Preparations set for private school closures due to VAT on fees
The Government is drafting plans to handle a potential surge in demand for state school places as concerns mount that private schools may face closures due to plans to charge VAT.
According to The Times, officials are preparing that the decision in the Autumn Budget to add VAT to private school fees could push some schools into financial trouble.
Schools that are smaller, with lower fees are reported to be most at risk, as government sources told the publication that these schools are being closely monitored.
To mitigate potential disruptions, a government source told The Times: “We have to plan for the worst. But there’s a limited amount we can do, so contingency plans are necessary.”
Another source told The Times: “Some private schools are undoubtedly more at risk of closure than others.”
“The government routinely monitors the transfer of tens of thousands of pupils per year between the independent and state sector, but this year there is an obvious added challenge we need to prepare for,” they added.
Private schools will be subject to 20 per cent VAT on fees from January 2025 after Chancellor Rachel Reeves announced the decision in her Autumn Budget.
This is predicted to be a net benefit for the Treasury of £1.3bn to £1.5bn per year.
Campaigners against the VAT measure warned the Times that some parents will struggle to absorb the fee hike, with many private schools likely passing on the costs in full.
It was reported that HM Treasury estimates suggest the policy could ultimately lead to 37,000 fewer private school pupils, roughly six per cent of the sector.
According to the Independent Schools Council (ISC) about 8,000 children were pulled out of private schools before the new academic year after Labour’s election in July, while a further 2,500 have followed since.
Julie Robinson, chief executive of the ISC, warned that the threat of closures is “very real”.
Meanwhile, a government spokesperson dismissed suggestions of widespread collapse as “completely misleading” to the paper.
The spokesperson said: “It is routine planning for government departments to use data to inform the design and implementation of a new policy and, as would be expected, we regularly monitor places across the education system.”
“We have been clear that the students who may switch schools as a result of these changes represent less than 0.1 per cent of pupils, and we are confident the state sector will be able to accommodate them,” they added.
In the background, the ISC, which represents 1,400 private schools, revealed in November it decided to bring legal action against the Government.
In late December it was revealed by the ISC that six families, supported by the ISC, officially filed a judicial review claim to the High Court to challenge the introduction of VAT.