Looming Crisis: Private Schools Face Closures Amid VAT Hike

[MicroB]

There has also been a significant push on showing polls showing the public highly supportive of the policy. But that same public also wants hanging back.

[The Cyclist]

8 minutes ago, MicroB said:

Ha ha. I mistyped. I meant sack not save them, on the off chance he's not one of them.

 

I can see this Policy being overturned in Court. As you will see in one of the 2 following links from the Guardian, The Courts tend to come down on the side of SEND families.

 

12 minutes ago, MicroB said:

I wish I could read that article, but I suspect it will be tragically comic.

 

It highlights  the futility ( and utter madness ) of potentially raising £1.8 Billion a year in VAT revenue whilst spending an estimated £5 Billion a year in additional teachers.

 

It is Government writ large, spend £1000 to save £100. Madness.

 

These 2 articles highlight, the problems with SEND pupils in the State School system, without adding additional SEND pupils due to a VAT raid that many will not be able to afford.

 

https://www.theguardian.com/uk-news/2024/dec/23/send-children-special-educational-needs-disabilities-anne-longfield

 

https://www.theguardian.com/commentisfree/2024/dec/29/children-special-needs-councils-labour-send

 

The last paragraph in the 2nd article sums the Labour Government up in a nutshell

 

There is a current teacher shortage, retention is bad and the plan to recruit an additional 6500 teachers over the course of this Parliament is laughable. Even if they managed to hit the 6500 target, this will not  cover the amount that leaves over the same period and neither will it solve the current shortage.

 

Interesting times ahead.

[MicroB]

2 hours ago, The Cyclist said:

 

I can see this Policy being overturned in Court. As you will see in one of the 2 following links from the Guardian, The Courts tend to come down on the side of SEND families.

 

 

It needs to get to Court first. A judicial review claim has been filed with the High Court. Solicitors are advising clients not to hang around presupposing a decision. And even if the Court decides the government acted unlawfully, it doesn't have to set aside the decision being challenged or make any other order. All that might happen is a moral victory.

 

I see some analogy with private healthcare. Before COVID, the private sector in the UK was relatively under utilised, for mainly electives. When COVID hit, there was really a firming up of the relationship between the NHS and Private Sector, with the government effectively buying up all the beds, or spare capacity, in the excpectation it would be a mass casualty event. More recently NHS referrals to the private sector are in the context of dealing with pent up demand, longer waiting times. Essentially, a patient can be referred to the private sector for their Op, and the NHS is billed at the same price the procedure might cost the NHS. Its possible the patient might recuperate in a NHS facility, or, with D2A, discharged to a private nursing home who bills the NHS. The surgeons doing the work frequently also work in the NHS.

 

Labour tells us Education is facing some sort of crisis. Teacheris are leaving, not enough teachers, hungry kids, buildings falling apart. 8 million kids taught by half a million teachers. They can't fill all the teaching vacancies as it is. Teachers do move between sectors; state to private and private to state. On balance, the movement to private is in the positive, ie better working conditions etc

 

In the private sector its about half a million kids taught be 80,000 teachers. The ratios are crude, because its more complex than that.  But, even now, private schools provide thousands of hours of free specialist teaching and access to facilities to their state counterparts

 

The government could increase the education budget by £5 billion (a 5% increase), and really, it will have an insignificant impact on the sector. Money spent now wont be felt for 5-10 years.

 

The government could view private schools as surge capacity. Sending pupils to them en masse doesn't really work, because often these schools are in the wrong places compared to state schools (the issue causing the transfer problems now). There could be ways for the government to make more parents see independant schools as a viable alternative (subsidy, vouchers). That wuld requre the fees to drop significantly, which can be mitigated to the schools through rolls, protecting revenues. Also, there could be greater secondment of teachers between the sectors, even part time.

 

One reason for the increase in fees, particularly between 2003 and 2014, has been employer pension contributions. Private school teachers are in the same pension scheme as state. Since 2003, that employer contribution has racked up considerably (now 25% of salary?). Based on average 1990 day fees in 1990, if they had tracked with inflation, the average cost would now be about £7500, which does show that in 1990, private education was making better use of resources than the state. Besides secondments, the government could come to an agreement over pension contributions.Even a time limited arrangement might give the state sector some breathing space, espeically with the thorny question of school construction. How do you rebuild a school without kids spending years being taught in rotted portacabins.

[camilla99]

On 12/31/2024 at 11:12 PM, MicroB said:

I've not bothered to read all the replies on this thread, but pleased that the topic is being discussed. Its a long post, so skip if you don't want to read it.

 

My nephew has attended an independant school since the age of 4. He's now on the cusp of starting his GCSEs, and is thriving, all the more so since joining the school cadet force, which has greatly enhanced his confidence.

 

His mother is a school teacher in the state sector, falling within the bottom 90% of the population (earning £59,000 or less). She does not live with the boy's father, who is also a state school teacher. They both contribute to his upbringing. They have first hand knowledge of the state of public education in the English East Midlands; its abysmal. My sister has experienced 2 of her pupils being stabbed to death. She has been assaulted by pupils objecting to being taught by a female. On parents night, she has met parents who have turned up drunk or under the influence. In her previous school, the majority of kids in her class were from Eastern Europe. She has been impressed how diligent they were. It is routine that teachers buy stationary supplies from their own pockets. In her present school, many parents seem to have second homes in Dubai and drive fancy cars.

 

Both parents agree that they will try their utmost for their son not to be disadvantaged by the state school. They feel he will not be given a fair shot in life. My mother and late father financially supported this. They were motivated not just out of love for their grandson, but out of concern for my sister. When she was much younger, she suffered a mental breakdown, which included being sectioned. Mercifully, that seems behind her, and she has gone on to be a school leader. But, as anyone who has suffered a mental breakdown, you never forget, and that memory can be frightening, and stress can see it return. So my parents, being elderly, were interested in the pastoral care the private school could offer (its a traditional RC school. We are not RC and not at all religious, and the boy's father is from the Subcontinent), in case something happened to them and my sister.

 

For 11 years, its been just about affordable. My sister lives frugally, with the occasional holiday in Cornwall, never eats out. She receives no bursary.

 

This move by the government has obviously  caused distress. The VAT bill is about £5000 a year. In 3 weeks time, she has to hand over a check for £10,000 to the school. The fees go up again in April, once the business rates concession are withdrawn. Increase employer NI is also kicking in.

 

While she already knew the general  availability of places in the area, her enquiries reveal there are zero places in the county for his year. The LA say they would be obliged to send him to a neighbouring county, by taxi, at a cost of £8,000 per year to the rate payer. Net loss to the public purse; £3000. This is likely to be repeated across the country. This is ludicrous. Oxfordshire has already said it will decline all mid year 10/11 transfers in January. Surrey, by FOI request, forecasts zero years 9-11 places in September 2025.

 

She has resigned herself to struggling to pay the fees. She has no choice. The alternative would be to resign her position, and home school her child. Its been a tough christmas. Her house is in a floodzone, and she has had to pay a £1500 house insurance, plus brake repairs on her car. She has had to borrow money for food this month. Naturally, the lad's christmas gifts were a bit threadbare, but he's ok with that. I feel a bit sad for him. His grandad died a couple of years ago, his gran is in a nursing home due to a NHS mistake, and now this. Both came from working class, ex-military. He's resiliant.

 

I'm not sure if it has been mentioned so far, but schools do not receive additional funding for mid-year transfers. Budgets are set based on the October rolls. The government has not put in place any additional funding. The net result might include hiring freezes, deferrment of maintenance, cuts in consumable ordering (pencils, paper etc).

 

Also, there are over 5,300 partnerships between independent and state schools, through the Schools Together programme. Some of this came about when schools had to demonstrate their charitable status, but in many cases, the programme merely formalises informal arrangements that go back decades. Its interesting looking at the Schools Together website at the nature of these partnerships. Examples include letting state school kids use the swimming pool free of charge, hosting inter-school sports events and concerts at no or nominal cost, providing speciality teachers (I estimate about 300,000 hours per year, representing I suppose about £15,000,000 @ £50 per hour).

 

The government has defined independant schools as businesses, which should pay VAT (though its actually the parents paying the VAT), and while they have not removed charitable status, they have removed most of the incentives to have charitable status (business rate relief). Many schools are likely to see accelerated declining rolls (nationally, there is a decline in overall school rolls, but not for all years), but still have the same salaries and upkeep bills. I suspect some of these partnerships in the future will come with an invoice, to help cover swimming pool upkeep, groundsman salary, contract teacher supply. The result will be less kids get to learn to swim, more end up obese, and more ignorant of the rare subjects.

 

The government, in its legislation, define the following as businesses:

 

Private schools, including non-maintained special schools

Universities

Commercial providers teaching English as a foreign language

 

Universities and TEFL schools remain exempt from charging VAT on services provided. The average gross margin for universities is about 4-5%, which is pretty good compared to a supermarket at 1-2%. No logic is provided why private schools in particular are exempt. I suspect Universities would put up more of a fight, as their existance is through Acts of Parliament, but Private Schools can only exist because the government lets them. TEFL schools I guess represent a potential voter base. Of course, acquiring a decent command of English is one of the prerequisates to gaining citizenship.

 

I expect some correspondants have interjected on the thread as supportive of the policy, along the lines of "squeezing the pips", on the assumption that the parents must be very rich. I can see how that perception arise. If I drop off the nephew at his school, there is a high density of Bentleys, Range Rovers, Porsches. I'm into my cars, but they are both old; a elderly retired race car, complete with dents and rust (nothing exotic, its Japanese) and a 20 year old Jag (because I want to tick off a V8 off the bucket list). Yeah, so I'm turning up in a banger, but they get the most looks  from the kids, because kids are kids.

 

https://medium.com/@diarmid.mackenzie/diversity-across-uk-independent-schools-a015a006f41b

 

 

I was surprised what the real world data. About 50% of kids come from households with an income of more than £59,000. I wouldn't say in 2024, £59,000 defines one as rich. It doesn't even qualify you for the LTR visa. 25% come from the bottom 70%, which means households with less than £40,000 in income.

 

So how on earth do 50% of families at independent schools afford the average £18k day fees? The answer is they can't. 1% are on full fee bursaries. 7% are on means tested bursaries. 33% have a scholarship or discount (https://www.pepf.co.uk/fact-finder/facts-and-figures/).

 

The increases due to government policy will accelerate the decline in rolls. There will be less bursaries and scholarships. The share of that pie chart by the top 10% will grow. Schools will become more exclusive, and probably less integrated with the local community as the percentage of international boarders grows

 

The others scrimp and save, often with extended family support, such as grandparents. Most of the fees already benefit the economy. The schools are often major sources of employment for rural areas. 80% of the fees typically goes in salries, which are spent in the UK. The government's unsaid objective is to drive the schools out of business. They can't afford to absorb the schools, because that means finding salaries for 80,000 teachers. Some of the oldest schools are on very expensive properties, with complex covenants. They will likely be sold off for exclusive high end residential development. Teachers in speciality subjects such as Latin will have zero chance of re-employment in the state sector. Most will probably leave educaton or go overseas. The death of the schools will be long and drawn out, as they lose critical mass, with empty classrooms

 

The government is vague about the expected windfall. It will certainly be negative in the first year, as VAT on capital expenditure over the last 10 years is paid out. Initially it was £1.5 billion in 2025, now it might be £1.8bn in 2029. The Treasury will say it will be spent on "improving public services", which might mean anything, the Department of Education is convinced they will get all the money, which I doubt. And even if they do, if they don't know how much money will be realised, how can they set budgets; government spending through raising loans, paid off by tomorrow's taxes. But really they don't care, because its Class Warfare. And Class Warfare involves dimwitted econimics, imaging the £18,000 will be spent on other taxable things, but it won't. It will be spent on holidays in the Maldives, German cars and yachts.

 

I had under estimated how factionalised Western Democracy had become, with governments around the world beholden to special interest groups, whether thats Brexiteers, Corbynites, MAGA. I'm a lifelong Tory, but consider myself to be part of the rapidly disappearing centre right/Disraeli/One-Nation part (I actively campaigned for Rory Stewart). I voted Tory in 2024; I had nothing against the sitting Tory, even though he was from the traditional Dry wing, because we have many common values. But Labour won the seat, the new MP has turned out to be a complete idiot, with whom I have vigourously and forecefully engaged with by Email. My mistake was assume that Starmer would be a "normal" politician, and "normal" discourse would resume. I'd like to think that he's not really all that committed to this policy, and believes the country has far bigger issues, and probably concluded its not a vote loser , so its a sop to the Left. But I failed to understand that he's weak. This will translate to an increasingly unhinged Labour Parliamentary Party, kind of the Ying to the Yang of the last Tory government. He won't see out his term.

 

They came for the old, then the kids. Then the rest. If private schools are businesses to be taxed, then why not universities (the Deputy PM probably thinks a University Education is a luxury, she didn't need it), certainly all those would-be fat cat CEOs getting their MBAs. Dentists as well, no excuse that you can't find a NHS one, because the government will pull out some spreadsheet showing how they increased funding for refugee dentistry. Insurance; a car is a luxury, so 20% on your policy. House contents insurance; VAT on that. Travel insurance; holidays are an indulgance for the rich only, plus killing the planet, tax on that. Books; the government missed its 20% on Harry Potter sales, it won't repeat that mistake again. Certain historic political works by Engels etc will naturally be exempted. Food; the 5% vat on cavier will end. And meat, And Kellogs, because its American etc. Electricity and water; the country as a hole will have to shoulder the burden when the government discovers a hidden £40bn blackhole under the sofa.

 

Sadly, Labour is reverting to type, but without the intelligence of Foot, Benn, Wilson, so vindictiveness coupled to stupidity. In 5 years time, the country will be in actual and figurative ruins. The chink of light is that the Tories will rediscover what they are about, and that's aspiration, and thats a pretty positive thing. Reform-UK is about negativity, things what they don't like. Reform is to the Tories what the SDP/Militant Tendency were to Labour (the two conspired to keep Labout out of power for 20 years).

 

With the current case, maybe the High Court case will be won, and that's Starmer's get out clause to save Rachel from Accounts and Phillipson, as he was a Human Rights Lawyer (of some distinction). But I am doubtful.

It’s sad to see how education is becoming so challenging for many. The system seems to be only getting more complicated and less fair.