Labour to publish VAT impact on private school fees on Budget Day

Full details of the impact of Labour’s decision to impose VAT on private schools will be published alongside the budget, ministers said.

The government must prepare for renewed criticism of its policy if the impact assessment is published just eight weeks before the controversial tax comes into force.

The analysis is reviewed by the Office for Budget Responsibility and is based on extensive collaboration with the independent sector.

This will likely also include whether schools will be forced to increase their fees and the possibility that some institutions will close as a result of this measure.

Labour has been criticised for not yet producing an impact assessment on the 20 per cent VAT, despite Rachel Reeves giving the green light in July for the measure to be introduced on 1 January 2025.

The announcement on October 30 leaves parents with only two months to transfer their children to the public sector.

The Conservatives accused the government of trying to “sweep the effects of this policy under the carpet”, just as ministers have not yet published an impact assessment of the finance minister’s decision to cut heating subsidies for the winter.

However, ministers stressed that the VAT scheme would also have a positive impact on education, as the money raised would finance 6,500 new teachers in state schools.

The government also says it does not expect a 20 percent increase in school fees as a result of the policy change. It wants private schools to absorb the costs and keep the fee increases as low as possible.

However, it was reported earlier this month that Eton will pass these costs on to parents in full.

In a parliamentary written answer to Shadow Education Secretary Damian Hinds, Chancellor of the Exchequer James Murray said: “On 29 July the Government announced that from 1 January 2025 all education services and vocational training provided for a fee by a private school in the UK will be subject to VAT at the standard rate of 20 per cent. This includes boarding services provided by private schools.

“The Government will confirm the introduction of these tax policy changes in the Budget on 30 October. Following a review of the Government’s costings by the independent Office for Budget Responsibility, details of the Government’s assessment of the expected impact of these policy changes will be published in the Budget as usual.”

Mr Hinds said: “Labour is trying to sweep the impact of its education tax under the carpet, just as it did with the Winter Fuel Payments, in a desperate attempt to avoid scrutiny.

“We have been raising the alarm for months about the impact this policy could have on school places and teachers if it comes into force in the middle of the school year.

“Now the government is avoiding important questions and we don’t know what their own assessment of the impact is.

“The government must urgently come clean on this policy – it is simply not good enough to treat families and the public this way. We will continue to hold them to account.”