Labour has dropped plans to end charitable status for private schools but says it will still remove other tax breaks if it wins the next general election. The status exempts some private schools in England and Wales from taxes. Sir Keir Starmer had previously said that charitable status for private schools could not be justified. The party now says it can remove “unfair tax breaks” without changing the rules on charitable status. Labour says it would charge private schools 20% VAT, as well as ending business rates relief.
A spokesperson said the party would use the money raised from the changes “to fund desperately needed teachers and mental health counselling in every secondary school”. “Driving high and rising standards for every child against the backdrop of a broken economy requires political choices. Labour isn’t afraid to make them,” it added. Senior party sources argue that their charitable status pledge was just a shorthand for specific reforms, to which it still remains committed. Conservative 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. “They are just making it up as they go long.”
There are around 2,500 private schools in England and Wales and the government says half are registered as charities and can therefore claim charitable status. This means they do not have to pay tax on annual profits, can claim gift aid on donations and get 80% relief on business rates. Last year, the Scottish government scrapped business rate relief for private schools. Julie Robinson, chief executive of the Independent Schools Council, argued that taking away the tax relief associated with charitable status for schools could create “a two-tier system within the charity sector”. She said it would set a “worrying precedent that any charity seen as not reflecting the political ideology of the day could be subject to additional taxes”.
The council has also previously argued that tax changes would “threaten the survival of the smallest independent schools”. Last year the Labour leader clashed with Prime Minister Rishi Sunak over the issue, with Sir Keir arguing that tax breaks for private schools were a “scandal”. He also cited Levelling Up Secretary Michael Gove, who asked, when he was out of government, how giving “state support to the already wealthy” could be justified. According to the Institute for Fiscal Studies, the average private school in the UK charges around £15,200 per year, while the most expensive schools, such as Eton College or Harrow School cost around £50,000 per year. Mr Sunak accused Sir Keir of “attacking the hard-working aspiration of millions of people”. The Conservatives have also questioned whether tax changes would raise the £1.7bn Labour has claimed it would.
