Rudolf Eliott Lockhart, CEO of ISA, shares insights on budget announcement

On Budget Day, we heard the Chancellor’s plans to add 20% VAT on independent school fees. This is why I believe it is a bad policy. 

It's a tax based on a belief that the uniting feature of independent schools is that they're all places of affluence rather than that they're united by being independent of the state & thus able to do things differently. Labour's vision of independent schools in general seems to be based exclusively on the famous schools with high fees and famous alumni. But there are around 2,500 independent schools and most are not like the stereotype. 

The point of independence is that a school can offer something different such as SEN provision, bilingual education, a performing arts curriculum, education within a minority religious ethos, or non-traditional approaches such as a school on a farm or outdoor teaching. But the Government hasn't wanted to listen to voices explaining the diverse reality of what independent schools actually look like. Indeed, the Secretary of State for Education seems to wear as a badge of pride the fact that she's not visited any independent schools. 

The strange thing is that if it's a policy targeting a sector Labour thinks is all like the most famous & most affluent schools, the reality is that it will end up helping quite a few of those rich schools while doing damage to the schools that Labour don't seem to realise exist. The schools with the most affluent parents tend also to be among the most oversubscribed. So, if some parents there can't afford fees once 20% VAT is added, other parents probably can. So oversubscribed schools will probably remain full even if the full 20% is passed on to parents 

In a small number of cases, these schools will actually be better off. Their fee income won't go down if they remain full, but they may be able to reclaim some tax once they are VAT registered (e.g. for spending on capital expenditure over the previous decade, or on future VAT-able spending). 

That said, for most independent schools this won't be the case. Most of the 2,500 schools are not oversubscribed, and most won't have had lots of capital expenditure over the last 10 years that they can reclaim VAT on. Most independent schools will already carry the scars of the very tough economic conditions we've all been through in recent years. The impact of Brexit. The impact of covid. The cost-of-living crisis. The energy crisis. Schools have already cut spending back to react to all this. So, for most independent schools, the prospect of 20% VAT on the fees in one year, on top of possible increases to employer contributions to NI, the loss of business rates relief for charitable schools, & the escalating costs of the teacher pension scheme, is daunting. 

There will inevitably be a number of independent schools that are forced to close as a result of VAT. And it won't be the big, famous, ones that Labour associates with privilege that close, it'll be the ones offering that specialist provision that are hit hardest. The end result will be a smaller independent sector, but it won't be the most affluent bit that has shrunk. I can't help but feel that Labour have come up with a policy that won't achieve what they would actually want.  

This policy sees the independent sector in simplistic terms: it's a sector used by rich people who can therefore be taxed more. It doesn't understand the range of people who might think they need to opt out of the state system. It's easy to point at schools with very high fees as Wes Streeting likes to, but there are also independent schools with very low fees, such as the bulk of schools with a Muslim ethos. These are schools often run on a shoestring with parents on modest incomes. It is also easy to claim that there is no problem for SEN pupils as the Government has said that pupils with an EHCP will be exempt from VAT, but the vast majority of pupils with SEN in independent schools don't have an EHCP, these aren't pupils whose parents choose an independent school because they are wealthy, but because an independent school best meets their child's SEN. Yet all this nuance and detail gets flattened by the crude stereotyping of independent education. 

The result is that lots of pupils are going to suffer needlessly. SEN pupils. Pupils from minority religious backgrounds. Pupils benefiting from a bilingual education. Pupils with talents in the performing arts. Pupils with all sorts of niche needs that independent schools meet. I completely appreciate that the Government won a mandate at the election and that there was a line in their manifesto about taxing parents who choose an independent education, but I am dismayed by the detail of this policy and the damage it will do. If the issue is about raising money, I would have much rather seen a more tailored policy that focused on those most able to shoulder the burden of higher taxes.  

There are plenty of sensible ways this could have been designed rather than a flat & regressive tax. If the issue is the 6,500 more teachers that the Government has said they want the policy to fund, then I'd much rather look at solutions where independent schools could work together to develop teacher training to guarantee new teachers to work in the state sector. 

But unfortunately, the policy sees things through a crude lens of class & privilege that distorts the diverse reality of independent schools. And we're left with a policy that will make the independent sector more like the things that Labour dislikes about it the most. 

Rudolf Eliott Lockhart
CEO, Independent Schools Association