Labour would introduce VAT on private school fees immediately if it wins power, meaning parents could be hit with higher charges as soon as the first academic year after the general election, i can reveal.
Senior Labour figures told i the party will end the tax-exempt status of independent schools as soon as possible if it enters No 10, rather than “phasing” it in across several academic years as was previously assumed.
Sir Keir Starmer has pledged that a Labour government would strip private schools of their charitable status, which makes them eligible for tax relief and a reduction in business rates.
It means private school fees will be hit with 20 per cent VAT if Labour comes to power, which the party estimates could raise £1.7bn to spend on lifting educational standards across the state sector.
When asked if the plans would be implemented immediately a senior Labour source said: “We will not be phasing them in.”
It has been likened to a “Robin Hood-style” policy that would see Labour redistribute wealth more evenly across British schools, with Sir Keir using it to make a personal attack on Rishi Sunak last year for attending £49,000-a-year Winchester College.
The plans are expected to play a crucial part in Labour’s 2024 election manifesto, which the party is preparing to unveil in the coming months.
With current polling showing Labour is on track for a sizeable majority at the next general election, Sir Keir would likely face little obstacle passing the VAT legislation through both the House of Commons and the House of Lords if he becomes Prime Minister.
The general election is expected to take place in autumn 2024 and by January 2025 at the latest, meaning the charge could be imposed in 2025. It is not clear if Labour would seek to bring in the charge part-way through an academic year.
It could come even sooner if Mr Sunak pursues a snap general election in spring next year, with several schools telling i they have drawn up contingency plans for a “worst-case scenario” under which VAT comes into force from September 2024.
The independent sector has warned of widespread school closures if the VAT plans take effect, with smaller private schools set to bear the brunt of the policy rather than household names such as Eton and Harrow.
Julie Robinson, the chief executive of the Independent Schools Council, told i: “We would urge Labour to take note of the real concerns that many across education have raised, particularly the effect their policy would have on children in smaller schools, in faith schools, children on bursaries, and pupils with special educational needs.
“Schools are having discussions and preparing as best they are able without timelines or policy detail. Any policy decision affecting this many children should be subject to full and thorough impact assessment.”
Silas Edmonds, headteacher at Ewell Castle School on the London-Surrey border, said the prospect of Labour’s VAT plans hitting as soon as September 2024 would mark the school’s “worst-possible-case scenario”.
“We would be in place to try and respond to it, but it would be incredibly tough,” he said. “The irony is that the really big, wealthy, independent schools – it’s not going to hurt them, because they’re absolutely bulletproof when it comes to this financially. It’s the smaller and medium-sized private schools that would be impacted from this. The bigger ones are totally inoculated.”
Mr Edmonds said his school, which charges £19,140 each year for its secondary school pupils, would try to “meet parents halfway” by cutting costs elsewhere. It could mean parents still face an additional £1,940 in school fees every year for each pupil in Years 7 to 13.
Lizzy Nesbitt, the headteacher of Emmanuel Christian School on the outskirts of Oxford, told i earlier this year that her small independent primary school would be pushed to the brink under Labour’s plans.
“We only have about 70 pupils at the moment – we’re a tiny school that’s already at capacity so we can’t just do things like increase class sizes to save costs,” she said.
Ms Nesbitt said the school, which charges £1,995 per term, would “reluctantly” have to draw on some sort of “philanthropy” to help it survive Labour’s proposed 20 per cent tax hike because there “are no other margins left to cut”.
“Independent education is not a monolith,” she said. “One of the rules of Government is listening not just to the loud and the big, but the small and the quiet.”
The impact on fee-paying parents will largely depend on how much private schools choose to swallow the additional costs of Labour’s VAT plans rather than pass them on in full.
A report by the Institute for Fiscal Studies published in July predicted that up to 40,000 privately-educated students could be forced to switch to the state sector if Labour wins the next general election, meaning the scheme could raise less money than the party has predicted – around £300m lower each year.
The IFS said it predicted that between 3 and 7 per cent of privately-educated pupils would move to state schools under the plans. It is well below the forecast of at least 17 per cent in a study commissioned by the lobby group for the independent sector, but would still result in higher Government spending on a small number of pupils moving from private schools to state schools.
It comes as Labour sources told i that the party is preparing for a ramp-up in attacks from the private school lobby in the coming months as the prospect of the party entering No 10 inches closer towards becoming a reality.
It means Labour leader Sir Keir will likely have to face down a political battle in the run-up to the general election, with senior figures in the independent sector telling i they were pushing for Labour to commit to a full consultation on the plans before passing it into law.
However, a range of experts told i earlier this year that the policy was “unlikely” to result in state schools being swamped with a sudden influx of former private school pupils whose parents had been put off higher fees.
They noted that private school fees have rocketed way beyond inflation in the past few decades as British schools become increasingly popular for wealthy overseas families.
Fees for schools that belong to the ISC have gone up by 22.7 per cent over the past five years, suggesting many families at larger private schools may be able to swallow the added costs under a Labour government.
A Labour spokesperson said: “While this out of touch, out of ideas, tired Conservative Government tinker at the edges, briefing about plans they may or may not see through in five years’ time, Labour makes no apology for relentlessly focusing on how to drive high and rising standards in our state schools.
“Because we are the party of fair taxes, we will end the unjustifiable tax break afforded to private schools and fund recruitment of over 6,500 more teachers as well as access to mental health counselling in every school.”