Private schools and British society
How far will the proposed VAT levy on private school fees go towards greater social integration on the road to a more meritocratic Britain?
29 November 2023
Britain’s private schools have often been in the news in the last five years. Concerns are frequently expressed that state school spending has declined, and that private schools remain socially exclusive, with their alumni occupying too high a proportion of positions of influence in Britain’s public life.
Most recently, the opposition Labour Party has said that, if elected, it will not remove the charitable status that most private schools enjoy but instead it has pledged to levy VAT on school fees.
In the run-up to a general election in 2024 and the possible implementation of these proposals or something similar by a new UK government, an informed and rational debate is needed. Programmes of research and policy analysis at IOE and at the think tank Private Education Policy Forum have been unravelling the pros and cons.
So what does the research show?
Key findings
The proportion of private school pupils in England’s schools has remained between 6% and 7% for decades, but they take up a greater share of the nation’s educational resources. While private schools are diverse, on the whole they are very much better endowed in both income and assets than the average state school. The extent of this is yet to be precisely measured but it is estimated that, taking into account fees, property and donations, private schools have a per-pupil resourcing level between two and three times that of state schools2. Enrolment at private schools remains highly skewed towards the rich (see Figure 1), and so, with exceptions, children from affluent households are often segregated by social class from those who cannot afford the high fees1,7.
Private schooling delivers, on average, moderately better performance in tests and comparable exams, and thus has helped private school pupils gain access to higher-status universities6,8,10,11. That university education, combined sometimes with access to helpful networks, guides privately-educated people into better paying jobs and higher incomes later in life3,4,5,11. Private school alumni also gain a disproportionate share, relative to their small numbers, of highly influential jobs in British public life and in business5.
To move towards a more meritocratic way to allocate places in British society, any successful reform would need to reduce the resource gap between private and state schools, and to reduce the segregation of pupils according to their social class and parental income. It is unlikely that levying VAT on private school fees would achieve this.
In fact, the proposal to levy VAT has a more restricted objective: to raise resources for state education. The best estimates, from PEPF research and simultaneously in more depth from the Institute of Fiscal Studies, suggest this reform would raise about £1.6 billion gross and between £1.3 billion and £1.5 billion net, adding about 2% to the state schools’ budget12. In other words, it would be a modest plus, as long as this is used as a supplement to, rather than a substitute for the regular budget.
However, judged either against a wider reform agenda or against the prospective financial prosperity of independent schools, the research shows that the policy would not make a large difference. The VAT could raise fees by an estimated 15%, which over the long term would shrink private school pupil numbers by between 16,000 and 41,000 pupils – or between 3% and 7.5% of the sector, thereby causing a small proportion of private schools to close. To that extent, the overall inequality of schooling would be reduced but only marginally. Against that, the pupils remaining in private schools would be drawn from marginally more affluent households, thus having a small adverse effect on the remaining schools’ social exclusivity. The large majority of private schools would continue to operate as normal.
Images
Top: Michael Jung / Shutterstock.
Figure 1: Henseke, G., J. Anders, F. Green and M. Henderson (2021). "Income, housing wealth, and private school access in Britain." Education Economics 29(3): 252-268.