During their election campaign, Labour outlined that if elected they would end the 20% VAT tax exemption on private school fees, in order to provide further funding for state schools, with some estimating it could create £1.3 – 1.5 billion per year in tax revenue. Following Labour’s victory last week, we look at the different views and opinions on potential implications of this policy.

One criticism of the policy is that it will inevitably result in an increase in private school fees, leaving many parents with little option but to remove their children from the private school system. This would mean more spaces being required in the already stretched state system and the need to fund more children.

Labour has been very clear that individual schools can decide how to cater for this additional cost – it does not necessarily mean hiking up school fees by 20%. Whilst the larger, older, and more elite private schools may have financial reserves that could cover the cost in the short term, there are many newer, smaller independent schools (often with a lower price point and who operate on tighter margins) that could see the greatest impact. Some may even need to consider closure.  Pupils in those schools would need to be accommodated elsewhere, either in the public or state school system.

Another concern is what would happen to the number of special education needs (SEN) places that are currently provided and in some cases funded by private schools. Labour’s policy outlines that VAT would not be applied on places accommodated by children who have an Education and Health Care (EHC) plan. Although this is positive, there is a significant number of pupils with special needs that do not have a EHC plan. They would potentially be forced out of a system that has the resources and expertise to support the most complex SEN needs. It is widely acknowledged that SEN provision is oversubscribed and the number of children with special education needs is on the rise. Government statistics published on the 20 June 2024 outlined an increase of 101,000 pupils from 2023 who require SEN support. The percentage of pupils with an EHC plan has increased to 4.8%, from 4.3% in 2023 and the percentage of pupils with SEN but no EHC plan has increased to 13.6%, from 13.0% in 2023. This group would not see a relief from the new labour proposals.

As well as special education needs places, bursaries could also be impacted with funding being reduced/ removed to avoid the need to increase fees. Through our education work at Nexus, we have witnessed the fundamental support that private schools provide by partnering with state schools and offering educational and sporting facilities at low or no cost. This policy could force some schools to reconsider such support to help balance the books.

The policy is though popular with many and promises to deliver benefits. Along with feeding much needed revenue into the state school system, it could allow for better social cohesion through more economically diverse state school year cohorts. Local schools would be more representative of the local community, ultimately reducing social-economic segregation. Although there is an opposing view that it could result in pupils being driven out even further with some parents even considering sending children overseas to private schools offering significantly reduced fees.

Poor mental health is a clear barrier to learning and the introduction of increased support in this area will be of undeniable benefit. Children spend a significant amount of time at school and their impact on the wellbeing of pupils is significant. This importance was certainly evident during the COVID pandemic; not only did this period significantly impact many children’s learning but also highlighted the importance of schools in providing a safe, secure, and stable environment. With promises to use the additional money to fund a free breakfast club in every primary school, it is hoped that behaviour and attendance would improve with more children turning up ‘ready to learn’.

My personal education experience was wholly within the state system. I had an excellent education and strongly believe the social cohesion that was offered positively impacted on my upbringing. I am however aware that the social environment within state schools varies widely with some offering better standards of care than others. This is why competition is so fierce, with some parents moving house to be within the catchment areas of better performing schools. Conversely, due to learning and development difficulties my brother attended a small SEN private school and would certainly have struggled within the state system. Unfortunately, it is schools like this that are likely to be the victim of this policy as the majority of SEN pupils do not have an EHC plan so would not be exempt from the additional tax.

Having young children myself, the education system is something that concerns me. I strongly agree that teachers need to be better supported and resources improved in order to create an education system where young people can leave prepared for the future. However, the state education sector is already significantly underfunded and I remain unconvinced that the additional money (on top of needing to accommodate more pupil places) would be enough to increase the standards of state schools to that required across the board.

What this change will mean for the built environment is open to speculation. However, it is highly likely that many state schools would need to be expanded and possibly new schools created. This is on top of the 500 + projects that have been announced on the school rebuilding programme (SRP) since 2021.

Proposed improvements at private schools would quite possibly be shelved. Sustainability improvements that schools have been striving for could be put on the back burner whilst they adjust to the VAT increase. Ultimately, the closure of private estates/ buildings could lead to the disposal of land for alternative uses.

As with all new policies, the outcome is uncertain but here at Nexus we will be here to support our clients (both state and independent schools) through the changes. If you would like to discuss or explore how Nexus Planning may be able to assist you with your education project, please do get in touch.

Authored by

Amy Petrikova​​​​, Associate