Labour Scraps Plan to Strip Private Schools’ Charitable Status, Proposes 20% VAT Instead

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The Labour Party has relinquished its initiative to eradicate the charitable status of private schools, amidst the cluster of tax breaks targeted for retraction in the event of their victory in the next general election. This charitable status has historically served as a tax immunity for several private schools in England and Wales, an exemption Labour’s leader, Sir Keir Starmer, once deemed unjustifiable.

However, the party now finds itself in the position to dissolve what it considers “unfair tax breaks” without interfering with the rules of charitable status. Labour has divulged its plan to levy a 20% VAT on private schools, alongside the dismantling of business rates relief.

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During his appearance on the BBC’s Political Thinking podcast, Sir Keir articulated that the policy was not an assault on private schools. The essence of it was to address the needy condition of the nation’s schools, which irrefutably demands funding. Sir Keir expressed his indifference to private schools, but emphasized his fervent wish for state schools to reach an equivalent standard – striving to initiate an educational environment where a student’s chances in life are undiscriminated by the type of school they attend.

A party spokesperson assured that the financial yield from these reforms would be allocated for the recruitment of sorely needed teachers, as well as mental health counseling provision in every secondary school. High-ranking party sources maintain that the promise of stripping charitable status was merely an abbreviation for specific changes, the commitment to which the Party still holds.

On the contrary, Conservative Treasury Minister, John Glen, sees Labour’s policy adjustment as a compelled reversal of a key policy. The Minister criticized Labour’s tactics, claiming unsubstantiated improvised strategies.

England and Wales currently host approximately 2,500 private schools, with the government reporting that half of these institutions boast registration as charities, thereby granting them the capacity to claim charitable status. The eminent privileges accompanying such a status include tax exemption on annual profits, gift aid claims on donations, and 80% relief on business rates. The Scottish government, however, moved to eradicate business rate relief for private schools last year.

Julie Robinson, CEO of the Independent Schools Council, raised concerns that stripping the tax relief that comes with charitable status might result in an unequal system within the charity sector. She voiced apprehension that any charity not adhering to the political philosophy of the time could find itself susceptible to extra taxation.

During a heated discussion last year, Labour leader Sir Keir Starmer called the tax breaks for private schools a “scandal,” inciting contension with Prime Minister Rishi Sunak. According to the Institute for Fiscal Studies, the average private school in the UK charges roughly £15,200 a year, while the tuition at high-end schools like Eton College or Harrow School could go up to about £50,000 per annum.

Mr. Sunak accused Sir Keir of sabotaging the hard-working aspirations of millions, while the Conservatives questioned whether the Labour’s proposed tax changes would generate the £1.7bn they anticipated.