Are private schools safe from Starmer?

Schools would pay VAT under Labour government but party scraps plans to remove charitable status

Keir Starmer and shadow education secretary Bridget Phillipson visit a school in London
Keir Starmer and shadow education secretary Bridget Phillipson visit a school in London
(Image credit: James Manning/PA Images/Alamy Stock Photo)

Keir Starmer has abandoned proposals to strip private schools of their charitable status if his party wins the next general election.

In a statement to the i news site on Wednesday, a party spokesperson confirmed that a Labour government would pursue its long-held plan to "remove the unfair tax breaks that private schools benefit from". But, in a marked U-turn on its previous stance, the spokesperson said this "doesn't require removing charitable status". 

Speaking to the BBC's Nick Robinson on the "Political Thinking" podcast, Starmer said that removing tax exemptions was not an "attack on private schools", as some within the sector had argued, but rather a way to fund improvements to "the appalling state of our schools". 

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What did the papers say?

"Ending the tax breaks enjoyed by private schools is one of Labour's flagship policies," said Poppy Wood, the i's politics and education reporter. "For several years", the party has said it would do so "partly by ripping up their charitable status" if it were elected.

Starmer "has now scrapped the policy", which would have required "a statutory change to the legal definition of 'charity'" and could have "wider implications for the charity sector", Wood continued. Independent schools had also argued that charitable status helps them to fund scholarships and bursaries "which help widen access" to private education. 

But a Labour government would "still press ahead with applying 20 per cent VAT on school fees" as soon as the party came to power, said The Times. Doing so would be "more straightforward" than removing charitable status – though Conservatives say this could still involve "a potentially complex" legislative overhaul.

The VAT proposal has "made private school parents dread the prospect of a Labour government", said Camilla Tominey in The Telegraph. While "elite" institutions may "have the resources to offset any fee increases", many independent schools could find "the extra costs would be simply too much". 

Around 7% of students in the UK are privately educated, and the policy "may sound like an automatic vote winner given that most people do not send their children to private schools", said English teacher Kristina Murkett, writing in The Spectator. But "the reality is, at best, more ambiguous and complicated". 

And "at worst, it will actually worsen social mobility and undo years of progress in private school philanthropy", she continued.

What next?

A report published by the Institute for Fiscal Studies (IFS) in July calculated that removing tax exemptions for private schools would raise £1.3bn–£1.5bn a year, equivalent to a 2% increase in day-to-day state school spending in England. In its statement to the i paper on Wednesday, Labour said the money saved would help pay for "desperately needed teachers and mental health counselling in every secondary school".

But a group of headteachers has warned that Labour's "private school tax raid would force pupils out" of some independent institutions, The Telegraph's political reporter Dominic Penna warned earlier this month. 

The IFS report concluded it would be "reasonable to assume" that if private school fees rise by an effective VAT rate of 15%, it would result in a 3–7% drop in attendance. 

Speaking to the BBC's Robinson, Starmer noted that schools would not necessarily need to "pass" the additional costs of paying VAT on to parents. "Each of the schools is going to have to ask themselves whether that's what they want to do."

Still, some private schools "are likely to celebrate the softening of Labour's position" on the issue, said the Financial Times. Charities "enjoy" exemptions on gifts and donations, as well as capital gains tax, which they would now retain should Labour win the next election

Labour will now be hoping to "draw a line under confusion" about its plans, said the paper.

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