Self-sabotaging Labour is finally waking up from its private school nightmare
Labour’s VAT raid will have a devastating impact on small independent schools. Even some of their own MPs are waking up to this.
Rachael Maskell, MP for York Central, has called for schools whose annual fees are less than £6,500 to be exempt from charging VAT.
She fears that the York Steiner School in her constituency might have to close. Set up in the 1980s, it is a laudable institution providing the type of exemplary individualised education that the state cannot hope to replicate – at remarkably low fees.
Families with a household income of under £20,000 pay just over £3,000 per year – those parents who earn over £80,000 pay a maximum of just over £10,000.
The school’s ethos may not suit all. It takes its name and educational philosophy from Rudolf Steiner, a turn of the century Austrian – well, take your pick – charlatan crackpot or genius without parallel.
He was certainly not a modest man, developing his own all encompassing theories of: schooling, farming, medicine, religion, architecture, theatre, poetry, wine-making, baking, cosmetics and racial hierarchies (he was a man of his time).
Regardless of this quirkiness, his eponymous school is doing great things for the children of York – and Rachel Reeves is now putting this in jeopardy.
To save poorer independent schools, Ms Maskell’s proposal does not go nearly far enough. The number of schools that charge fees as low as York Steiner are vanishingly small. Spending on state schools in England this year stands at £7,690 on average per pupil.
You would be hard pressed to find an independent London day school which charges less than that not per year but per term – and many charge considerably more. Day fees at St Paul’s Boys are £31,000 and at Westminster are fast approaching £40,000.
It is not these illustrious schools that are at risk – it is those with much less deep pockets. And the reasons go beyond them not having endowments to cushion the blow. The largest cost for virtually all schools is staff salaries, but it is a much higher proportion of total expenditure for less renowned schools.
Once VAT is imposed on fees, schools will be able to reclaim the VAT they are paying on inputs. Salaries are not subject to VAT, but – for example – spending on building programmes or IT equipment is. And for richer schools, this capital expenditure makes for a much higher proportion of total spend.
St Paul’s Boys told parents earlier this month that “forward planning and VAT recovery” will mean that when VAT comes in on fees, the total bill will go up by 9pc rather than the full 20pc tax rate. But this will simply not work for schools that don’t have fancy facilities to spend money on.
This latest assault on private education follows a previous money grab on the sector – undertaken when Michael Gove was education secretary. Historically, most independent schools have been part of the state’s pay-as-you-go unfunded Teacher Pension Scheme.
In 2012, the employer contribution to the pension scheme was 14.1pc – this year it has reached double that to over 28pc. In practice, this only hurt independent schools – for state schools, the Government has simply increased the grant commensurately.
Ms Reeves is pushing her VAT policy in the name of equalising chances, but its certain result is that life will become much more difficult for York Steiner and hundreds of other small schools that are doing a brilliant job.
Their grander siblings will continue to do just fine. Labour’s policy does not even work by its own measure.