The decision of Labour Party leader Sir Keir Starmer to reiterate one of Jeremy Corbyn’s more high-profile election manifesto promises – the abolition of independent schools’ VAT relief – should be sending a chill through the entire independent schools’ sector.
The Labour Party has actually mooted this tax change for years, but with opinion polls all putting Labour in the driving seat - with a chance not only of a win but an actual landslide - Starmer’s pledge could easily be voted into law within months of Labour taking office.
The independent education sector is clearly already facing once in a generation headwinds. Significantly increased fuel costs and rising wage bills mean that school fees are destined to go up dramatically - regardless of any changes to the VAT regime. For parents who are already struggling, to find that their already increased fees have ballooned by an additional 20 per cent of VAT overnight might be the final straw - particularly as the realities of the long slow recession begin to bite.
We have long known that demand for independent schools is surprisingly inelastic. It appears that parents will sacrifice an awful lot before deciding to take their children out of an environment where the perceived benefits – in terms of exam performance and life opportunities - are seen as extremely valuable.
But there comes a point for almost every family budget when something has to give – particularly as mortgage costs are also skyrocketing.
There’s no way to sugar-coat it: I’m afraid the future looks grim – particularly for smaller schools who bear higher central costs per pupil, and the boarding schools that traditionally relied on international students to keep the wolf from the door.
In many cases, international students have gone for good – driven out by political pressure at home, and lingering fears from parents that their children may be stranded again by Covid on the other side of the world.
Then there’s another feature of a prolonged recession, a desire by parents not to be seen to be conspicuous consumers and being able to afford what is perceived by most people as an unpalatable luxury. The days when people openly flaunted their wealth are now fading fast. Many parents won’t want to stand out from “ordinary” citizens, many of whom are going to find it extremely difficult to heat and eat at home over the next few years.
Add in a move by the Russell Group universities to contribute in their own way to the levelling up agenda by making it harder for privately educated children to get university places, the attractions of independent education begin to diminish dramatically.
It's a judgement call by Starmer, of course. If the middle classes decide to knuckle down and bear the VAT on school fees, it will be a clever way to tax a group who are not traditionally heartland labour supporters and it will be a useful money spinner for the Treasury.
But if it backfires, as I suspect it will, and parents start to take their children out of the private system in numbers, it will present a Labour Government with an even more significant problem – finding places in the maintained sector for tens, if not hundreds of thousands of pupils at very short notice.
It takes a while to bring new schools and new teachers on stream, and it costs a lot of money – possibly more than Labour will be able to raise from diminishing VAT revenues from the private sector. State schools are already creaking at the seams, and they will struggle even more if Labour isn’t careful.
By Tom Buchanan, Founder and Managing Director of Paternoster Communications