Labour will close potential ‘VAT loophole’ for private school fees
Labour would block parents from dodging VAT on private school fees through paying for years of schooling upfront, Bridget Phillipson has suggested.
The shadow education secretary said that the Labour Party would ensure that its planned legislation, which would charge 20 per cent VAT on fees if enacted, leaves no loopholes for parents to avoid paying the tax.
Schools have warned they could have to close because tens of thousands of pupils in England will be priced out of private education under a Labour government.
The party’s policy means that parents paying average non-boarding secondary school fees of around £17,600 a year could need to find around an extra £3,500 for each child.
Some schools have told parents that they could sidestep paying VAT under a possible future Labour government by paying for years of their child’s education in advance, before the new legislation came in.
However, Ms Phillipson said on Tuesday: “We would make sure that the legislation is drawn in such a way to ensure that avoidance can’t take place.”
She said: “There is precedent for that. Back in 2010, George Osborne, when he made VAT changes, did something very similar.
“So we’re clear there was precedent when the legislation was drawn in such a way that it is effective in raising the money that we need to invest in our state schools.”
When Mr Osborne, the former chancellor, raised the standard rate of VAT to 20 per cent from 17.5 per cent in 2010, he introduced “anti-forestalling provisions” aimed at preventing people applying the lower rate for goods and services to pre-payments.
A similar policy for school fees would mean that VAT would still apply to payments made before Labour abolished the tax exemption if the payments were made for schooling that takes place after the policy has been introduced.
‘A clear attempt to exploit stereotypes’
Responding to Labour’s plans for private school fees, David Woodgate, the chief executive of the Independent Schools’ Bursars Association, said: “The number of parents who can afford to use fees in advance schemes is very small and any political focus on this niche issue is a clear attempt to exploit stereotypes about independent schools.
“Most of our parent base are from dual-income households who pay school fees each year from taxed income and it is these families who should be concentrated on: these are the people Labour’s tax on education would hit hardest.”
Ms Phillipson was speaking at the Centre for Social Justice (CSJ) think tank in London, where she accused the Government of failing to take a crisis in school attendance seriously because it was about “other people’s children”.
She said: “Because it isn’t Winchester, is it, where half the children fail to turn up at least one day a fortnight? It isn’t Charterhouse. It isn’t Eton, and it isn’t Rugby. No.
“For the Tories, the attendance crisis is always, and invariably, about other people’s children.”
She used her speech to warn that the number of pupils regularly missing school since the pandemic was “terrifying”.
She said: “There’s a school in Hastings where over 47 per cent of the children were persistently absent in 2021-22. At a school in Knowsley it’s over 50 per cent.
“This isn’t a minor issue for the department to address in its own good time. It’s a disaster.”
Ms Phillipson said she supported using fines to tackle school absences as she criticised parents who allowed their children to skip school so they could enjoy “cheaper holidays” and “birthday treats”.
A new identifying number, similar to the existing NHS number, would be introduced to hold together children’s records across different services, for example social care and education, Ms Phillipson said.
Labour would also introduce a national register of children who are not in school and use artificial intelligence to spot absence trends to improve coordination between education, social care and the wider services that support families.
Gove praised for ‘high expectations’
In a speech where she sought to establish Labour as the party of “high standards” in education, she praised Michael Gove for bringing a “fresh eye”, “high expectations” and “new focus” when he served as education secretary between 2010 and 2014, a period when he clashed with teaching unions over his reforms.
Ms Phillipson said: “What Michael Gove brought to education, for all of our disagreements about many of the approaches that he took, was a sense of energy and drive and determination about education being central to national life.
“What we’ve seen in recent years with this merry go round of education secretaries – I’ve had five in my time as shadow education secretary – is a lack of priority being given to education.”
On Monday, Gillian Keegan, the Education Secretary, said that tackling poor attendance figures was her “priority” as the Department for Education launched a national drive to tackle persistent absence.
It came after a poll conducted for the CSJ suggested that almost three in 10 parents believe it is not essential for children to attend school every day.
