Labour backs down on plans to strip private schools of charitable status

28 September 2023, 07:28

Labour has backed down from its plan to strip private schools of charitable status
Labour has backed down from its plan to strip private schools of charitable status. Picture: Alamy/Getty

By Kit Heren

Labour has backed down from a plan to remove charitable status from private schools, but said it would still remove "unfair" tax breaks.

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The party said it would still charge private schools 20% VAT on fees and remove their business rates exemptions if elected.

Labour said it no longer needed to strip charitable status from the schools, which educate around 7% of the UK's children, in order to change tax policy.

Remaining a charity has other advantages for schools, such as being able to claim gift aid on donations and not paying tax on annual profits, which must be reinvested in education.

Opponents claim that private schools having these advantages is unfair.

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.

Read more: James O'Brien ridicules those prioritising Labour's private school VAT plans over the cost of living crisis

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"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."

Julie Robinson, chief executive of the Independent Schools Council, was still critical of the plan.

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."

Private schools educate around 7% of the UK's children
Private schools educate around 7% of the UK's children. Picture: Alamy

Labour's policy costings only ever took into account charging VAT on school fees and ending the business rates exemption, rather than the other tax breaks.

But 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".

Chief Secretary to the Treasury John Glen said: "Labour has been forced to U-turn on one of their major policies - this time admitting that their schools tax hike just doesn't work."

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