The UK Labour Government plans to impose VAT on independent school fees from January 2025 and The Scottish Council of Independent Schools (SCIS) has submitted a full response to the Government consultation, highlighting the negative consequences for the Scottish education system (SCIS response to VAT on fees draft legislation).
The Scottish Council of Independent Schools (SCIS) believes the introduction of VAT will disrupt the education of thousands of children in the independent sector and place a significant burden on the state sector.
SCIS regularly engages with politicians of all political parties to promote the benefits of the independent sector and to highlight the unintended consequences of policies which could harm the education of those in our sector, and beyond.
The sector in Scotland is working hard to develop our partnership work with state schools and we believe there is more to be gained for all pupils by working with our sector.
To learn more about partnership working in Scotland’s independent schools click here
SCIS will continue to make the positive case for the independent sector and present evidence about the potential disruption to the education of pupils and the risk to schools, communities, and the wider economy from adding VAT to fees to mitigate the negative impact of the plan.
We encourage you to help us increase understanding of the benefits of the independent sector and the unintended consequences of the VAT on fees proposal by using the evidence we have developed.
SCIS commissioned an independent economic analysis of the sector in Scotland by BiGGAR economics. The report found:
- The sector contributes more than half a billion pounds each year to the Scottish economy.
- Independent schools support almost 12,000 jobs in Scotland.
- It brings in £38 million in international exports
- More than 100,000 people who don't attend independent schools benefit from the partnerships with them.
You can read the full report here: BiGGAR Economics report
The impact of VAT on fees
- VAT on fees will cost the state money in Scotland when the independent sector shrinks by 13 per cent or more (BiGGAR report finding).
- Six thousand pupils will have their learning disrupted by being forced out of the sector (based on 20 per cent leaving the sector as estimated in the Baines Cutler independent report).
- Pupils with additional support needs will be affected the most by disruption to their education.
- The policy will harm education in the state sector, which will have to cope with an influx of thousands of extra pupils.
- Tax breaks have already been ended for the independent sector in Scotland (business rates relief has been removed).
What will the policy mean for pupils?
It’s predicted that around 6,000 pupils in Scotland will have their learning disrupted. Children who are in receipt of fee assistance will be most at risk of being forced out of independent schools. Their family’s income has already been rigorously means tested and assessed as at the limit of what they can afford therefore we know they cannot pay any more. Being forced to move school will be particularly detrimental to children with additional support needs.
What will this mean for parents?
Fees have already had to substantially increase in recent years to fund pay and pension increases for teachers. Many families in the sector are already struggling to pay for their children’s education. Schools are already doing everything they can to reduce their running costs to help with the affordability of fees. However, if VAT is added to fees, it’s estimated around 20 per cent of families will be forced to withdraw their children from schools in the independent sector.
We remain conscious of the already considerable cost of an independent education and recognise the additional burden VAT would place on families regardless of the rate actually imposed, whether 20% or less and schools will do everything they can to keep their fees as affordable as possible.
Could the VAT policy result in better funded state schools for all?
A report commissioned by SCIS, and carried out by respected economic consultants BIGGAR, estimates the amount generated from VAT on schools in Scotland could be around £51 million. But that income would need to be balanced against a drop-off rate of pupils leaving the system who would have to be educated at a cost to the state.
Taking into account the new costs to the public sector and the loss of tax revenue from independent schools, the financial benefits of the VAT imposition would be wiped out if just 13% of pupils left the Scottish system.
Is there a concern that this proposal ignores the positive benefits independent schools bring to Scotland?
The Biggar economic report found the sector directly employs more than 7,000 people and adds £548 million in value to the national economy in Scotland. With supply chain spending, the number of jobs supported rises to more than 11,000. There are also 120,000 people in Scotland who benefit from partnership and community work carried out by independent schools ranging from the provision of online learning, to the use of sports facilities and assistance with university applications.
What will the impact be on the Economy?
Independent schools save the public sector £189 million through a combination of education and capital cost savings. When the contribution of employment taxes from the sector are taken into account, that figure rises to £347 million.
More than 1,200 international pupils are educated in the sector, accounting for £38 million in export earnings.
Adding VAT to fees would inevitably lead to a reduction in numbers of pupils, teachers and supply chain spending, which would damage the economy.
What will the impact be on the state system when more pupils require places?
Thousands of children re-joining the state system will increase the costs on the state sector by more than £50 million in Scotland. It will also lead to increased competition for places in state schools with many children losing out on places at their local state school because of the higher demand which will be created in some areas by an influx of pupils. An independent report by Baines Cutler estimates a drop off rate of 20 per cent of people from the sector is probable if 20 per cent VAT is added isc-vat-full-report-1018-for-circulation.pdf (bainescutler.com) This is a UK wide report. The impact in Scotland could be higher.
These changes have been described as removing a tax break. Has VAT ever been charged on fees?
It is not a tax break. VAT on education does not comply with EU tax law and this policy could damage Scotland’s international reputation and export economy. Independent schools are not receiving special treatment: no state school has to pay from its budget any tax from which our schools get relief.
Education policy is devolved to the Scottish Government. Does that mean these changes will only apply in England and Wales if the policy is implemented?
No. Education is devolved but VAT isn’t so this tax would be imposed across the UK. However, Westminster cannot control how any money raised would be spent in Scotland. That would be a decision for the Scottish Government. There is no guarantee any money raised through the policy would be spent on education rather than a different policy priority.
Do Labour’s proposals make any distinction between the English and Scottish school systems?
Not so far. For example; no allowances have been made to the differences in regulation north of the border.
Independent schools in Scotland are individually assessed by the Office of the Scottish Charity Regulator to ensure they meet charitable law. This rigorous process – which does not happen south of the border - has resulted in several improvements in schools across Scotland, enhancing the contribution they make to society. Independent schools in Scotland also pay full business rates.
What is the role for the Scottish Council for Independent Schools in challenging the policy?
SCIS is a charity which exists to promote education and to highlight policies which could limit choice in Scottish education.
We are having constructive conversations with all political parties to explain the potential for the independent sector to play a greater role in partnership work with state schools and assisting more learners in Scotland, instead of imposing a policy which will harm the whole system.
How do we continue to raise the issues this policy would create?
This document is intended to help anyone who thinks this policy will have serious unintended consequences to present the factual argument against the policy.
MPs, MSPs and Parliamentary candidates will be particularly interested in hearing from families who are in receipt of bursaries, who have children with additional support needs, and those who are attending faith schools.
SCIS will continue to make the case against additional taxation in the independent sector because of the damaging unintended consequences it poses for all learners, for local councils, communities and the economy.