This wicked tax on private education is going to backfire badly
The start of a new school year ought to be a happy time for families – full of hope for the future, tinged with perhaps a little sadness that those golden years of childhood are slipping by so quickly. This year, tens of thousands of parents are facing acute stress and anxiety as the Government introduces halfway through the school year a wicked and unprecedented tax of 20 per cent on those paying for their children’s education.
Many people simply cannot afford it and are frantically searching in vain for places in the state sector. These are not wealthy folk who can just pay up, and many of them have written to me with heartbreaking stories. A single parent struggling with two jobs to pay the fees for a child with special needs. Another terrified of the impact on their autistic son of uprooting him from his school and moving him to another unfamiliar environment.
Members of the Armed Forces who risk their lives to keep us safe are being forced to consider leaving the careers they love. One Forces family has moved 17 times in the line of duty, and boarding school is the only practical option for their children. This new tax, given their modest salaries, makes it no longer possible.
What has happened to the Armed Forces Covenant? How can it be right to impose a penal, unplanned tax on teachers, health workers, small business people, and others already squeezed by the cost of living crisis, who drive old cars, take inexpensive holidays, and scrimp and save to choose the schools that are best for their children? Children with special talents in dance, sport or music are facing the prospect of being forced out by Christmas.
The Government, like everyone else, has not got a clue as to how many children will be affected. No impact study or cost benefit analysis has been done. Given the speed of implementation, it is hard to avoid the conclusion that this is ideologically driven, and ministers simply do not care. As a result, councils cannot plan for the inevitable increase in state school class sizes. The Government denies that there will be problems with ballooning class numbers, but Emily Thornberry let the cat out of the bag when she said “if we have to have larger classes, we have larger classes”.
The position will be particularly egregious in Edinburgh, where one in four pupils attend fee-paying schools. Many of the children forced to move schools will find a different curriculum and exam boards. It’s just astonishing that this cruel and stupid policy could come from the Labour Party of Tony Blair, who himself attended an Edinburgh private school and who campaigned for education, education, education.
Sir Keir Starmer is alone in imposing a tax on education, which every civilised country recognises as a public good. If VAT can be levied on schools, why not nurseries, university fees, or tuition costs? The Chancellor seems to believe it will raise £1.3 billion, but this is based on some very dodgy assumptions brilliantly demolished by the Adam Smith Institute, which estimates that it could cost the Treasury almost an additional £2 billion.
The Government prays in aid the Institute for Fiscal Studies, which itself urges caution. The fact that ministers have not done their own analysis and published it is a national scandal. On Thursday of last week, the minister, Baroness Smith of Malvern, told the House of Lords that the Office for Budget Responsibility agreed with the Government’s assumptions on revenues. If, given the huge uncertainties, that is correct, I fear for the reputation of the OBR and its work should be published immediately.
The Labour peer Lord Hacking has prepared a formidable analysis, which suggests something very different. The key issue is the likely level of migration from the private sector to the public sector. He estimates that, if it reaches more than 10 per cent, there will be no saving but a cost and continuing burden to the state. This is because every child educated privately saves the taxpayer considerable sums of money. The Chancellor’s assumptions seem to be based on a migration figure of 5 per cent. A Times survey of parents in April of this year found a migration figure of more than five times that amount.
Many independent schools are small and tiny changes in pupil numbers can wipe them out. Scotland has already lost two schools since the tax was trailed. This means the numbers seeking places in the state sector can be substantial, triggered by small numbers of parents being priced out. Of course, the Etons of this world will survive, but these large, well-endowed schools make up less than 10 per cent of the independent sector.
So what can be done? The Government must abandon introducing the new tax in January 2025. Some people are suggesting exemptions from VAT for children with special needs or for parents in the Armed Forces. This shows a basic misunderstanding of how VAT works. It is a tax on a service not the consumer. I realise that the Government is in a bind, having said it would impose a tax on education in the manifesto. It was a foolish, uncosted promise which was not thought through and which did not consider the unintended consequences.
If the Prime Minister is determined to go ahead with this damaging and cruel policy, it should be phased in after the end of the current school year and the rate of VAT set at 5 per cent, not 20 per cent. That might even result in the Treasury getting some revenue instead of a substantial bill for increasing inequality and reducing choice in education.
Lord Forsyth is chairman of the Association of Conservative Peers and a former secretary of state for Scotland