Private school children: diminishing inflow forecast

In mid-December Tim Jonas’ daughter said goodbye to friends and teachers at her private school in Wakefield, in Yorkshire. Jonas, a web developer, says his family can no longer afford the nine-year-old’s fees, now that Britain’s Labour government is adding 20 percent in value-added tax (VAT).

After two years of bitter debate, VAT on school fees came into force on January 1. For all the heat it has generated, the best bet is that the change will have less impact than diehards on both sides have made out. Yet that ought to worry Labour, which insists that making private education pricier is a good way to spend its first months in charge of schools. A party that once prioritised “Education, education, education” seems to be strikingly short of good ideas.

Fees at most private schools are going up at once, though by varying amounts. Hoity-toity schools such as Eton are passing parents the full 20 percent. Some others say they are making efforts to limit increases, but that they expect to phase in the full amount over time. VAT-reclaim rules will permit some schools to make savings (when businesses start charging customers VAT they stop paying tax on some of their own expenses). But even then most schools will have to make spending cuts, or draw on savings if they wish to keep fee increases below 15 percent.

The effect on enrolment will take some years to become clear. Although some children are moving already, parents try to avoid withdrawing them in the middle of the academic year, or when they are working towards big exams. The government’s best guess is that private schools’ rolls will eventually fall by 6 percent or so, putting about 100 private schools out of business (Britain has about 2,600, with around 600,000 pupils, 6 percent of school-age children). It expects that children will be moved to state schools and some parents will not choose private education in the first instance.

For the moment these guesses seem reasonable. In private, headmasters say they are more worried about a diminishing inflow of new pupils than about an exodus of existing ones. The Independent Schools Council, an industry group, says that the number of 11-year-olds entering private secondary schools fell by about 5 percent last September, according to a survey of 700 institutions. It believes that worries about fees were the main reason.

Parents with children at the poshest schools will have the least trouble finding extra cash. Smaller, humbler institutions are likeliest to shrink. The changes spell particular trouble for children with special education needs, predicts Tony Perry of Education Not Taxation, a group that opposes the reform. Their parents sometimes stretch their finances to afford private education, having concluded that local state schools cannot give their children the education they need.

The most important question is whether the levy’s benefits will outweigh its hassles. Labour is probably right that taxing fees will raise about £1.5 billion (Rs.16,500 crore) annually (even if many children flee to state schools, parents are likely to spend a chunk of what they save on stuff that is subject to VAT). But even if all that money goes into education, it would raise the state-school budget by a meagre 2 percent.

Yet threats to young brainpower are mounting. Around a quarter of secondary-school pupils are “persistently” absent, twice as many as before the pandemic; the share who are missing more than half the time is going up. Services for children with special education needs are in crisis; rising costs threaten to bankrupt local councils. The fight over private schools has distracted policymakers from more important matters. Time to get back to class.