Schools out: the dissolution of private education
St Joseph’s College in Reading survived two world wars, the Great Depression and a pandemic. But it could not weather two years under this Labour government. Next month, its 500 pupils will be among thousands across the country who do not return to the schools from which they broke up for the summer holidays. These are the casualties of the government’s decision to impose VAT on private school fees and remove business rate relief – a policy ministers promised would not have such consequences.
We still haven’t seen the full effects of Labour’s recklessness. The true damage will take time to set in. We know that during the financial crisis, parents struggling to pay fees avoided moving their children until they reached a natural break in their education: the end of primary school, GCSEs or a key stage. Governors exhaust every alternative before admitting defeat, pursuing mergers, selling assets and cutting costs in the hope of surviving another year. But the rot has set in, and faster than expected.
Century-old Victorian institutions are closing or morphing into unrecognisable organisations. It will not be long before we are left with a sector transformed: a small number of globally elite schools with fees so high they function only as finishing schools for the rich; parents obtaining certificates proving their child has deficiencies which cannot be accommodated in the state sector; and a handful of religious and eccentric schools able to obtain funding outside of normal fees.
The Department for Education (DfE) initially predicted that 14,000 pupils would leave the private sector by this summer. So far, the figure is 30,000 pupils, at least. Sarah Cunnane, from the Independent Schools Council, describes the rate of closures as ‘very concerning’ and suggests that healthy schools, which ‘would have been open for years to come’ and which were not previously in financial trouble, are at risk.
The changes to VAT and business rate relief did not land in isolation. Schools have also had to absorb the increase in employer national insurance contributions (NICs) and the minimum wage, both introduced in April last year. State schools received additional public funding to offset the higher NIC bill; independent schools did not. For a sector where staffing accounts for the majority of costs, the effect has been severe.
Proponents of charging VAT only want to talk about Eton and Harrow. But Britain’s elite public schools were never going to fall victim to this policy. These schools know they can pass on costs to parents. And if British parents can’t pay, there is no shortage of wealthier international families who will stump up to secure a British education.
Richer schools have also been cushioned by endowments and donations. The regional pattern is revealing: 9.6 per cent of mainstream independent schools in the East Midlands have closed since January last year, compared with 3.9 per cent in London and 3.6 per cent in the south-west.
Girls’ schools are also disproportionately struggling. More than twice as many have closed as boys’ schools. Girls’ schools are often newer and lack historic funds. In an attempt to avoid closure, many single-sex institutions have been forced to pivot to a co-educational model. Cheryl Giovannoni, the chief executive of the Girls’ Day School Trust, warns that these changes risk ‘girls becoming something of an afterthought in the decisions about what is best for them, and how their futures will be defined’.
Durham High was one of the schools that became co-ed shortly after the introduction of VAT, but this was not enough to save it from closure last month. A former member of the board of directors notes that the school wasn’t well endowed, and that it ‘was the plumbers and the sparkies and the scaffolders’ who paid the fees, with a significant number of pupils on assisted places. He speaks of the ‘tremendous pride and admiration’ he had for the staff, who during lockdown were unique ‘among both private and state schools in the area in continuing to deliver the full curriculum’.
Durham High’s fees ranged from £14,475 to £19,323 a year – comparably modest for day education in the region. Parents will struggle to find a similar local offering for their children.
The school was owned by Galaxy Global Education, controlled by Shangqin Gao, a Chinese businesswoman. The group has recently purchased a number of English schools and closed three of them down, including Malvern St James in the West Midlands and Ruthin School in Wales, all with little notice, leaving pupils without a school place and teachers without work.
Labour’s Mary Kelly Foy has accused the company of a land grab. Because private schools are a rapidly declining asset, it may make far more sense from a commercial perspective to buy them and sell off their grounds to developers. Galaxy denies that this was its strategy, claiming that the schools were unable to operate against the backdrop of ‘unprecedented pressures’.
When governors are struggling to make ends meet and reconcile rising costs, they often look to a sale to save the school. More than 30 independent schools have been sold to Chinese investors in the past decade. As more schools battle insolvency, that number is likely to rise. But these buyers are far more ruthless than a governor team made up of parents and community figures. They aren’t interested in a school’s history and may choose closure if the value of an institution’s assets outstrips its profit-making potential.
Private equity funds now also dominate the educational landscape, which may seem strange since the sector is dogged by mounting overheads. But these firms have hit on a way to make money against the backdrop of VAT.
The one growth sector in private education is special needs. This is because children in possession of an Education, Health and Care Plan (EHCP), which states they have needs that can only be met in a private school, will have their fees paid in full by the local council, ensuring no fall in pupil numbers. The council can also claim the VAT back. As of February this year, 30 per cent of independent special schools were backed by private equity firms. Roughly a third of these are based outside the UK – in Jersey, Guernsey, the US, Qatar and Abu Dhabi.
There is now a strong incentive for families previously paying for education to obtain an EHCP to retain a private school place. The former education secretary Damian Hinds has pointed out that many families are likely to ‘find that they cannot afford the extra 20 per cent, so they will apply for an EHCP and the child could get placed back in the same school, with the entire cost now being picked up by the state’.
There are currently 538,547 pupils with an EHCP, up 11.6 per cent from 2025. While not all of these plans will require councils to pay for private education, many will, and it is conceivable that more parents have sought them to ensure council funding for their children’s education because they themselves cannot afford to pay increased fees.
The DfE claims that there is no scandal in the story of school closures. Its often trotted-out line is that ‘more private schools opened than closed’ since VAT was introduced. This may be technically true, but it misses how the sector is drifting away from its roots. Eighty-four per cent of schools which have closed were mainstream. Many were centuries-old centres of academic excellence, while 89 per cent of openings are special schools.
We have replaced Malory Towers with another exercise in infantilisation, placing large numbers of children in a state of learned helplessness by sending them to institutions specialising in ADHD, dyslexia or ‘emotional difficulties’. Meanwhile, England’s exceptional schools are struggling. The Purcell School, Yehudi Menuhin School and Chet-ham’s School of Music – where, respectively, Jacob Collier, Nicola Benedetti and Thangam Debbonaire, Labour’s former shadow culture secretary, trained – have all been hit by VAT and business rate relief changes.
Specialist music and dance schools are among the most vulnerable to government vandalism. Due to their participation in the DfE’s Music and Dance Scheme, which provides income-determined grants, many of these schools effectively have their fees set by the government. They cannot simply hike them to cover rising costs. They are also among the most expensive schools in the country to run. Students require one-on-one teaching and extensive contact hours. Class sizes are small and boarding is necessary to house so many talented students in one place.
Baroness Keeley has warned that Chetham’s in Manchester is in particular ‘financial distress’ due to ‘rising costs and the introduction of VAT on fees’. The school fears it may be forced to close in the next few years. Ninety per cent of Chetham’s pupils receive financial support. Their parents do not have extra money lying around to finance VAT hikes. It is also one of the only music schools of its calibre in the north of England.
The Royal Ballet School also faces financial threat. The school requires a pianist for each class and regularly imports costumes from Europe for productions. To cut costs would be to undermine the future of English ballet. One of the school’s heads, David Gajadharsingh, has warned that VAT will ‘destroy opportunity’ for young dancers.
While the government has increased grant funding for these schools, with the Treasury paying itself back some of the tax hike, the money isn’t enough to cover rising costs and is only applied to families earning less than £45,000 per annum. The principal of the Purcell School has identified a £4 million shortfall in funding, in part caused by VAT and business relief changes.
Labour told us that it was taxing private schools to fund the recruitment of 6,500 additional teachers. But the number of full-time equivalent teachers in England’s state-funded schools has fallen by 1,900. And the policy might not even be revenue-raising at all. In Scotland, the VAT raid has already cost more than it raised. Every child that moves into the state education sector does so at a cost of £8,850 to the public purse. The policy’s net fiscal gain is slowly being eroded by that cost.
What has Labour actually achieved? It has forced the closure of at least 78 schools, 87 per cent of which weren’t selective. It has robbed 8,429 pupils of their school places. It has forced girls’ schools to abandon the single-sex principles on which they were founded. Where we once had Victorian institutions, we will now have Chinese-owned schools vulnerable to asset stripping, and private equity-backed special schools sucking at the taxpayer’s teat.
The policy has made Britain one of only two countries in the world to tax children’s education like a consumer service. It is also one of the only times that the government has removed tax relief from a whole class of charities -– paving the way for future policy. If the government doesn’t like what your charity provides, it is now free to remove relief and with it your ability to function.
If ministers wanted to raise revenue, why did they bring in VAT changes in the middle of a school year, with just five months’ warning? Would it not have made more sense to allow private schools to prepare for lost revenue? And why did it bring down the second blow of business-rate relief removal three months later?
None of this should surprise us, though. Bridget Phillipson, the former education secretary, has said she is ‘not the only spiteful class warrior out there’ and showed off T-shirts emblazoned with the slogan. Lucy Powell, the recently appointed Education Secretary, was waging a war on private education long before she got the job. In 2016 she opposed an Independent Schools Council proposal to introduce 10,000 free private school places at the same cost to the government of sending a child to state school. She told the Conservatives to stop ‘fixating on independent and grammar schools as silver bullets to school improvement’.
Under Jeremy Corbyn, Labour wanted to abolish private schools. Now it might not even need to bother. A sector too depleted to offer bursaries, unable to train the next generation of musicians and dancers and increasingly dependent on foreign capital may simply cease to exist in the form Britain has known for generations.
