The Institute for Fiscal Studies (IFS) also dismissed claims that ending tax breaks for private schools would lead to a mass exodus from the sector
The Labour Party’s plans to end tax breaks for private schools and add VAT to private school fees would generate up to £1.5bn in additional revenue for the state sector, a leading think tank has found.
The Institute for Fiscal Studies (IFS) also dismissed claims that ending tax breaks for private schools would lead to a mass exodus from the sector, placing more pressure on state schools.
In a report entitled: “Tax, private school fees and state school spending”, the IFS today said: “The evidence suggests that putting VAT on private school fees would have a relatively limited effect on numbers attending private schools – perhaps a reduction of 3–7% in private school attendance. Even that reduction would have limited impact on tax revenues as money not spent on school fees would likely be spent on other goods and services on which VAT would be payable.”
The IFS estimate that Labour’s proposals will raise an extra £1.3–1.5 billion per year in the medium to long run. This would allow for about a 2% increase in spending on schools in England, which Labour have proposed would be targeted at disadvantaged students.
Luke Sibieta, IFS Research Fellow and author of the report, said: “Labour’s proposals to remove tax exemptions are likely to raise an extra £1.3–1.5 billion after allowing for exemptions, deductions and extra school spending to cater for any pupils moving to the state sector. The evidence suggests higher fees are likely to have a weak effect on demand.
“As it is, we expect that the change in private school attendance levels will be small. This leads to surer increases in tax revenues and less need for additional public spending on state schools. If the main aim of removing tax exemptions from private schools is to raise revenue, then this is likely to be achievable. If the aim is to encourage more pupils into the state sector and reduce inequalities by school attended, then this policy package is likely to have only minor impacts.”
The IFS’s findings come at a time when sections of the right-wing press have sought to whip up a moral panic over Labour’s plans to abolish tax exemptions for private schools.
Basit Mahmood is editor of Left Foot Forward
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