This month, VAT on private school fees was introduced across the UK.
Here’s what you need to know about the policy and its impact in Scotland:
Why is Labour adding VAT on to private school fees?
The 2024 Labour general election manifesto promised to “end the VAT exemption and business rates relief for private schools to invest in our state schools”. It said the party planned to recruit 6,500 new teachers, “paid for by ending tax breaks for private schools”.
Labour estimated that the change would raise around £1.5 billion a year, ring-fenced for reinvestment into state education. However, in Scotland, it has been pointed out that money raised through the policy will not necessarily be re-invested in state schools - how the cash is spent will be a matter for the Scottish government.
In Scotland, business rates relief has already been withdrawn for independent schools - the Scottish government introduced the change, which was expected to raise £5-7 million, in 2022.
What are Scottish independent schools saying?
The Scottish Council of Independent Schools (SCIS), which represents 69 independent schools in Scotland, says the move will “disrupt the education of thousands of children in the independent sector and place a significant burden on the state sector” because families could be forced out because of rising fees.
It has also said the policy could lead to job cuts in private schools as “the only financial lever open to most schools in Scotland” would be “to reduce staffing levels of both teaching and non-teaching staff”.
SCIS said in its official response to the UK government’s plans that VAT on fees was “one of several factors” that led to the recent decisions to close Kilgraston School in Perthshire and Cedars School in Greenock.
After chancellor Rachel Reeves confirmed Labour’s plans to add VAT to private school fees in October’s Budget, the Independent Schools Council - of which SCIS is an affiliated organisation - announced that it would be taking legal action against the government over the policy.
Are independent special schools exempt?
No - there are some mitigations in a bid to ensure the policy does not adversely affect pupils with the most acute additional needs but it is argued these do not go far enough.
The government has said where a pupil’s place in a private school is funded by the local authority because the pupil’s needs cannot be fully met in the state sector, or are best met elsewhere, councils will be able to reclaim the VAT they are charged on the fees.
However, VAT will be applied to the fees of self-funding pupils in independent special schools.
The Donaldson’s Trust, which describes itself as Scotland’s national body for neurodiversity and runs a grant-aided special school, says this could have “detrimental impacts”.
It said in its submission to the government consultation that self-funded places at grant-aided special schools were “almost always a ‘last resort’” for families and “not a luxury or convenience”.
It continued: “Many self-funders attending [grant-aided special schools] would simply not attend a school, or receive an education of any sort, if they were not able to access our specialist provision or those of similar independent schools.”
SCIS also urged the government to “exempt children in specialist school settings whose fees are paid by their family”.
However, it remains the government’s policy that VAT will apply to these pupils’ fees. It says preferential VAT treatment should be tied to a formal, independent assessment that a child’s needs cannot be met in the state sector.
SCIS chief executive Lorraine Davidson said: “There was a way to minimise the harm this education tax will cause to children. Unfortunately, the UK government chose to ignore our plea on behalf of the pupils whose education will be most at risk, and have implemented it in a way which will maximise the harm to children’s education. Their approach is unfathomable.”
Could the policy have other unintended consequences?
Rod Grant, headmaster of Clifton Hall School in Edinburgh, has said that the policy could lead to fewer bursaries in the private sector.
Speaking to LBC radio in 2024, he said the school currently supported 62 children but he could not “turn around to the parent body and say, ‘I am adding 20 per cent to your fees but at the same time looking after 63 children and financially supporting them’”.
According to SCIS around a quarter of independent school pupils currently receive financial assistance.
Introducing it mid-year has also been criticised. SCIS said being removed from a school mid-way through the year could have “an adverse effect on wellbeing”, especially for pupils with additional needs or adverse childhood experiences.
How much will the policy raise in Scotland?
The only official figure is that the policy will raise £1.725 billion a year across the UK, according to the Treasury. There is no official Scotland-specific figure.
A report commissioned by SCIS and published in February 2024 estimated that £51 million would be raised through the move in Scotland - considerably lower than the figure cited by Labour politicians.
At the EIS teaching union’s general election hustings in June, Pam Duncan-Glancy, Scottish Labour’s education spokesperson, claimed that £100 million to £120 million would be raised, enough to employ 1,800 teachers in state schools.
However, the SCIS report, by Biggar Economics, warned of a potential 13 per cent drop in the private sector’s school rolls (3,190 pupils), which would “more than wipe out the gains in revenue from VAT”.
Other reports have predicted less of an impact on private school rolls.
The Institute for Fiscal Studies predicted that removing tax exemptions was likely to have a “relatively limited effect” on the number of children attending private schools, estimating a 3-7 per cent reduction. The Office for Budget Responsibility predicted a 6 per cent drop in pupil numbers.
The Treasury has estimated that private school fees will increase by 10 per cent. However, it has been reported that this was an underestimate, with fees rising by more than Labour predicted.
When it comes to this policy, why is the focus so often on Edinburgh?
The city has a high concentration of independent schools (the council estimates 15 per cent of pupils attend them, although the reported figure is often higher), and some fear the impact of an influx of pupils into the state sector.
Earlier this month Tes Scotland revealed between 1 June and 15 January a total of 51 independent school pupils moved to Edinburgh state schools (18 pupils to primary schools and 33 to secondaries).
The president of secondary headteachers’ body School Leaders Scotland, Pauline Walker, who is head of The Royal High School in Edinburgh, described the flow of pupils into state schools to date as ”more of a trickle than a flood”.
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