The Labour government has announced plans to remove the tax exemption for private schools, a policy set to generate over £1.5 billion annually for state education. Starting January 1, private schools will be required to pay 20% Value Added Tax (VAT) on tuition fees, a move aimed at addressing educational inequalities and improving state school resources.
Finance Minister Rachel Reeves confirmed the decision, stating that the funds will be used to hire 6,500 new teachers and enhance educational standards in state schools, where 94% of the country’s children are educated.
Funding State Schools and Reducing Inequalities
The policy, first outlined in Labour’s October budget, is projected to raise £1.5 billion for the 2025-26 school year, with revenue expected to grow to £2.1 billion annually by 2029-30. This funding will help reduce the disparity between private and state schools, which widened significantly during 14 years of Conservative rule.
“High and rising standards cannot just be for families who can afford them,” said Education Secretary Bridget Phillipson. Labour leaders emphasize that this policy reflects their commitment to public education and economic equality.
Impact on Private Schools and Fees
The Independent Schools Council, which represents private institutions, reported that average tuition fees currently stand at £18,000 per year and are expected to rise by approximately 10% as schools absorb some of the VAT costs.
Critics argue that the change could lead to a surge in state school enrollment as families may opt out of private education. However, studies, including research from the Institute for Fiscal Studies, indicate that the number of children in state schools will decline by 2030 due to population trends, mitigating concerns about overcrowding.
Labour’s Broader Vision
This tax reform is part of Labour’s broader agenda, following their landslide election victory in July. The government is focused on boosting economic growth and enhancing public services, including education.
“This funding will go towards our state schools, where the majority of children are educated. It’s time things are done differently,” Reeves said in a statement.
The policy has sparked debate, but Labour remains steadfast in its position that investing in public education is key to creating equal opportunities for all children.
