LONDON: The UK will end a tax exemption for private schools on Wednesday, the centre-left Labour government has announced, in a move set to raise over £1.5 billion ($1.9 billion) for public education.

After years of worsening educational inequalities, from Jan 1, private schools will have to pay 20 per cent value added tax on tuition fees, which will be used to fund thousands of new teachers and improve standards in state schools. “It’s time things are done differently”, finance minister Rachel Reeves said in a statement on Sunday.

The funding will “go towards our state schools where 94pc of this country’s children are educated”, she said.

The policy was promised by Labour in its election campaign and officially laid out in its inaugural budget in October. It hopes the move will bring in 1.5 billion for the 2025/2026 school year and rise to 1.7 billion a year by 2029/2030, which will be used to fund 6,500 new teachers in the public sector.

Despite warnings from private schools, the govt is ploughing ahead and will charge 20pc VAT on independent school fees

Tuition fees in private schools already average 18,000 a year, according to the Independent Schools Council, which represents private schools. That figure is set to rise, with the government estimating that tuition fees will increase by around 10pc, with schools taking on part of the additional cost.

“High and rising standards cannot just be for families who can afford them,” said education secretary Bridget Phillipson.

Opponents of the reform say state school enrolment will explode if the private sector is lost, increasing the cost to the government. But studies contradict this.

The Institute for Fiscal Studies calculated that the number of children in state schools will actually fall by 2030 due to a projected population decline. Several research centres also point out that the disparity between private and state schools widened sharply under the 14-year Conservative rule.

Despite warnings from private schools over the impact of the policy, Prime Minister Sir Keir Starmer is ploughing ahead and will charge 20pc VAT on independent school fees from the start of 2025.

According to The Independent, private school leaders have warned the combination of tax hikes in the budget and the removal of their charitable status, which saw fees exempted from VAT, could lead the sector to “fall apart”.

They have also argued that the hike in school fees as a result of the policies will force more children into the state sector, overwhelming already stretched schools and wiping out any gains to the public finances.

And, ahead of the policy coming into force, Liberal Democrat education spokesperson Munira Wilson said: “Students and teachers across our education system are crying out for support, but we’ve been clear the government’s decision to tax education is the wrong approach.

“The government should now lay out what effect this misguided policy will have on the families of the 100,000 children with special educational needs currently at independent schools who do not have education, health and care plans.”

The Labour government won a landslide election in July promising to boost economic growth and improve public services.

Published in Dawn, December 30th, 2024