With grandparents intending to pull more money from their pensions and parents looking to work for longer than planned or reduce their pension contributions should Labour comes to power and introduce VAT on private school fees, cash flow planning has become even more useful in adviser-client conversations.
If Labour wins the election on July 4 it plans to introduce a 20 per cent tax on private school fees, using the money to plug the funding and resourcing gaps in state schools.
Back in February, Helen Hayes, shadow minister for education, said: “The Labour Party believes in parental choice, but the conversation today has to take place with fairness in mind.
“In 2022–23, average independent school fees were £15,200, but average state school spending per pupil was £8,000. The gap in funding between independent and state school spending has more than doubled since 2010.
“With the £1.3bn of funding that would be raised each year from our measure, we could significantly increase school spending, allowing the government to drive high standards across our state schools too.”
But Julie Robinson, chief executive of the Independent Schools Council, has argued Labour’s plans will financially impact both the independent and state sectors.
ISC represents 1,300 schools in the UK, whose members account for around 86 per cent of the total number of pupils in independent schools in the UK.
Robinson says: “We remain concerned that Labour’s tax policy will not raise the money it has promised our state colleagues. It risks leaving them underfunded and oversubscribed.
“Independent schools have been working hard to keep fees affordable to parents – as evidenced by the below-inflation fees rise seen last year.
“While they will look to make efficiencies, between two-thirds and three-quarters of any school’s budget goes on staff, who are the most valuable resource in any school.”
Parental concerns
The UK independent sector as a whole educates around 615,000 children in more than 2,500 schools.
According to the Institute of Fiscal Studies, there has been a 20 per cent real-terms increase in average private school fees since 2010. This has been driven by increases in inflation and employer pension contributions.
In that time private school pupils have accounted for about 6-7 per cent of the total UK school population.
But there are fears that independent schools – particularly the smaller ones – could be forced to close as a result of Labour's plans.
While it is hard to give an exact number of parents who could pull their children out of private school if Labour’s plans go ahead, speaking to financial advisers it is clear that many of their clients are worried about the impact on their finances.
Parents of children who require special educational needs support are also worried about the state school system’s capability to offer the services needed if they have to leave the private sector.
Independent financial advisors like Ian Cook, who is a chartered financial planner at Quilter Cheviot, is handling enquiries from clients who are looking to potentially draw out money from their savings and pensions to pay their grandchildren’s fees.
