Report used by Labour to support private school VAT raid written by minister’s friend
A close friend of a government minister wrote a report Labour has used to justify the party’s private school VAT raid.
Matthew Pennycook, a minister in the Department for Levelling Up, Housing and Communities, was reported to have been the best man at the wedding of Luke Sibieta, who authored the Institute for Fiscal Studies (IFS) paper on Labour’s plans.
The report found that the VAT policy was expected to have minimal impact on state schools and would likely raise up to £1.5 billion for the Treasury.
Sir Keir Starmer has cited the report when defending his plan to force private schools to pay VAT on fees, which is due to come into effect from Jan 1 2025.
A Treasury document published in July said Mr Pennycook’s department would be involved in implementing the tax raid.
Alongside the VAT plans, the Government will also end business rates relief for private schools in England, which will be legislated for through a local government finance bill led by the housing department.
Other ministers have also repeatedly cited the report when referring to the Government’s VAT plans, with Baroness Smith, the skills minister, mentioning it in Parliament as recently as last month.
The IFS report published in July last year was written by Mr Sibieta, a research fellow specialising in education policy at the independent think tank. He has worked at the IFS for almost 20 years.
‘Removing tax exemptions’
Mr Sibieta is also a close personal friend of Mr Pennycook, the housing minister, and the pair used to live together, according to the political website Guido Fawkes. Mr Pennycook was reportedly also best man at Mr Sibieta’s wedding.
Mr Sibieta’s research suggested that, despite fears state schools could be overwhelmed by the VAT plans, it was likely only to force out around three to seven per cent of the private school population – or around 20,000 to 40,000 pupils.
The report also suggested that “removing tax exemptions would probably have a net gain to the public finances of about £1.3 billion – £1.5 billion per year”.
Labour has leant on the upper limit of this analysis, saying it will use the estimated £1.5bn brought in through the VAT raid to raise education standards in the state sector.
However, other organisations have criticised the estimates as optimistic, and suggested the proportion of private school pupils driven out by the policy could be much higher, and therefore the money raised much lower.
The Independent Schools Council (ISC), which represents around half of private schools, published figures last week showing around 10,000 fewer pupils have enrolled at private schools this September compared to last year.
Julie Robinson, the ISC’s chief executive, said it suggested predictions relied on by Labour could be off the mark.
“This data couldn’t be clearer: parents are already removing their children from independent schools as a result of the Government’s plans to charge parents VAT,” she said.
“This is just the tip of the iceberg and the knock-on effect on schools is significant, with many small schools already at risk of closure.”
Mr Sibieta insisted the number of private school pupils was expected to fall even without the VAT policy coming into force as a declining birth rate makes its way throFugh the school system.
“It is way, way too early to reach definite conclusions. Whilst parents will be anticipating the change, it hasn’t even come in yet,” he wrote on Twitter.
“We’ll probably need to wait for at least two years to get a good sense of whether the effect is small or large.”
Tory deferral
It comes amid broader concerns over the Government’s VAT plans, with education unions and tax associations now calling on ministers to delay the policy until at least September 2025.
The Conservatives will also use an Opposition Day debate on Tuesday to call for the policy to be postponed until 2028 in regions where state schools are the fullest.
Writing for The Telegraph ahead of the debate, Damian Hinds, the shadow education secretary, said: “To avoid a localised school place crisis, we are calling for the education tax to be deferred for three years in areas where secondary schools are currently more than 95 per cent full.
“Labour’s education tax will be bad for state education – it will reduce choice, increase class sizes and be disruptive for teachers and pupils.”
Mr Sibieta and Mr Pennycook were approached for comment.
An IFS spokesman said: “The IFS is, and is widely recognised to be, a politically independent research organisation committed to the highest standards of empirical analysis on important issues of public policy.
“Our report on VAT on private schools, like all our work, adheres to these standards of excellence and impartiality, laying out the evidence as it exists whilst making clear the limits of that evidence.”
The Government was contacted for comment.
Labour’s education tax will be a total disaster for vulnerable pupils
By Damian Hinds
Think about someone who goes to private school. Unless you have experience of one of these schools with friends or family, you probably think of someone like my old colleague Jacob Rees-Mogg. Posh, basically.
And it was probably Jacob who the Labour Party had in mind when its education tax was designed – what is a 20 per cent rise in the price of something that is already out of reach of a normal person? Making the rich pay more, whatever the consequence, is an old favourite of the Labour Party.
But Labour has two problems. First, not everyone who is at a private school is Jacob Rees-Mogg. Second, when you are in government, your actions have consequences and you have to deal with them too.
We should be honest – very rich people who send their children to the most elite private schools will probably not be much affected by this tax. They don’t like it, but they will pay it. Labour’s aim will have been achieved.
But it won’t stop there. A lot of other people will be hit by this tax, they won’t be able to pay and their child’s education will be disrupted. Either Labour doesn’t know about them or doesn’t care.
The Conservative Party doesn’t think education should be taxed.
Today in parliament we are calling out this retrograde policy and speaking up for the children who will be harmed by it.
Pupils who have an Education Health and Care (EHC) plan are some of the most vulnerable in our society – whatever school they go to – and disruption to their education should be avoided at all costs. Sir Keir Starmer has recognised this by conceding those with a named school on their plan will be reimbursed the cost of their education tax. This should be extended to any child with an EHC plan and those in the process of applying for one.
The impact of moving schools for those pupils working towards public exams is exorbitant. A new school may not offer the same syllabus or even subject. The Government should exempt all students currently in years 10, 11, 12 and 13 so that their studies – and exams – are not disrupted.
There are pupils who are currently supported in private schools by the taxpayer because the Government accepts their education cannot be provided in the state sector – be they students on the Music and Dance Scheme or pupils from military families supported through the Continuing Education Allowance.
With concerned families unsure how to pay the increase in cost, the Government should recognise the insanity of giving with one hand and taking with the other.
Small religious schools and schools who charge fees that are lower than what the state pays for education should be exempt. And to avoid a localised school place crisis, we are calling for the education tax to be deferred for 3 years in areas where secondary schools are currently more than 97 per cent full.
Labour’s education tax will be bad for state education – it will reduce choice, increase class sizes and be disruptive for teachers and pupils.
The overnight introduction of a 20 per cent tax part way through the academic and tax year without having published any impact assessment or projections of the revenue it will raise smacks of the chaos that defines this government.
Unions, teachers and parents have warned against this rushed implementation. But if the Government is not willing to stop the introduction of this poorly made policy there are steps it can take to avoid the education tax being as ruinous as it is set to be. The choice is up to them.