Has Labour flip-flopped on stripping private schools in England of their charitable status? Senior party figures from Keir Starmer down have certainly been guilty of using loose language, conflating such a move with their plan to apply VAT to private school fees and other tax breaks.
Starmer said in July last year: “When I say we are going to pay for kids to catch up at school, I also say it’ll be funded by removing private schools’ charitable status.”
He was repeating language and policies contained in Labour’s 2017 and 2019 manifestos. But when Labour policymakers have been questioned about how the plan would work in practice and how much it could raise in additional revenue, they have been clear: adding VAT to fees and removing business rates relief from private schools was the first priority, and questions about charitable status would have to wait.
There are two reasons why Labour wonks were happy to leave charitable status alone. The first is that the VAT exemption for school fees is entirely unconnected to charitable status. Under current tax regulations, most educational services – such as music lessons, university tuition and private tutors – are exempt from VAT. Changing the rules to apply VAT to encompass private school fees would be technically straightforward, according to experts. And it’s the VAT change that will raise the bulk of the £1.3bn-£1.5bn in net revenues anticipated by the Institute for Fiscal Studies (IFS).
Similarly, removing the relief on business rates that private schools currently enjoy is also unconnected to charitable status, as the Scottish government has already demonstrated by removing the tax break from schools there.
