Labour’s assault on private school tax breaks: a vote winner?

A leading think tank has dismissed fears of a “mass exodus” from Britain’s private schools if a Labour government carried out its pledge to scrap tax breaks for fee-paying schools.

Labour has pledged to add VAT at 20% to school fees if the party wins the general election next year, as part of its plans to break the “class ceiling”.

Research by the Institute for Fiscal Studies (IFS) found the Labour plans could generate up to £1.5bn in additional revenue. Josh Hillman, director of education at the Nuffield Foundation, called this a “small but potentially worthwhile sum” that could provide a 2% boost in spending for England’s state schools.

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And the policy would have “a relatively limited effect” on pupil numbers, the research found.

Politics of ‘envy’?

The Times derided Labour's policy announcement earlier this year, dubbing the plans for a tax raid on private schools a means to “penalise aspiration and thwart the natural desire of parents to provide the best opportunities for their children”, in a leading article which accused Labour of kowtowing to the “politics of envy rather than of social reform”.

Labour’s plans risk making private education unaffordable for households with more modest incomes, leaving private schools to be “the preserve only of the wealthy, who can absorb higher fees in their household budgets” and leading to school closures due to “lack of revenue”, argued the paper. If the independent sector is “squeezed” then the state sector will have to “take up the slack”, necessitating increased spending on teachers, infrastructure, and resources.

The IFS may say that Labour’s policy would have a “relatively limited” effect on pupil numbers, but its own estimates say it could push up to 40,000 children out of private education and into state schools, to the tune of some £300m a year, said The Telegraph. And this comes as many middle-class families are already being “priced out” of Britain’s private schools “due to surging fees”.

And Labour may have “misjudged” the public mood over the plans, said The Telegraph. According to a poll commissioned by the Independent Schools Council (ISC) and carried out by Public First, 48% of respondents agreed that private schools should keep their tax relief, including the VAT exemption on fees.

Boost for state sector

Yet the IFS’s analysis only “confirms” Labour’s analysis that ending tax breaks for private schools could increase revenues by about £1.6bn, said The Guardian. It also estimates that taking into account additional costs to the state sector of around £100m to £300m a year, the policy would lead to a net gain to the public finances of £1.3bn to £1.5bn.

It is also clear the number of children leaving private schools will be so small as to have a negligible impact on the state sector. For Labour, this is the “perfect conclusion”, wrote Zoë Grünewald in The New Statesman, allowing Labour to say that the policy is far from a “tax on aspiration” as many parents will still send their children to private school.

The party will likely have to “hold its nerve” in the coming fight over tax breaks, but the party’s “thoughtful tone, combined with a determined focus on educational inequality” are “promising indications”, said The Guardian. Of course, it will have to do more if it comes to power to make up for the current government’s “shocking” neglect of schools in recent years.