Labour partial U-turn on private schools’ tax breaks clampdown

Private schools would retain some of their tax breaks under a Labour government, after party chiefs backed down on their pledge to strip such schools of charitable status.

The party has planned – in its first year in power if it wins the next election – to impose VAT on private school fees in England.

And shadow education secretary Bridget Phillipson had spoken of “scrapping charitable tax status for private schools to fund the most ambitious state school improvement plan in a generation”.

She said Labour MPs agreed that “charitable status for most private schools is something that should come to an end”.

Labour sources now say they no longer need to strip the schools of their charitable status. But they remain committed to a policy of charging 20 per cent VAT on fees and ending the business rates relief from which independent schools benefit.

It means some of the current perks will remain. Being able to claim gift aid on donations and not paying tax on annual profits, which must be reinvested in education, are among the tax breaks that the status confers.

Party insiders pointed out that they only ever intended to remove the VAT and business rates perks, saying charitable status was used more as shorthand for the policy.

A Labour spokesman said: “Our policy remains. We will remove the unfair tax breaks that private schools benefit from, to fund desperately needed teachers and mental-health counselling in every secondary school.

“This doesn’t require removing charitable status. However, 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.”

Critics have warned the rise in fees could cause a large shift in pupils from the private to state sector.

Julie Robinson, chief executive of the Independent Schools Council, remained critical of the policy.

She said: “If Labour takes away the tax relief associated with charitable status for independent schools, the policy would create a two-tier system within the charity sector, setting a worrying precedent that any charity seen as not reflecting the political ideology of the day could be subject to additional taxes.

“We would love to work with Labour to build more effective ways to achieve our shared goal of improving education for all young people.”

Additional reporting by PA

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