The HMRC’s Capital Goods Scheme has suggested that private schools may be able to recover VAT incurred on their building or refurbishment projects for facilities like swimming pools, sports halls, music and drama studios, laboratories or lecture halls.
Labour’s calculation, however, does not take into account the possibility of children moving to the state sector if VAT was put in place. An Independent Schools Council survey indicated that private establishments could lose at least 20% of their pupils if a tax of 20% was applied to fees.
In the researchers’ most favourable scenario, school fees VAT would yield £1bn p.a., £600m less than that suggested by Labour. In the group’s least favourable vision, wherein 25% of pupils exit private schools, VAT would destroy any revenue earned by placing a burden of those pupils on the state sector.
‘Labour’s claims are far too optimistic’
EDSK Director and ex-Ministerial Advisor at the Department for Education, Tom Richmond, said that Labour’s claims that £1.6bn a year could be raised through private school VAT seemed “far too optimistic,” particularly if more than a tiny number of pupils leave the private system and move to state schools. Adding VAT to fees is expected to impact the wealthiest families and reduce the level of public support for the tax. Labour has dismissed the report’s conclusions.
UK Education Secretary, Gillian Keegan, observed that Labour was basing “significant policy decisions on outdated and incorrect assumptions.”