Private schools forced to close blame Labour's VAT raid

Telegraph

04-03-2025

A dozen private schools have blamed the Government's VAT raid for forcing them to close since the policy was first touted.
Twelve schools have directly linked their closures or planned closures to Labour's tax raid, while scores more have shuttered since the policy was first seriously discussed by the party.
The policy came into force on Jan 1, and made private school fees subject to 20 per cent VAT for the first time.
According to Department for Education statistics, 77 private schools and independent specialist schools in England have shut down since it was revealed in October 2023 that Labour would apply VAT to fees within its first year of power.
Four schools have pointed the finger at the levy for forcing them to close down so far, while a further eight have announced plans to shut in the coming months and blamed VAT.
St Joseph's Preparatory School, in Stoke on Trent, closed in December, on the eve of the VAT's introduction.
The school said the 'incredibly difficult' decision was made ahead of the 'changes coming regarding independent school funding'.
Roisin Maguire, who was head teacher at the Catholic school for 12 years, said the school was forced to close because parents 'simply could not manage an extra 20 per cent' on fees and warned that further school closures would follow.
Two Scottish schools have also accused the tax raid of causing them to buckle, including Cedars School in Greenock, which closed at the end of September. It described the VAT raid as the 'straw that broke the camel's back'.
Kilgraston School in Perthshire, Scotland's only Catholic boarding school, also said it would close last August.
In a letter to parents, it claimed the VAT policy would exacerbate its falling pupil roll and hammer the school's finances, which had already racked up a £860,000 shortfall in the last academic year.
Other private schools that have already shuttered and blamed the tax raid include Alton School in Hampshire and Downham Preparatory School in Norfolk.
Both of these closed before the general election last July, but their head teachers claimed they would not be able to subsidise VAT on fees under an incoming Labour government, making them unaffordable for parents.
Alton School said 'adverse political and economic factors' had drained pupil numbers and left it 'unviable' to run, while Downham Prep claimed the prospect of VAT on fees was the 'nail in the coffin' since it was already 'borrowing money, so we couldn't absorb any of that'.
A further eight have announced plans to shutter at the end of the school year and pointed the finger at VAT.
They include St Hilda's Prep School for Girls in Hertfordshire, which announced last week it is consulting over a planned closure as early as this summer. The school counts former home secretary Suella Braverman among its alumni.
In a letter to parents, St Hilda's said the financial difficulties facing the school were 'substantial' and warned it was currently operating at a significant loss.
It added: 'Coupled with falling pupil numbers, the school is also facing significant financial challenges, including the implementation of VAT on school fees from January 2025, the increase in employer National Insurance contributions and the removal of 80 per cent business rates relief from April 2025.'
Other schools have announced their closures since Labour first firmly committed to introducing VAT on fees, although they have not linked the decisions directly to the tax policy.
Most of the schools that have collapsed to date had amassed serious financial losses or suffered from dwindling pupil rolls over the past years, making them vulnerable to political changes.
The Government has insisted that around 50 mainstream private schools in England shut in a typical year, alongside smaller specialist schools and others across the UK.
However, the sector has warned that a fresh wave of schools is expected to close when the Government strips charitable private schools in England of their business rates relief next month.
This will force them to pay full business rates on buildings for the first time.
Experts have suggested that smaller private schools will be most at risk compared with larger and more historic institutions such as Eton College, where parents can more readily afford fee rises and which usually have bigger reserves.
Treasury estimates suggest the raid will lead to 37,000 fewer private school pupils in the long term – a fall of around 6 per cent, many of whom will face a scramble for state school places.
On Monday, a Labour MP called on the Government to consider reversing the policy if the economy grows.
Rupa Huq, the MP for Ealing Central and Acton, warned that the private school sector was not 'one size fits all' and that the VAT levy would 'make an elitist system more elitist'.
'The Government says in their response [that] ending tax breaks to private schools was a tough but necessary decision. I mean, could there be when this growth comes… a way of undoing it or something?' she said.
'What I would suggest is possibly doing it on a turnover basis – so for your enormous schools that can afford it, yes – but for the smaller ones who have been caught in this trap, no,' she told a House of Commons debate on the topic.'
The Government is currently facing legal action over its flagship education policy after the Independent Schools Council (ISC) launched a High Court challenge.
The lobby group, which represents more than 1,400 private schools, has argued that the VAT raid undermines the human rights of some children, with a judicial review hearing set to take place from April 1 to 3.
Julie Robinson, chief executive of the ISC, said earlier this year that the impact of the Government's VAT policy would increase 'over the coming months and years'.
'It is true that a small number of schools close every year. But it is equally true that the Government's triple tax whammy on independent schools will prove a bridge too far for schools already under financial pressure,' she said.
Neil O'Brien, the shadow schools minister, warned that 'it will be parents, pupils, and teachers in the state sector that will pay the price for Labour's ideological attack'.
'Once again, we can see the deeply damaging impacts of Labour's education tax,' he said.
'Every independent school that is forced to close by this punitive measure represents more pupils that will need to be found places in state schools, many of which will struggle to accommodate them. Fewer parents will get their first choice of state school as a result.
'There are 130,000 children with special needs being educated in the independent sector at present, and if thousands of them are taxed into the state sector that will put a lot of pressure on special needs provision in the state sector.
'At the end of the day, it will be parents, pupils, and teachers in the state sector that will pay the price for Labour's ideological attack.'
A government spokesman said: 'Ending tax breaks for private schools will raise £1.8 billion a year by 2029-30 to help fund public services, including supporting the 94 per cent of children in state schools to achieve and thrive.
'On average, around 50 mainstream private schools typically close each year. This is due to a range of reasons, including financial struggles and school standards issues.
'Local authorities and schools commonly support children and parents in these circumstances, we are confident in local state schools' ability to accommodate new pupils.'