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Keir Starmer’s Claims About Labour’s Private Schools Tax Hike Don’t Add Up

by Mr Chips
10 January 2024 7:00 PM

The Labour Party says it will remove “unfair tax breaks” on independent schools, raising £1.6bn in VAT and £0.1bn in business rates, which it will spend on improving state schools. It seems to be coy about sharing its fag-packet business case (I’ve asked, no answer); the only way to reach those numbers is by assuming (1) the schools pass virtually all the tax onto parents’ bills and (2) virtually no families present or future migrate towards the state sector despite a resulting fee hike. If many families do migrate, as some reports indicate they will, it rapidly becomes expensive for the taxman and blows a proverbial ill wind towards state schools and the public finances.

Keir Starmer has spoken on Radio 4 of “stress-tests” proving his business case. Interviewers should be all over this. What test? What method? Who did it? Who audited it? What are the risks if you’re wrong? And most importantly, why won’t you publish the whole lot? If only our journalists, and the Conservative Party, were more inquisitive.

Most recently he told LBC radio that:

We have obviously looked at reports on this and all the reports show that it’s unlikely that parents will take their children out of schools… I have looked at this question of will it lead to children leaving private schools and going to state schools and the answer to that, on all the evidence I’ve seen, is no that it won’t [emphasis mine, here and below].

There’s not much evidence. Neither we, nor any country in the world, has ever slapped a 20% tax on school for the excellent reasons that (1) education creates significant social benefit and (2) private education saves the taxpayer a heap of cash. Such “evidence” as exists is pretty speculative and all of it indicates that some parents will become unwilling or unable to keep paying independent school fees.

I’m not aware of a single report that justifies Sir Keir’s LBC remarks.

Baines Cutler report

I’d be surprised if nobody has shown him this Baines Cutler report. We know that Shadow Education Secretary Bridget Phillipson is aware of it. Either Sir Keir needs to read more widely, or he’s being economical with the truth. In the executive summary you can read the stern warning:

Changing this to make school fees liable to VAT would have a very considerable impact on the independent schools’ sector, ranging (on a school-by-school basis) from tough, to catastrophic.

The warnings continue of school closures, strains on the taxpayer-funded sector, operational challenges in the latter and the unpredictability of distribution of the demand switch (it will fall unevenly and nobody knows where). The headline ‘drop-off’ rate predicted is 25%.

EDSK

This EDSK report explores the fiscal consequence of pupil migration from private to state sector using both a 5% and 25% scenario. Quite reasonably, the authors do not commit to an unknowable migration forecast, but they do conclude (referring to Baines Cutler) at the 25% level the VAT measure raises zero net revenue (allowing for less VAT revenue than forecast and for extra state school expense). That’s extremely generous to Labour since it assumes no school closures or cost-cutting (which hit payroll taxes and supplier VAT) and assumes parents continue working and paying tax at the same level themselves, even as they start receiving their education for free at taxpayers’ expense.

The payroll taxes alone on what parents earn to pay school fees amount to around £10bn (assuming 40% taxpayers) so this is a major omission from the debate. 25% migration equates to £2.5bn at risk, plus the lost value-add to parents’ customers, employers and employees, most of which is taxable in some form. Taking that into account, my fag-packet suggests the policy raises zero net revenue somewhere between the 5% and 15% level – I’m making big guesses whether migrating families continue working hard for luxuries, or instead choose more leisure, but so is everyone else.

Experts?

A valid criticism is that Baines Cutler was funded by the Independent Schools Council and rested heavily on a ‘stated preferences’ survey of motivated parents and independent schools. We’d much rather rely on ‘observed behaviour’, but we’re talking entirely uncharted waters. So do we, or don’t we, rely on experts? Who is more expert on independent schools’ customer dynamics than the schools and their customers?

Perhaps we should ask Francis Green of the Private Education Policy Forum, author of Engines of Privilege, who wants private schools to be abolished. Without irony, Professor Green complains about independent schools’ institutional weight while calling to expand the state from his state-funded job and state-funded research budget. Professor Green, natch, took advantage of taxpayer funding to send his own children to grammar school, so no privilege there.

If we’re wary of bias from the ISC, we should treat Professor Green’s input with similar circumspection.

Before we look at Luke Sibieta’s Nuffield Foundation-funded IFS report on the expected effect of VAT, let’s note that Luke Sibieta has previous with Professor Green. They worked together on this previous Nuffield-funded Institute for Fiscal Studies report, to tell us plenty about inequality and rather less about quality in education.

Luke Sibieta studied at UCL. Professor Green’s at UCL. I’m sure it’s all perfectly objective.

The IFS report

Back to Keir Starmer and the likelihood of pupil withdrawals. The IFS ‘best judgement’ was that 3-7% of pupils could be expected to migrate to taxpayer-funded schools and that the net tax revenue raised would therefore be more like £1.3-1.5bn than the £1.6bn claimed by Labour. So again, either Sir Keir needs to read it or he’s being economical with the truth. And that’s his most supportive evidence.

I’ve explored the IFS report before on Daily Sceptic and here on my blog: it misrepresents some very thin and very old data; it extrapolates into the future ignoring macroeconomic changes and disposable income; it arbitrarily holds expenditure constant thus taking for granted tax receipts on families’ labour supply; and it assumes no schools will close or cut costs even facing 3-7% pupil withdrawals.

Most importantly, as I (and EDSK, and the originators of the IFS’s source material on price elasticity) have said, this stuff is tremendously hard to predict. The IFS buries uncertainty deep in the report and omits it entirely from its press releases and Paul Johnson’s tail-wagging 90-second video.

Nobody knows how today’s or tomorrow’s parents will react to a large and unprecedented price hike, amid a cost-of-living and housing affordability crisis, while being the ‘broad shoulders’ that already carry the increasing tax burden by cross-party consensus. Saying “here’s the one true scenario” for families’ reaction to an unprecedented hike doesn’t cut it.

We could call it a ‘reverse Ferguson’ by the IFS. Publish just one best-case scenario while burying the downside risks deep in the report. A responsible balance would be, for example, “here’s a worse/worst-case fiscal outcome if there’s more pupil migration than we expect”. Apparently the ‘plausible worst case’ is worth fixating on when it’s climate and Covid science, but we can don our rose-tinted spectacles when the state wants to rinse hard-working parents doing their best for children.

Can schools absorb the VAT?

Sir Keir goes on to say that schools can themselves absorb the VAT.

This is the VAT paid by schools, they don’t have to pass this onto the parents, they can do it in other ways.

I’ve covered this claim here and it’s not quite the pretty get-out he implies. I figured Labour ends up with about half the VAT expected, with significant risks to the downside. Unlike Labour, I shared my fag-packet.

Most obviously, if the VAT sits within, not on top of, the parental budget, it’s going to be smaller. Also obviously, the school’s going to have to make some savings on payroll and other expenditure, hitting income tax and NICs. Less obviously, there are downstream losses on taxation from those employees and suppliers’ reduced spending in the broader economy; at worst, they’re on benefits. There’s a risk families withdraw to the state sector anyway due to reduced quality (having lost, say, 15% of school workforce) – independent schools have to be much better than free taxpayer-funded schools. There’s also a risk schools become unable to cover or adjust their fixed costs and are therefore forced to close. There’s a near-certainty schools reduce their bursary provision and partnership activities (they might be under heavy pressure from parents to do so) both of which negatively affect the state sector.

Conclusions

We’re all poorly-placed to make firm predictions about an unprecedented tax hike. There’s not much evidence out there, and all the reports indicate some migration around 5-25%, which are the scenarios explored by EDSK. There’s not a single report that supports Keir Starmer’s position, and the more optimistic IFS coverage needs treating with much more caution.

Even if schools carry the VAT by cutting costs elsewhere, it’s still a drastic economic contraction resulting in far lower tax receipts than Labour claim. Voters, journalists and Conservatives must hold Labour accountable when it asserts what ain’t so.

Mr. Chips is a pseudonym for an employee of a private school. He writes on Substack.

Tags: EducationLabour PartyPrivate SchoolsSchoolSchool choiceTax Rises

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36 Comments
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Monro
Monro
1 year ago

Once you have understood this, you have understood ‘pandemic!’ ‘the world is on fire!’, nut zero, ‘Blair’s Britain’ and everything:

‘Combining data for the past five years, from 2018 through 2022, allows for a more robust analysis of demographic differences in views about marijuana legalization than is possible from a single poll. Using this aggregate, Gallup finds support for legalization averaged 67% among the general population but varied significantly by subgroup. Conservative, religious and older Americans are the least supportive, while liberal, nonreligious and younger Americans are the most supportive.

Specifically, subgroups whose support for legalization exceeds the national average by 10 or more percentage points include those with no religious preference (89%), self-identified liberals (84%), Democrats (81%)’

‘Marijuana Views Linked to Ideology, Religiosity, Age’ Nov. 2022

‘….the concentration of THC in cannabis has increased significantly over time meaning that cannabis used today is typically much stronger than previously.’

‘…people who use high potency cannabis are more likely to experience addiction than those using low potency products. It also suggests that people using high potency cannabis are more likely to experience a psychotic disorder, such as schizophrenia.’

‘High-strength cannabis linked to addiction and mental health problems’ July 2022

Last edited 1 year ago by Monro
38
-3
RW
RW
1 year ago
Reply to  Monro

Cannabis addiction is a very real phenomenon[*] but this has nothing to do with the perennial chestnut of the new superhigh potency weed. I’ve already read these stories more than 20 years ago. But then, that’s just another instance of participiants of the so-called culture wars on all two sides being equally corrupt and equally willing to use bad fabrications to further thier dubious causes.

[*] If you’re used to consuming Cannabis-products all day, suddenly stopping this will result in a very miserable feeling one will usually desire to end as soon as possible. This lasts for about two weeks and needs a conscious effort to overcome. Before I moved to England, I gave my last piece of hashish as present to someone (much thanked for in the falsely cozy ways of this subculture) because I had grown intellectually tired of this (and of the people associated with it). That wasn’t exactly pleasant for about half a month but I like my non-stoned self better.

21
-4
Monro
Monro
1 year ago
Reply to  RW

You are entitled, of course, to your own opinion.

Others will base theirs on the evidence:

‘This study finds strong evidence of an association between cannabis use disorder (CUD) and schizophrenia among both males and females, and the magnitude of this association appears to be consistently larger among males than females, especially among those aged 16–25. Importantly, 15% of cases of schizophrenia in males may be preventable if CUD was avoided. Although CUD is not responsible for most schizophrenia cases in Denmark, it appears to contribute to a non-negligible and steadily increasing proportion over the past five decades. In young males (21–30 years, possibly up to 40), the proportion may even be as high as 25–30%. There are global increases in legalization of nonmedical use of cannabis, increases in THC content of cannabis and in total THC doses consumed (Caulkins, Pardo, & Kilmer,) increases in the prevalence of cannabis use and CUD, and decrease in public perception of harm from cannabis use (Chiu, Hall, Chan, Hides, & Leung,)

Alongside the increasing evidence that CUD is a modifiable risk factor for schizophrenia, our findings underscore the importance of evidence-based strategies to regulate cannabis use and to effectively prevent, screen for, and treat CUD as well as schizophrenia.’

Association between cannabis use disorder and schizophrenia….May 2023

9
-2
LaptopMaestro
LaptopMaestro
1 year ago
Reply to  Monro

Addicts don’t like to hear the truth.

11
-1
RW
RW
1 year ago
Reply to  LaptopMaestro

You are hereby awarded the medal for the idiot who’d certainly be posting this. It’s truly deserved. I was actually reluctant to publish the comment just because one of your species was going to react in exactly this way to it. But since it’s widely claimed and believed that cannabis is actually not addictive, I thought pointing out that it definitely is was worthwhile.

PS: You’ve also crossed into illegal territory here by making factually wrong statements about me I could easily disprove weren’t you hiding your name.

Last edited 1 year ago by RW
4
-6
RW
RW
1 year ago
Reply to  Monro

Your text has absolutely no relation to my comment which was about two things

1) The wrong myth of cannabis not being addictive.
2) The eternal superweed hoax.

5
-2
Marque1
Marque1
1 year ago
Reply to  RW

As I have mentioned before I have a few mental problems from the Army. After my wife died I fell apart and spent 20 years in both a bottle and smoking industrial quantities of ‘blow’. I am clear of both after finally getting some help, other than the offered prescription ‘zombie’ drugs. NHS Veterans (Wales) were marvellous in helping me understand and work through my problems although it was brutal. I did not start smoking it until I was in my mid forties and I think that this makes a big difference, my brain is fully formed and I was, ostensibly, an adult. I often wonder if the age at which these others started is ever taken into account, or if it is just monstered to fit a position without reference to the still growing brains of the young. Alcohol and other drugs do affect the development of the immature mind, as is well known. Including abuse by a parent while pregnant (Greta Thunberg, allegedly) causing FASD.

Last edited 1 year ago by Marque1
13
0
Monro
Monro
1 year ago
Reply to  RW

You are clearly too lazy to have read the reference, or even the brief quotes from it, thereby undermining your own protestations.

Bon voyage!

0
-3
Dinger64
Dinger64
1 year ago

It’s bloody well causing me mental health problems having to listen to all their shyte!

111
0
nige.oldfart
nige.oldfart
1 year ago
Reply to  Dinger64

Same here, I keep getting the great urge to go and biet da schidt out of something that really deserves it. Which is causing mental conflict with the part that says that this is not rational. Also with all this safety baggage that is toted these days, why has no one been done for causing harm to others by their actions, as indicated within the introduction of the H&S at work act 1974, from which all the ails of today are derived.

13
0
A Y M
A Y M
1 year ago

In order to maintain most woke ideological religious tenets, you must hold multiple counter factual lies and inconsistencies in your mind. Moreover one must constantly change these ideas once they are proven false without using the change of information as a basis for reevaluating your information sources and your peer group networks.

To continuously lie to yourself requires a lot of emotional energy which the woke cult tries to keep fired up through media dog whistles. However the right wingers are also caught up in these hysterical stories and suffer as a consequence. For them, it’s constantly seeing lies endorsed by the left and ratified by the news and media never seeming to improve and always leading to more disasters. Then the ever present impending fear that it’s all going to hell and there’s nothing we can do about it, including banging away at our cultist lefty friends and family in the vain hope they will “wake up” and have their heads deeply buried in the sand.

Its a war on all our minds, woke or awake.

Last edited 1 year ago by A Y M
66
0
RW
RW
1 year ago

56% of white, liberal women aged 18–29 had ever been diagnosed with a mental health condition by their doctors

Old joke, but has to be made here: Didn’t you just write that they were woke liberals?

This sort of Left Wing Politics is a mental health problem. Think running around with leaky facemasks to protect oneself against submicroscopic invisible enemies lurking everywhere, believing that a weather beast god will one day kill us all and that some demonic superhuman entity places human souls in wrong bodies solely to torment them.

Doesn’t strike me as particularly sane and balanced.

63
0
TheGreenAcres
TheGreenAcres
1 year ago

Holding multiple contradictory opinions at the same time can’t be good for one’s mental health either.

On a related topic I heard that a BBC reporter at a presser for the Women’s football asked a Moroccan player how many lesbians where in the team. Completely ignorant of the fact that not every country is as tolerant of that sort of thing as Britain – and despite the same BBC regularly contributing to the argument that Britain is a sexist, homophobic hell-hole of oppression.

26
0
For a fist full of roubles
For a fist full of roubles
1 year ago
Reply to  TheGreenAcres

And there was me thinking they were referring to trans women who had not changed their sexual preferences once they had transitioned.

12
0
TheBasicMind
TheBasicMind
1 year ago

No need for an explanation or question really. Being woke is an identity relationship (as in algebraic identity) with being mentally ill. It requires devotion to an ideology beyond reason and elevation of a victim mentality over healthy self sufficiency. It has taken over from traditional left wing politics. Plus as Jordan Peterson points out, as the latest research shows, it is also accompanied by a big dollop of psychopathy.

22
0
For a fist full of roubles
For a fist full of roubles
1 year ago

I have always thought that supporting left wing politics was a mental condition, particularly of young people. Most tend to grow out of it as they grow up and assume the responsibilities of adult life.

29
-2
Mogwai
Mogwai
1 year ago

One does not need to look far at all in Clown World for examples of mentally ill people trying to normalize their behaviour. I’m pretty sure adults identifying as babies would qualify. Eat your heart out Damian Hirst;

https://twitter.com/OliLondonTV/status/1683464633527549952

https://twitter.com/_The_Bayou_Boy/status/1683112626664898560

10
0
Stuart
Stuart
1 year ago

I think you will find it’s mental health problems causing the left wing politics

30
-1
Jonathan M
Jonathan M
1 year ago
Reply to  Stuart

Just what I was going to say!

10
0
sskinner
sskinner
1 year ago

“Could Left-wing politics be causing mental health problems?”
What?!! Perhaps Left-wing politics is the mental illness. Prolonged efforts of a person (or the group) to keep reality outside of their head is not conducive to good mental health.

“Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.”
Thomas Sowell

11
0
Jabby Mcstiff
Jabby Mcstiff
1 year ago

It is a very small number of people who give a monkey’s about these trendy ideas. I think that even in hotbed USA it was just eight percent. The whole thing is a psy op to convince you that these are the most important issues whilst they fleece you dry.

9
0
Cynical to the core
Cynical to the core
1 year ago

A small proportion will have genuine mental health problems, for the rest it’s a trend, just another bandwagon to jump on or a label that’s a useful tool for getting out of anything they don’t want to do.
It could also be that this is the mollycoddled generation who have been raised to be perpetually offended and taught that the world is a scary place. These young adults have never known the freedom of spending long summer days out with friends with no parental supervision, sorting out their own differences and entertaining themselves. Instead, their lives have been micromanaged by over anxious parents, they’ve been picked up and dropped off everywhere, run crying to the nearest adult if another child called them a name and won prizes for failing because ‘everyone’s a winner’. Now they’re adults they don’t have a clue how to operate in the real world and peddle all this woke crap to try and make it all a bit less scary with the ‘be kind’ message and such like.

4
0
varmint
varmint
1 year ago

Ofcourse when you believe things that are not true you get yourself into a whole lot trouble. Once you think capitalism is evil when infact it has brought billions out of miserable poverty then right away your world view that does not match what is actually happening in the real world will cause you some anxiety. Once you believe that humanity will be wiped out by a little trace gas that makes you glue yourself to the street then perhaps it is long past the time you saw a shrink. etc etc all the way down the list of absurd Liberal Progressive anti human policies.

2
0
DevonBlueBoy
DevonBlueBoy
1 year ago

You don’t have to be a nutter to espouse left wing ideas, but it certainly helps

2
0

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