The Government’s VAT raid on private schools risks costing the taxpayer up to £1.8 billion as parents cut their work hours once their children move into the state sector, a report has found. The Telegraph has the story.
Private schools will be forced to pay 20% VAT and business rates from January 1st, with the independent sector expected to raise fees as a result. Last week, Eton College said it would join the schools passing on the cost to parents in full.
A family would need £340,000 of disposable income to pay the average annual school fees of £17,000 for two children over 10 years.
But those who can no longer afford to go private as a result of the tax raid will experience big wealth gains, and related research suggests this would make people reconsider how much they need to work.
At least some of the parents unable to afford the higher costs are likely to work less, retire early or even quit working immediately, according to analysis by the Adam Smith Institute.
The free market think tank looked at what would happen if two-fifths of money these parents earn or the hours they work specifically to cover school fees was instead taken as leisure.
It found it could cost the Treasury between £360 million and £1.81 billion, depending on how many pupils migrate to the state sector.
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