Labour preparing for private school closures after VAT raid on fees, reports suggest

Contingency plans are underway in Whitehall for a surge in demand for state school places amid concerns that private schools will shut due to fee increases, according to reports.

Officials are said to be bracing for the possibility that some private schools will close when the policy to impose VAT on school fees comes into effect in the new year.

Government sources have told The Times that smaller schools that charge less and are located in more competitive locations are most vulnerable.

However, a government spokesperson also told the newspaper that the idea that officials were preparing for a collapse of the private schools sector was “completely misleading”.

Labour will remove the VAT exemption from January and business rates relief for independent schools from April, with parents expected to foot some of the cost.

The move has prompted a backlash from those who will be affected, but the government has refused to back down.

The government estimates that the tax on fees will raise £460m next year, rising to £1.7bn by 2029-30 – money that ministers said would be used to fund 6,500 new teachers for state schools.

On average, the Treasury expects private school fees to increase by around 10 per cent as a result of the introduction of VAT, while it predicts that 35,000 pupils will move into UK state schools “in the long-term steady state”.

A further 2,000 children are expected to leave private schools, comprising international pupils who do not move across to the UK state system and domestic pupils who will be homeschooled.

Government sources are confident that state schools will be able to deal with the increased intake.

One told The Times: “We have to plan for the worst. But there’s a limited amount we can do, so contingency plans are necessary. Officials are monitoring those schools most at risk of closure to help local authorities prepare better where the number in need is significantly greater.”

As many as 20,000 to 40,000 pupils are set to drop out of private schools as a result of the introduction of VAT, according to estimates from the Institute for Fiscal Studies in a report issued by the think tank last year.

A government spokesperson told The Times that suggestions that officials were braced for the collapse of private schools were “completely misleading”.

The spokesperson added that the government routinely uses data to inform policy design and to monitor the education system. They emphasised that less than 0.1 per cent of students might switch schools as a result of the changes, and expressed confidence that the state sector would be able to accommodate them.