Private schools across the country will increase their fees on Jan 1 by more than the Government predicted as its VAT raid takes effect, The Telegraph can reveal.
Sir Keir Starmer’s controversial move to apply 20 per cent VAT to private school fees was designed to boost the state sector, with the tax increase set to fund measures including more teachers.
In an impact assessment in October, the Treasury claimed fees would only rise by 10 per cent on average as a result, arguing that many of the country’s 2,600 independent schools would not pass on the full cost to parents.
But a Telegraph analysis of fee changes from 964 private schools in England, Scotland and Wales suggests this claim was wrong.
Around half of those schools are increasing fees by 15 per cent or more, while a fifth – including Eton, which educated Prince William – are hiking fees by the full 20 per cent. The average fee increase was found to be 14 per cent.
No, no, not the policy, that’s just spite. The economic estimate there.
The actual state of economic knowledge was “Add VAT and school fees, on average, will rise by something less than the rate of VAT. Exactly how much will depend and we’ll have to wait and see”.
Which is what has happened. So, pretty accurate then.
That some chose estimates of purportedly greater accuracy for political reasons is politics, not economics.
Services inflation is running at 5%, so it is possible that the Treasury estimate is close. They could have been clearer about what they were estimating of course if they’d said “we estimate fees will continue to rise of which 10% will be due to VAT on paid school education”.
Wouldn’t you expect them to have to put up fees by the full VAT take if they need to make the same net income? And then some to cover the fixed costs with an expected reduced customer base?
This looks like the private schools raising their prices by a calculated amount.
The calculation is “How much can we raise them and not have too many parents moving their kid to another school?”
Note that famous schools (Eton) raise by the full amount this year. After all, if you’re going to Eton moving to another school is seen as a step down.
But the idea that the schools will take the hit in their endowments etc. was always silly. Look for the others to raise their prices the remaining amount in succeeding years. “We’ve done the math and we can’t help it.”
The Forces of Progress have so fucked up the state schools that lots of families must have decided, grudgingly, to pony up for schooling. It’s worth looking at the unusually frank assessment here of one of the consequences.
https://archive.is/PDRkf
Its not just the VAT they need to cover, its also the increase in employers NI and the removal of charitable rate relief.
Proposed changes to the national curriculum (more indoctrination & propaganda, less education) might be designed to limit the exodus from private to state school.
Just on the VAT, the increase should be less than 20%, because once schools charge VAT they can also recover the VAT they pay on their costs. Eton is being cheeky therefore.
But since a school’s main cost is staff, on which there is no VAT, that isn’t a huge amount. And, as BiND says, there are other tax changes coming in as well which are also being priced in.
dearieme,
So, why aren’t people moving to Munich in droves?
My feeling on this is that London is a mix of people. On the one hand, a relatively small number of high value people working in finance/hedge funds etc. And on the other hand, millions of people who are either sucking at the teat of the state or doing the low-grade local services jobs. Whitehall, government departments, the arts, the museums, quangos. It’s the B Ark of Britain. And they have to suck up the rent because they can’t leave for a better paid job. A productive business isn’t going to pay these people anything like what they’re earning in London. So they can’t leave and force rents down. They can’t move to Wiltshire to farm or design vacuum cleaners, and BMW doesn’t want some bureaucrat from EHRC to design their new engines. They tried that with indicators and look where it got them.