘We have put in place an exemption for anyone with special educational needs who’s on a [EHC] plan.[…]If, because of particular needs the plan can only be met at a private school, that child or that fee is exempt [from VAT].’ 

However, it is apparent from the same interview that children with special educational needs who attend special or mainstream private schools but do not have an EHCP would not be exempt from paying VAT on fees. 

Will there be any other exceptions?

The detail in this policy is being drip-fed to the public and so some things that are uncertain now may become clearer soon. We do know that fees charged by the country’s 32 state boarding schools, where education is paid for by the state and parents only pay the boarding fee, will be exempt from VAT. It had been hoped that private boarding schools would receive similar exemption for their costs associated with boarding provision but the Financial Times has reported that is unlikely to be the case and the IFS study on which much of Labour’s policy is built, clearly factors boarding costs into its equation. 

How easy will it be to move my child to a state school?

If you anticipate moving school at a normal point of entry (entering reception, year 7, year 12 at the start of the academic year in September 2025) you can take part in the main round of admissions and your child will be subject to the same process as every other child applying. However, if you are going to apply to a state school at any other time or entering any other year group you will need to complete your LA’s in-year admissions process. In-year applications work differently as you need to apply directly to the admissions authority. If the school is run by the LA (eg a community or voluntary controlled school) then your LA is the admission authority. However, if you are applying to an academy, foundation or voluntary aided school (most faith schools fit into these categories), these schools are their own admissions authority and so you must deal directly with them for admissions. 

Labour has stated that dropping birthrates should free up a lot of school places; hundreds of thousands in the next five years. However, while the national numbers make it appear as though the state sector can absorb both the short-term impact of pupils leaving private schools and the longer-term effects of families choosing not to go private, the more localised numbers paint a different picture. 

Despite research published in the Financial Times that shows the majority of local authorities may have space in state schools, there are also many which will struggle to provide places for even a handful of children coming from the private sector. The situation in each local authority is different – a concentration of the worst affected seems to be in London and the South East - but you should be able to find details of place availability online or your LA will provide details on request. And remember even if you know a school doesn’t have any places available, there is nothing to stop you applying to the school and attempting to get a place through the appeals process. 

What if we don’t like the state school we’re given?

Local authorities have a statutory duty to provide a school place for every child who applies for one. Once it has offered you a state school place, their statutory duty is done. Unfortunately, there is no requirement for the school to be one you would choose or easy to get to. In an areas with a shortage of state school places, those with availability are likely to have poorer levels of academic performance.  

There is also a possibility that the school place you are offered is a considerable distance from home. Statutory guidance says that the maximum length of journey a child should be given is 45 minutes at primary school and 75 minutes at secondary school. Local authorities interpret this in different ways although it’s worth mentioning that journeys of more than 2 miles (for children under 8) and 3 miles (for children 8 and over) will qualify you for free school transport.  

Appealing the decision

You can appeal to any school that has rejected your application. You can also ask to be put on the waiting list. If you have been rejected from schools close to home but the local authority has found you a place at a school some distance away, you may choose to appeal to the schools that rejected you arguing that they would be a better option given the long journey your child would otherwise face. Read our article to understand more about school appeals. If you are not offered a school you like, our advice is to keep an open mind and try to find the good in it. Set aside reputation, pay it a visit and make your own mind up. If you really have no choice but to take the place, consider using some of your newly disposable income to supplement with tutoring and extra-curricular clubs outside of school to give your child the rounded education you were hoping for. 

Alternatives to the state sector

If fee increases leave you with no choice but to take your child out of their school, it may be that a different private school in your area is still affordable. There are never guarantees about the availability of places and you might find yourself on a waiting list but if you’re determined to avoid whatever state school is made available to you, then this might be an option for you. If you have to bide your time waiting for place to become available at a state or private school or if you simply now want an alternative to mainstream schooling, then homeschooling, online or hybrid schooling may be worth looking into. 

How can we help?

The Good Schools Guide Education Consultants helps hundreds of parents every year find the best schools for their children. With a wide range of experience across state, private and special education, our experts are available to advise and troubleshoot all your educational dilemmas.

Image credit: Keir Starmer

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