Private school fees may stay the same despite VAT levy, says minister
Imposing VAT on private schools may see no increase in fees, a Treasury minister has claimed as he was challenged at Westminster. Lord Livermore, a former adviser to both the Blair and Brown governments, said many institutions would “take steps to absorb a proportion if not all” of the new levy.
From January, the Government plans to remove the VAT exemption and business rates relief for private schools to enable funding for 6,500 new teachers in state schools.
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Currently, independent schools do not have to charge 20% VAT on their fees because there is an exemption for the supply of education.
Critics have warned over the short timescale involved and the risk of unintended consequences, including the impact on children with learning difficulties who attend specialist independent schools and military families.
But speaking in Parliament, Lord Livermore said: “Very many private schools will take steps to absorb a proportion if not all of the new VAT liability, so there may actually be no increase in fees in such circumstances.”
Tackling the Labour frontbencher, Tory peer Lord Lexden, who is president of the Independent Schools Association, said: “Is it not time that the Government realised that its education tax – the first in our history – is likely to force a large number of parents, particularly those using the small special needs schools in the independent (sector), to move their children next term to state schools which are wholly unprepared for them?”
Rejecting this, Lord Livermore said: “The answer to his question is no.”
He added: “We expect a large number of private schools will take steps to absorb a significant proportion of this VAT liability so the majority of that fee will not be passed through.”
Labour former minister Lord Foulkes of Cumnock said: “Is the minister aware that many of us think that taxing these schools, like other private enterprises is long overdue?”
Lord Livermore said: “This is a necessary decision that will generate additional funding to help improve public services including the Government’s commitments relating to education and young people.”
The minister told peers despite a 75% real-term increase in fees since 2000, the number of children in independent education had “remained steady suggesting an inelastic demand for private school places”.