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Hey, let's Talk About VAT... Again...


VAT


It is becoming rather difficult to continue to organise my thoughts on this topic. There are so many. I have so many. Now that the debate has finally errupted, bringing the likes of Piers Morgan to the table, LinkedIn is awash with commentary. Some of it reasonable, some of it irate, some of it rather difficult to understand and some of it so stupid, you're surprised the commenter found the mental flexibility to create an account.


Each one elicits a response at this point. Even the studid comments get me going. I try to kid myself and say, as a mantra, that LinkedIn isn't Social Media. Not really. Just so I don't feel bad about wasting my working days away on typing angry replies without ever hitting the 'send' button.


The solution for both - wasting hours I should be working and not hitting send - is to write a blog post like this.


I have to apologise before you continue. I tried to organise my but, as I said, it's proving to be very difficult indeed. I have to distinguish the rage reactions from the rational ones. I have to ensure the ill-tempered immediate and ad hominem responses don't take over from the eloquent and neutral observations. Now that I find myself agreeing with Piers Morgan, you will agree with me, these times are very, very emotional and confusing indeed.


So if this post feels like an endless stream of consciousness, captured like a whole bunch of angry comments to a whole bunch of insane other comments; well, then you're possibly right. I am afraid it is exactly that.


Why Should We Feel Sorry for the Rich

Now there's a headline.


I don't really understand the relevance but I guess it's nothing more than some good old-fashioned click-bait.


Is click-bait old-fashioned? Asking for a friend.


Anyway, who ever said you should feel sorry for anyone. Especially the rich. If you didn't know this by now, let me tell you. The rich will be just fine.


Of course, it's important to agree on the definition of rich. Perspective is everything. My daughter is going on a school trip. If I give her £100 pocket money, she's likely to be the richest girl on the bus. If the school trip lasts an entire month, she's likely to be the poorest.


Actually, if it's a one-month school trip, I assume her parents would be the poorest.


In the Private vs State debate, 'the rich' has been the catch-all term for anyone in private education. While it's true for a lot of families paying for private education, I am unsure it's true for everyone. Additionally, I do believe it's important to point out that rich is not the same as evil. I assume people might call me rich. Let me assure you, it's a very recent development. For twenty years of my working life, my months lasted a whole lot longer than my wages.


Back to my point though, there's no one here that's looking for sympathy.


Not even the parents who are categorically not rich and who made a conscious, if sometimes forced, decision to 'go private'. A decision that might be fuelled by certain special educational needs that were difficult cater for. Some children have pretty serious histories of bullying that led to their family leaving the maintained sector. Others may have been racially abused, discriminated against, harrassed and so on. I am not suggesting this doesn't take place in the private sector. The operative word is choice. Within the maintained sector, there's less of it.


Though, again, no one ever said to be sorry for any of these kids. And, again, the truly rich will be fine anyway.



It's Not the Politics of Envy... This Is Not Ideologically Driven

Maybe not. Here's a tip: if you find yourself having to deal with the same questions over and over again, it might be time to stop questioning the questions and look at your answers.


Another really good way to find out if any of these policies are ideologically driven is to check any random YouTube post on this subject. If we're cheering the possibility of rich people being messed around it, envy might have something to do with it.


Take this one dad who called in to complain. Typical rich guy, both his kids at proper rich-bastard private schools - one at Milfield and one at Rugby. He talked about how he'd taken both of them out and applied for a school in Spain. Saved himself £20k. Now the comments section was beside itself with glee. Hurray for the common man and, 'No sympathy for Tory whingers.'


What we're forgetting is that this guy just took £50k of income south for the winter. Like, literally. £50k that was spent at posh private schools and - I don't know - Bentleys for the Headmaster. However, possibly £50k for regular jobs for regular people. The catering staff at these schools, the person that cuts the grass to within an inch of its life every day, the school counsellor. Possibly £50k that finances a bursary or academic scholarship for some kid who works his/her socks off every day. However you look at it, it's two students who are now not funding the Treasury.


But hey, it's a rich tosser who doesn't get his way!


So, three cheers for Pyrrhic victories!


And here's another way to check we're not just out to mess with the uber-wealthy. Just check which schools are mentioned time and time and time again. I am not going to mention them here. Open any newspaper, look for the VAT on Fees discussion and you'll find a couple of pictures of them, a reminder of which wealthy school Rishi Sunak went to and some school where they serve foie bloody gras for breakfast.


Why do they never mention the Scarborough Colleges of this country? Why not the Windermeres, the Terringtons, the Tettenhalls, the Plymouths and the Fyling Halls? The other 1600-and-then-some independent schools, some of which are held together by blue tack, a piece of string and a band aid.


Is it because no one cares?


Now tell me this has nothing to do with envy and everything to do with proper education for all.



The Wealthy Will Find Ways to Pay

True.


The wealthy will. The wealthy always will.


The rich might.


The others might not.


It's a gamble.


But let's look at some facts. So far we've been wasting most of our time talking about predicted drop-out rates. Some say 5%, some say none, some say 50%. Personally, I think the actual drop-out rate of children in private education is going to be miniscule. Everyone will find a way to pay. Everyone. The wealthy and the rich will. The people scrounging to make it work will just scrounge a little harder. For as long as it takes.


And then their child graduates.



While we've been wasting our time talking about drop-out rates, we've been forgetting that the children graduating need to be replaced by new children.


And there's the rub.


There's the gamble.


At Scarborough College, we had more enquiries for our traditional points of entry than ever before. One by one, they started not returning our emails and our phone calls. We find ourselves in June and, were it not for pinching share elsewhere, a good 40% down on registrations.


40% down without a resourceful Marketing and Admissions Director means that within five years, our beautiful school becomes a beautiful nursing home or a beautiful Job Centre Plus. It also means a much higher rate of drop-outs than predicted and a much higher rate of drop-outs than feared.


That's just us - one school out of a few hundred - ensuring we have the numbers by making sure some of the other schools do not.


What will that do to the maths of this policy? Find out below.



Independent Schools Are Rich

And bonus myths: independent schools can just charge less and/or absorb VAT.


Remember that list, Scarborough College, Plymouth College, Tettenhall College and so on. We're not rich. Not that rich.


I mean, we're not poor either. It's, again, how you wish to define rich. For many of us, our wage bill accounts for well over 50% of our overheads. In some cases, it's 75%. As business models go, even selling Christmas trees in January sounds more sensible.


Saying all independent schools are rich is exactly like saying all state schools are failing. Just as narrow-minded, just as stupid, just as uninformed and - ultimately - just as damaging. There are, indeed, ridiculously wealthy private schools. The very opposite of the ones I described above, where the Head regularly has to invest in buckets because the roof is basically its own sprinkler system. But remember, we're not out to 'get' the ultra-wealthy, are we? This is not what this is about!


An LBC presenter said that schools can just absorb the VAT. Trust me, if we could, we would. It would make our lives so much easier and what a great promise to make any new enquiry. Are you worried about the VAT on fees - don't be. We got you covered.


Some schools have already announced they will absorb VAT. One school Head announced it and then made a pretty sharp U-turn about 24 hours later. Probably after he spoke to the Head of Maths (or anyone with half a brain). The sacrifices will be felt elsewhere, budget cuts and staff lay-offs being two of them. The Head or Director of Marketing to resign, I hear you say? No, more like the person who cuts the grass, the person with the friendly face at the servery, the receptionist or quite possibly the wonderful teaching assistant.


The money will have to come from somewhere and, as I have been at pains to point out, the schools we keep discussing in the newspapers will be just fine. Just. Fine.


It's the small guys. Feel free not to care but 90% of who works at these places are people like you and me.



And finally... The Maths

An estimated £1.6b will find its way into the Treasury's coffers.


6,500 new teachers will be employed.


Everyone will have breakfast apparently. Or some people will. I don't quite know what this is about.


Manchester United will win the Champions League.


The UK will win the Eurovision.



The £1.6b is a figure that has been plucked out of the sky (no pun intended, in case you watched the video). It is based on an average school fee times the number of children attending independent education. Times 20%.


That simple?


That simple.


No mention of discounted fees, no mention of a drop in numbers and no mention of VAT that is (and will be) claimed back. There's not even any identifiable understanding as to how that average school fee had been calculated in the first place. Is it just the sum total of all school fees divided by schools? Is it divided by the number of kids in the different year groups (paying different fees per year group) in different schools, charging different fees? Where did this number come from? Did the report look like someone had spent 70% of their time thinking what Word Art title to go for?


If my daughter were to ask me for a raise in pocket money, I am going to be honest; she'd have to come with more compelling data than that.


The £1.6 income does not take into account current school fee remissions. It does not take into account the level of VAT claimed back by the independent sector. Worst of all, it does not take into account even the smallest margin of drop-outs from the independent sector. Or, indeed, any drop-outs at the point of entry, which I described above.


Which is already happening!


If I used Labour's own numbers - I know, this is pretty daft - I would calculate that every 10,000 kids dropping out of private education is a net loss of £100m. That includes drop-outs where kids who graduate are simply not replaced by a new registration, which is already happening.


Which is already happening!


The 10,000 kids costing the £1.6m income to go down by £100m is based on no VAT income for those kids (because they're not in private education, duh!) plus the cost of educating this child in the maintained sector. This cost is loosely based on £7,000 per child per year.


Now I am not a mathematician and I am not a risk assessor so please don't take me to task on these numbers too much. Or, if you are, the same as you would any Labour candidate. I find it difficult to calculate any other risks. 10,000 children extra into the maintained sector would require more than the promised 6,500 teachers (for they are 'extra'). It would mean more classroom space, more fuel to heat the building and a bunch of other costs. I would say the £100m is more conservative than anything but, also loosely, based on my own ignorance.


At around the 50k - 60k drop-out mark is where I see tables turning. By the way, this number is about 10% of all children in private education, so what is happening now is not too far from that number already. At 50k, the net loss is £500m and threatens the 6,500 new teachers as they would start to become unaffordable. It goes without saying that this is not taking into account having to find an additional 1,500 teachers to teach the 50,000 students pouring into the maintained sector.


It does not take into account the need for vast investment in SEN provision and more space to teach; nor fuel, electricity, counsellors and so on. This does not take into account the 10% of independent schools that would likely close, leading to job losses and whatever other chain reactions that might set off.


I could be wrong.


But it will be one hell of a gamble.



And Finally...

If the gamble doesn't pay off, it may destroy an industry with a rich heritage. An industry that has been in the wars as of late (Brexit, Covid - I could go on) but with plenty of stories of resilience, innovation and a coming together of people from as far as Chile and Japan, from the Gambia to Bahamas. An industry that is respected across the world, which helps fuel the UK higher education industry that is worth well over £110b each year.


The gamble will affect an industry that, right now, contributes just over £14b to the UK economy itself, generating £4.3b in tax revenue (another loss that may be difficult to calculate - certainly for me). And this is just looking at Independent School Council (ISC) schools. It will affect the 280,000 people that are currently employed, paying their taxes (another potential loss) and the close to 9,000 partnerships that exist today between independent schools and schools, clubs, charities and other relevant stakeholders.


When the dust settles, we will see that we'll land somewhere in the middle. 25,000 children left the private sector or ended up not choosing the private sector. A mere 5% of independent schools closed, making redundant a mere 3,500 teachers and teaching assistants, half that in non-teaching staff. Some of the teachers got employed in the maintained sector but Labour couldn't find enough cash to fund all of the extra 6,5000 'world class' teachers. Having to build classrooms, recruit and pay for teachers to make up the deficit first and foremost and shelling out other ancillary costs. The maintained sector continued to crumble, now under the added weight of extra students, the added weight of more demand for SEN provision and without the funding that it was promised. Not the extra funding promised, nor the funding that was simply required to begin with. Simply because it wasn't there.


The wealthy were just fine. It was fun listening to their complaints on LBC, reading their red-veined rants in The Daily Mail.


Then they disappeared from view.






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