Labour backtracks on private schools' tax status

Labour backtracks on private schools' tax status

A Labour government would retain some of their tax breaks from private schools under a Labour government, following party chiefs U-turn on their pledge to strip such schools of charitable status.

However, Sir Keir Starmer's party insists it will still impose 20 per cent VAT on private schools in England in its first year in power.

And shadow education secretary Bridget Phillipson said in January that Labour would be scrapping charitable tax status for private schools to fund the most ambitious state school improvement plan in a generation.

However, Labour officials now say they no longer need to strip schools of their charitable status to meet its commitment to charge 20 percent VAT on fees and make independent schools start paying business rates.

In a statement, Keir said: 'I don't want to launch an attack on private schools with his VAT plans - and claimed that the institutions would not have to pass on the extra cost to parents.

The Labour leader said he is very comfortable with the private institutions as they continue to criticise him for his policy. Sir Keir said private schools do not have to pass the additional fees in the form of increased fees.

It has to be passed on to the parents in fees. And each of the schools is going to have to ask themselves whether that's what they want to do, Mr Robinson said in the BBC's Political Thinking with Nick Robinson podcast.

The updated Labour policy means that some of the current perks for private schools will remain. The status offers tax advantages such as the ability to claim gift aid on donations and not paying taxes on annual profits, which must be reinvested in education.

Party officials said they only ever intended to remove the VAT and business rates perks, saying charitable status was used more as shorthand for the policy.

Momentum, a left-wing pressure group, said Sir Keir was'capitulating to elite interests' by backtracking on his pledge to end charitable status.

Tory Treasury minister John Glen said Labour has been forced to U-turn on one of their major policies - this time admitting that their schools tax hike just doesn't work.

Liz Brownsell, head of charities at law firm Birketts, said most private schools would actually have to lower fees to make it cost-neutral for parents, despite Sir Keir's claim that it was down to schools whether to pass on VAT to families.

s situation, she told The Independent. But she warned that there will be an impact for the vast majority of fee-paying parents.

Ms Phillipson insisted it was not a U-turn when she was asked by Mumsnet whether she stood by saying private schools should be stripped of their charity status.

On Sky News, Labour's deputy national coordinator Ellie Reeves said:

The Torys have also questioned whether the tax changes will raise the amount of money Labour claims it will. The Institute for Fiscal Studies has previously said that imposing VAT on private schools will raise an additional £1.5bn a year.

The Liberal Democrats also made clear that they were opposed to imposing tax on private schools - a potential bone of contention in the event of a hung parliament. A spokesman for Ed Davey's party said that charitable status 'does need to be reviewed so it only rewards schools that do real community work'.

In addition, independent sector leaders have warned the increase in fees could cause a significant shift in pupils from the private to state schools. Julie Robinson, the chief executive of the Independent Schools Council, remained critical of the policy, warning of a 'two-tier system within the charity sector'.

If Labour takes away the tax relief associated with charitable status for independent schools, the policy would create a two-tier system within the charity sector, setting a worrying precedent that any charity seen as not reflecting the political ideology of the day could be subject to additional taxes.