The planned introduction of VAT on school fees, should Labour win the next general election, is a hot topic right now.

It’s difficult to predict the consequences of this policy, as there is so much uncertainty surrounding how many pupils will leave the independent sector as a result, with predictions varying wildly.

I’ve read a lot about whether state schools can absorb the potential exodus of private school pupils and what financial implications this has for the state (now having to pay to educate these children). However, I’ve not read anything about what will happen to the future state school pupils that will be replaced by this exodus (if there is one) because it seems evident to me that future non-private school joiners will likely enter the state system at the very top of the food chain.

I thought it would be interesting to use the data held in Locrating to see if any conclusions can be drawn. Specifically looking at 2023 secondary school admissions and exam data for England.

Firstly, I looked at how many children were offered their first-choice school and what I learned is that it is clear that the best-performing schools are the most difficult to get into; in England, 82.6% of children got an offer for their first-choice secondary school, but when you look at the top third of schools (based on A-level average point score) that number reduces to 75.8% and when you look at selective state schools (i.e. grammars) that figures further reduces down to just 60.5%.

Selective state schools are placed squarely in the top-performing schools; 161 are in the top third of all schools, 101 are in the top 10%, and only four are not in the top third of all schools.

These schools are overwhelmingly oversubscribed. Of the state schools in the top 10% of all schools, 85% are oversubscribed, with some receiving three times more applications than available places—the average for the top 10% being 60% more applications than available spaces.

The conclusion I can draw is that competition for the top state schools is clearly high. These are not schools that currently have “spaces.”, they likely already have long waitlists.

There is a similar, if not starker, picture for independent schools; 70% of independent schools are in the top 15% of all schools, and 92% are in the top third. Independent schools are clearly predominantly high up the league tables.

It should be noted that many independent schools are not selective and also cater to Special Educational Needs (SEN) that cannot be met by the state (a reason many parents send their children to independent schools, something often overlooked); they achieve better results through measures such as smaller class sizes and other additional teaching resources. They are able to do this as the state spends on average around £8,000 per year on a secondary school pupil. In contrast, the independent sector spends closer to £20,000.

There is much debate about how many children will leave the independent sector once VAT is added to school fees; the IFS estimates between 3% and 7%, and the ISC 25% over five years. What is clear is that however many do leave, almost all will be targeting the top state schools. By considering private education in the first place, they are actively targeting the top schools, and I can see no reason why this education aspiration would change.

The current cohort may be stuck as the top state schools are clearly already full, also parents will likely not want to detrimentally impact their child’s current study programme; e.g. they may be in the middle of GCSEs or A-levels; and so, I think it likely the dropout rate (children leaving the independent sector and not being replaced) will increase over time as children complete their schooling.

But these children are just part of the picture. What of the pupils entering secondary school for the first time who would otherwise have gone private?

There will almost certainly be an immediate impact on new applications, i.e. those joining a school for the first time. The Independent Schools Council say 2023 saw the first drop in private school applications in more than a decade.

According to the ISC, in 2023, there were 23,643 new day pupils in year 7 (the first year of secondary school) at independent schools. Suppose we assume 20% of these pupils can no longer afford independent school (above the IFS estimates but below ISC ones). In that case, that’s almost 5,000 children who will be targeting the top state secondary schools.

How will they do that? Well, these are parents who likely have means; they’ll be saving what they were going to spend on school fees (typically around £20,000 per year for secondary school, which is a whopping £140,000 for years 7 to 13), which they can instead invest in tutors to help pass that grammar school 11+ test (yes, you can absolutely be tutored to do well in this test), or they could invest that £140,000 in property, right opposite the best local school, ensuring they are at the top of the list when it comes to distance based admissions. Despite the cost and disruption of moving home, it seems hard to imagine this would not happen. I can’t see these wealthy, academically ambitious families, who were mostly looking at the top 15% of schools, suddenly being happy with poorer-performing schools!

What effect will that have? One assumes there will be a push down; the children who would have attended independent schools will push out children who would have otherwise attended those top state schools; pushing them down the league tables and out of the grammar schools.

Granted, the numbers are small as the overall number of children in an independent school is small (at only 6% of all pupils), but if we know 70% of independent schools are in the top 15% and if 5,000 no longer apply to these schools, then that’s 3,500 more pupils targeting the top 15% of state schools each year, in which there were 74,105 places in 2023, so that’s almost 5% of pupils being pushed out or 1 in 20, that’s one or two pupils pushed out of every class.

And it’s going to be those that cannot afford tutors, or to live close to top performing schools (which have higher property prices) that’ll be pushed out; obviously bright children will remain in selective state schools, no matter what; but the vast majority are not selective and so the system can be "gamed" by moving home.

I think the argument is that state schools will get better as a result of this influx. I’m not convinced the extra revenue is going to have any impact, nor will these wealthy pupils end up in the schools that most need to improve. In fact, the taxpayer’s alliance has calculated that a 26% dropout rate will actually cost the taxpayer more, as the cost of educating the dropouts exceeds the tax gain from adding VAT. So, there’ll be no extra money for schools at all!

And if these dropouts end up in what are already the best-performing schools, then there won’t be the claimed improvement due to having wealthier, more pushy parents around and more ambitious children. In my experience, grammar schools and other top state schools are already full of wealthy middle-class students, pushy parents, and ambitious children! It’s the ones lower down the scale with more issues, and the private school dropouts won’t reach these schools.

The IFS says the tax gains will allow a 2% increase in state school spending. A 2% increase is completely insignificant (£7,690 per pupil to £7,843 vs £20,000!). It simply won’t reduce the inequality between the state and the independent sector, nor fix the underfunding in state schools.

Those that stay in the independent sector, paying the higher fees, will be the wealthiest, and as such, independent schools will become even more elitist, but it is important to note that not all people attending independent school are “rich”; many are “struggling” (choosing to spend their limited resources of education) others are forced into the sector due to special educational needs that cannot be met by the creaking state system. So, there will be many disadvantaged children losing out (i.e. those with SEN) as I don’t see the state sector being able to step up their SEN provision with such a tiny increase in funding.

It doesn’t help that Labour has provided no details on exactly how and when this new VAT policy would work, despite it possibly coming into force in mere months; should they win the election on 4th July? Without clarity on how the policy will work and, crucially, when it will start, there are so many unknowns.

There is an argument that falling pupil numbers over time (due to population decrease) means that the state system can absorb the dropout from the private sector, but I would argue there will always be oversubscription at the best schools; we have seen most are very heavily oversubscribed and that is unlikely to change even with a reduced pupil population. Sure, there may be lots of spaces emerging in the lower performing schools, but it seems unlikely that ex-private parents will want their children to attend these schools.

In summary, this policy will not decrease inequality and will most likely impact the education outcomes of the least well-off the most (i.e., the ones pushed out of the top state schools). Will this therefore end up actually being a regressive policy?! Time will tell ...

References:
https://ie-today.co.uk/news/first-drop-in-independent-school-students-in-decade/ https://www.ft.com/content/031cd124-1c63-43e7-9008-2c8f0b460917 https://www.taxpayersalliance.com/analysis_vat_on_private_schools_could_end_up_costing_taxpayers https://ifs.org.uk/publications/tax-private-school-fees-and-state-school-spending https://www.isc.co.uk/media/9316/isc_census_2023_final.pdf https://www.isc.co.uk/media/5926/isc-vat-full-report-1018-for-circulation.pdf https://assets.publishing.service.gov.uk/media/5a82a832ed915d74e3402e69/House_prices_and_schools.pdf

Author: Lewis Tandy