How Labour's vindictive VAT on private school fees policy will damage the NHS

I can understand why Labour thought putting VAT on fees for independent schools was a good policy. It’s broadly the case that, for one reason or another, Labour voters don’t like private education; the government, inheriting a total shambles, needs more money; and it might pacify the party’s left which might be feeling rather left… behind.

The problem is, of course, that outwith Edinburgh, with its peculiar plethora of private schools, most people, when they hear the words ‘independent school’ think of Eton. I call this the ‘Rees-Mogg effect’, and for many people, it’s a useful emetic.

In fact, Eton’s response to the arrival of VAT on its ancient and storied premises, is, I think, rather commendable: the full-fee payers will have all 20 per cent clapped on their fees. This means the school can protect those of its pupils who benefit from reduced fees (or no fees) by actually adding to its bursarial funding as a result of clawing back VAT on capital expenditure.

Of course, Eton can afford do this. Most of its parents are, by any standards, loaded, and it has millions in the bank. Most independent schools are not so fortunate: they do not have large financial reserves and will have to try to soften the impact on their fee-paying parents. This is proving to be a delicate balance.

In the harried discussions after all this began, the outcome predicted by opponents of the move was that there would be a mass exodus of pupils from independent schools, meaning that state schools would risk (more) overcrowding, the state would lose money to pay for these extra places, and less VAT would be raised anyway.

The public's image of private schools tends to be based around ideas about Eton. The reality for most is very different (Picture: London Express) | Getty Images

No sign of mass private school exodus

Now, I am happy to be corrected, but my sources tell me that, in fact, parents are straining every sinew to keep their children in independent education. I expect a lot of holidays have been cancelled; grannies have been lent upon; parents will take on extra hours at work or second jobs; and hopefully some students in their senior years will get jobs themselves.

However it’s done, young people will largely stay in the schools where they, by and large, like being pupils. This is the nature of parenting; and the current state of Scottish state education, with overworked, stressed-out teachers, increasing levels of aggression, and the Curriculum for Excellence staggering on, will add fuel to the fire. So I suspect that the Labour party’s estimates of how much cash they will raise through this policy will be more or less right.

However, it’s a bad policy for reasons that egalitarian, left-wing politicians won’t really have considered. The vast majority of any school’s expenditure goes on salaries and other costs about which it’s hard to do much. Yes, a school might change its stationery – much derided by UK Education Secretary Bridget Phillipson – or indeed cancel a new swimming pool (though let’s remember they would get the VAT back on that), but the majority of independent schools don’t have much ‘soft’ money to play with, in order to try to mitigate the effect of the 20 per cent tax on their full-fee-paying parents.

They know that parents who are giving up a great deal of money to educate their children outwith state education will appreciate even one per cent or so less of a gouge. So how do they do that?

Poverty-related attainment gap

Well, a great many independent schools, and in particular those in Scotland, were founded as charities and many of them try hard to carry on educating less-well-off kids. Many of the Edinburgh schools, which I know best, are rightly proud of their bursarial programmes. When I was responsible for admissions at Heriot’s, I used to say, “George Heriot’s School! Closing the poverty-related attainment gap for 400 years!” because it was true for us and true for others.

While some of the money used for bursaries will be ring-fenced, much of it isn’t, and there is evidence already from some schools in England that they are narrowing, or closing down, their charitable work, now that the government has decided that, in VAT terms, they aren’t charities. The net effect, of course, is that independent schools will be less socially mixed and become yet more ‘elitist’, just as they did when grant aid was removed in the 1970s. They will, in essence, be even less equitable.

‘Doing less NHS work’

And there’s another thing that came out of the blue just last week. Being an ageing, healthy hypochondriac, I decided to save the NHS some money and go and see a private doctor about something that was bothering me (it was totally harmless).

This fellow was a jolly man who knew I had been the principal of an independent school in the city. He has three kids at private schools. “Well,” I said, “you’ll be putting in some more hours here to pay the VAT!”

“No,” he replied, “I’m not working more hours. I’m just doing less NHS work, and more private work.” He smiled with uncharacteristic bitterness.

Pro bono work at risk

You know, a great many doctors in this city balance NHS work against private work. A great many lawyers and vets do some pro bono work. A great many business people can put their prices up. A lot of parents may be able to find yet new ways of saving on their tax bills.

It’s not unreasonable for them to interpret this policy as having a measure of vindictiveness in it. It has understandably stirred up a hornet’s nest in Edinburgh and among independent school parents throughout the UK.

It must have seemed like a shoo-in at manifesto time, but its unintended consequences may eventually make the government realise that this is a bad policy and not a wise way to take on independent education.

Cameron Wyllie is a former head teacher. He writes a blog called A House in Joppa and is the author of a book called Is There A Pigeon in the Room? My Life in Schools