- Labour retracts private school tax
- Plans to end tax breaks
- Controversy over policy change
Labour has abandoned plans to strip private schools of their tax-exempt status, but says it will eliminate other tax benefits if it wins the next general election.
The status exempts certain private institutions in England and Wales from taxation.
Sir Keir Starmer, leader of the Labour Party, had previously stated that private institutions’ charitable status could not be justified.
The party now claims it can eliminate “unfair tax breaks” without altering the regulations governing charitable status.
The government believes that half of England and Wales’ 2,500 private schools are charities.
Charity schools receive contribution and company tax exemptions and cannot operate for profit.
To maintain their charitable status, private schools have had to demonstrate “public benefit” creation since 2006.
Labour says it would levy 20% VAT on private schools and terminate business rate relief to raise an estimated £1.7 billion.
The party would utilise the monies “to fund desperately needed teachers and mental health counselling in all secondary schools.”
Sir Keir said the policy was not an “attack on private schools,” but that the country had to “do something about the appalling state of our schools” and that those changes would need to be funded.
“I’m very comfortable with private schools,” he said, “but I want our public schools to be just as good, so it doesn’t matter whether you send your child to a private school or a public school because you’ll have the same life opportunities.”
The party believes that ending VAT relief would be more expedient than removing schools’ charitable status, which could be complicated and subject to legal challenge.
However, the measure appears to contradict Labour and Sir Keir’s top team members’ statements.
Sir Keir told the Sunday Mirror in 2021, “Labour wants every parent to be able to send their child to an excellent public school.” However, enhancing them for the benefit of all costs money. Therefore, we cannot justify private institutions’ continued charitable status.”
In a press release issued in July of the previous year, the party stated, “Labour will end the charitable status of England’s private schools.”
And during a January parliamentary debate on the taxation of schools, Shadow Education Secretary Bridget Phillipson stated that “charitable status for the majority of private schools should end.”
According to senior party insiders, the charitable status pledge was merely a cypher for specific reforms to which the party remains committed.
Class warfare
During a question-and-answer session hosted by the Mumsnet website, Ms. Phillipson insisted that the party’s plan to terminate tax breaks for private schools remained “unaltered.”
She stated that “ending charitable status was not a prerequisite” and that “we can move forward with ending the tax breaks relatively quickly and then invest that money in improving outcomes for children.”
However, Prime Minister Rishi Sunak, who attended fee-charging Winchester College, stated that the policy was part of a “class war” designed to “punish” aspirational parents.
He added that Labour’s approach demonstrated “they simply do not comprehend the aspirations of families like my parents, who worked extremely hard.”
He told, “They do not comprehend the desire that people have to provide a better life for their children.”
The Scottish government eliminated business rate relief for private institutions last year.
Julie Robinson, chief executive officer of the Independent Schools Council, argued that removing the tax relief associated with schools’ charitable status could result in “a two-tier system within the charity sector.”
She stated that it would create a “worrisome precedent” in which any charity deemed not to reflect the prevailing political ideology would be subject to additional taxes.
Additionally, the council has argued in the past that tax changes would “threaten the existence of the smallest independent schools.”
Sir Keir argued that tax rebates for private schools were a “scandal” a year ago when he clashed with Prime Minister Rishi Sunak over the issue.
He also cited former Levelling Up Secretary Michael Gove, who questioned the justification for providing “state support to the already wealthy” when he was out of office.
According to the Institute for Fiscal Studies, the average private school in the UK charges about £15,200 per year, while the most expensive institutions, such as Eton College or Harrow School cost about £50,000 per year.
The Conservatives have questioned whether tax reform would generate the £1.7 billion that Labour claims it will.
