Labour backs down on plan to end charitable status of private schools
Private schools would retain some of their tax breaks under a Labour government, after the party backed down on its pledge to strip them of charitable status.
Labour remained committed to its policy for England of charging 20% VAT on fees and ending the business rates relief from which independent schools benefit.
But, as first reported by the i newspaper, the party said it no longer needs to strip the schools of their charitable status to achieve this, meaning some of the current perks will remain.
Being able to claim gift aid on donations and not paying tax on annual profits, which must be reinvested in education, are among the tax breaks that the status confers.
Party sources pointed out that they only ever intended to remove the VAT and business rates perks, saying charitable status was used more as shorthand for the policy.
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.
“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, remained critical of the policy.
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.”
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”.
The Tories were accusing Labour of having U-turned.
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.
“Keir Starmer is clearly only interested in short-term policies designed to grab headlines, without any regard for the consequences – and inevitably has flip-flopped on them.”