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Sir Keir Starmer has been accused of hitting British military families with an “unfair” cost over Labour plans to impose VAT on private school fees.
Labour has announced plans to remove value added tax (VAT) exemption on private school fees. It says the move will help to fund 6,500 new teachers in England.
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VAT at the standard rate of 20% applies to all payments for the January 2025 term made from 29 July 2024 onwards to crack down on parents paying the fees in advance.
And now, Conservative Greg Smith has argued a “wave of anxiety has swept through parents, teachers, and administrators across the UK” as a result of the measures.
He also warned it could “cost taxpayers millions of pounds” and “risk diminishing the quality of education that every child deserves in this country”.
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Labour to hit military families with VAT nightmare – and it will 'cost taxpayer millions' (Image: GETTY)
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Writing for the Daily Express, the MP for Mid-Bucks said: “One particularly concerning aspect of this policy is its impact on military families.
“My constituency is home to RAF Halton and RAF High Wycombe, and many military families depend on private education to provide stability amid frequent relocations.
“These families, who already make significant sacrifices in service to our country, would face greater challenges under this new tax.
“Disrupting their children's education with an added financial burden is not only unfair but also undermines the Government’s commitment to supporting those who serve our nation.”
Mr Smith's warning came shortly after Scotland's only Catholic boarding school announced plans to close with immediate effect, citing Labour’s VAT policy as a factor.
On Tuesday Kilgraston School in Perthshire informed parents, staff and former pupils it would close, with current pupils to be offered places at nearby schools.
On average private schools, also referred to as independent schools, charge about ￡15,000 a year.
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Labour’s VAT hike would therefore mean families with children at fee-paying schools having to find an extra ￡3,000 on average to keep them studying there.
Experts at the Institute for Fiscal Studies estimate this could lead to an influx of demand for state schools – causing Labour's plans to backfire.
They warn roughly 40,000 students could be forced out of private schools as a result of the plans, which Mr Smith claimed would “place a huge strain on already overstretched state schools”.
He said: “The potential consequences of this policy have rightly been called out by the Shadow Secretary of State for Education, the Rt Hon. Damian Hinds MP.
“He has warned of the chaos that could ensue if this tax is actioned without a clear plan to accommodate the influx of displaced students into the state sector.
“The result could be unprecedented disruption within our education system—a risk we cannot afford to take.”
Bridget Phillipson was appointed Secretary of State for Education on 5 July 2024 (Image: Getty)
Treasury documents published alongside Rachel Reeves's sooner-than-expected policy announcement admitted the plans would squeeze some parents out.
They said: “The Government recognises that these policy changes may lead to increased costs for some parents and carers, and that some pupils may subsequently move into the state education sector.”
But not everyone is convinced. British psychologist and professor of clinical psychology Daniel Freeman argued there was evidence to suggest that increasing fees would not necessarily lead to a drop in demand for private education.
Writing in an article for the Institute of Economic Affairs, he said: “I remain unconvinced by claims that charging VAT on fees will lead to a mass migration of 10%, 15% or even 25% of students from the private to the state sector.
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“These figures rely on the price elasticity of demand for places in British independent schools being relatively high.
“The independent school sector itself has provided – albeit unintentionally – very good evidence for the low responsiveness of demand to increases in fees.”
A Government spokesman said: “We want to ensure all children have the best chance in life to succeed. Ending tax breaks on private schools will help to raise the revenue needed to fund our education priorities for next year, such as recruiting 6,500 new teachers.”