Extra funding for Scottish councils if schools face influx of private pupils after Labour's VAT raid

SNP minister outlines potential impact on local authority budgets

Education Secretary Jenny Gilruth has confirmed that councils for areas like Edinburgh are likely to receive a greater share of funding if pupil numbers rise at local state schools in the wake of Labour’s decision to add VAT to private school fees.

The Westminster government introduced the tax change on January 1, leading to an increase in costs for parents of up to 20 per cent.

Around a fifth of Scottish independent schools are in Edinburgh, and the city’s 19 such schools educate about 40 per cent of the nation’s private school pupils, although many youngsters travel from other parts of the country or further afield.

Areas like Perth and Kinross, Aberdeen and Glasgow also have relatively large numbers of private schools and pupils, compared to other parts of Scotland.

Edinburgh City Council has already said that close to 60 pupils have moved from the private sector to its schools since last June.

The local authority has insisted it has sufficient space, although Boroughmuir High School and James Gillespie’s High School have told parents they are “at capacity”.

Further movement to council schools is expected in the summer, before the start of the next school year.

The Office for Budget Responsibility (OBR) has predicted that the bulk of any reduction in enrolments from private schools will not come from current students, because “parents will be more reluctant to disrupt their education”, but that it would be more likely to be “prospective future new students” who will not now attend private schools.

Education Secretary Jenny Gilruth chats to students at Madras College in St Andrews as they receive their exam results (Picture: Jane Barlow/PA) | PA

Ms Gilruth has written to Holyrood’s education committee to update MSPs on a number of issues, including the impact of VAT.

She confirmed that any councils experiencing a rise in pupil numbers can expect a greater share of funding.

The SNP minister said: “The needs-based formula used to distribute the quantum of funding available for local government is kept under constant review and is agreed with COSLA on behalf of all 32 local authorities each year.

“The formula uses the most up to date information for the full range of indicators, including the annual school census. It follows, therefore that if the number of pupils in a council area grows relatively faster than other local authority areas, the council will receive an increased share of the available funding, all other factors being equal.”

Lorraine Davidson, chief executive of the Scottish Council of Independent Schools, said: “We warned the UK government that the education tax would cost the state money in Scotland, and harm the education of all pupils.

“As we predicted, taxpayers will have to meet the cost of more children being educated in the state sector, while those forced out their school communities are having education disrupted. This is an illogical, damaging policy which should be reversed before it causes more harm to Scottish pupils.”

In her letter, Ms Gilruth also highlighted that the UK government had initially indicated that funding raised from the removal of the VAT exemption on independent schools would be ring-fenced and applied to the budget for the Department of Education in England to increase teacher numbers in England.

This would have led to the Scottish Government receiving a share, estimated at around £150m, under the Barnett formula.

However, it is no longer being ring-fenced, meaning Ms Gilruth “cannot confirm any consequential funding impact for the devolved Scottish budget as a result of changes”.

She said: “We will continue to work with HM Treasury to understand what the funding implications may be for the Scottish Government.

“It’s important to note that it is the impact of the net changes to the Department of Education’s budget that will ultimately impact the level of block grant funding received by the Scottish Government and that positive movements from individual components could be offset by negative movements elsewhere.”

A UK government spokesperson said: “Ending tax breaks for private schools will raise £1.8 billion a year by 2029/30 to help deliver 6,500 new teachers and raise school standards, supporting the 94 per cent of children in state schools to achieve and thrive.

“The Barnett Formula will apply in the normal way to the Department for Education’s expenditure limits. It is for the Scottish Government to allocate their Barnett-based funding as they see fit, and they are accountable to the Scottish Parliament for those decisions.”