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Education
09 March 2025

Labour's VAT Plan Could Force 100 Private Schools To Close

Treasury Minister reveals potential impact on private education amid growing scrutiny.

Around 100 private schools could be forced to close under Labour's plans to impose VAT on private schools. Treasury Minister Torsten Bell has admitted for the first time this could happen due to the new 20 percent VAT on independent school fees. The government has once again faced scrutiny over their policies, as experts point out the potential consequences of this decision on the private schooling sector.

Bell disclosed to Parliament this week, "Evidence suggests around 50 private schools close each year during normal business. Although we would expect some additional closures, we have not seen any evidence to revise our view on the overall number of extra closures. It may be modest—perhaps something in the order of 100 schools over three years." This admission marks the first concrete acknowledgment from the government about the number of school closures anticipated as a consequence of the VAT levy.

The Independent Schools Council (ISC) has estimated the potential fallout of this plan, indicating if 100 schools close, around 40,000 pupils would be displaced and 11,000 jobs would be lost. CEO Julie Robinson lamented, "The loss of any independent school has significant repercussions for local employment, businesses, and families. This tax on education will not raise money, will not benefit state schools, and will not improve outcomes for children." The council also highlights the urgency of the situation, noting the rising number of school closures since the VAT was introduced.

According to the Independent Schools Bursars Association, up to 286 private schools—around 11 percent of the total 2,600—may be forced to shut their doors due to financial pressure. A dozen schools have already closed or announced their intentions to do so within just the first three months of the year. Notably, the VAT was implemented at the start of 2025, and from April of this year, the tax exemption for business rates for independent schools will also be lifted.

Bell’s comments came during a debate on independent schools at Westminster Hall. Critics of the government's tax policy are voicing concerns, arguing it lacks adequate evidence and foresight. Still, government officials have previously stated they were not braced for the closure of schools, maintaining their position against the claims made by critics.

Despite Bell's comments, some government representatives pushed back, with one source explaining, "Many of these schools shut because they are poorly run, or because parents have voted with their feet after price rises without corresponding improvements in quality." This perspective highlights the government’s stance—that the closure of poorly performing schools does not necessarily indicate failure of policy.

Meanwhile, the Labour party insists the revenue generated from the VAT will finance 6,500 additional teachers and improvements within state schools. Critics have thoroughly disputed these claims, questioning the practicality and feasibility of these projections.

Simultaneously, broader educational trends impacting public schools continue to emerge. Education Week recently reported on the alarming trend of school closures across American public schools, marking gaps due to population shifts and declining birth rates. Notably, American education has been experiencing considerable shrinkage as families increasingly opt for home-schooling or private institutions. The demographic cliff is raising concerns, with projections indicating public school enrollment might drop by 2.7 million students by 2032.

At the core of these concerns is the steep decline in fertility rates since 2007, contributing to the alarming expectation of a 13 percent decrease in the number of 18-year-olds graduating from high school by 2041. The impact of this demographic collapse extends to higher education, as reported by NPR—the pace of college closures accelerated dramatically, surpassing one institution per week during the first half of 2024.

The Federal Reserve Bank of Philadelphia has warned of impending college closures, correlatively tied to the drop-off of the youth pipeline. And as Japan grapples with similar issues—where 30 percent of the population is now over 65—the parallels for the U.S. are ominously clear.

Calls for action abound, with solutions proposed revolving around re-establishing family structures and encouraging childbearing as immediate measures to counteract these demographic trends. Efforts to remedy this pressing issue must prioritize the well-being of children, advocating for family values, education, and overall community support to reverse these worrying trends.

Heathfield girls private school, located in Ascot and boasting notable alumni like actress Sienna Miller, has taken proactive measures to adapt to these tumultuous times, announcing its integration with Mill Hill Education Group to secure its survival and future growth.

Overall, the intertwined fates of public and private schools highlight the urgent need for comprehensive reform and actionable steps to secure the future of education across demographics.