A private school in Hampshire has become the first to shut ahead of Labour’s proposed VAT on fees, which the party has promised to introduce “straight away” if it wins the general election in July.
Alton School, an £18,000-a-year ($22,800) Catholic school with 370 pupils, will close at the end of term, citing dwindling pupil numbers and “adverse political and economic factors”.
In a statement on the school’s website, it said: “This proposal is based on a continued decline in pupil numbers, to the extent that the school has now become unviable.
“This is due to a combination of adverse political and economic factors.”
Families of pupils at Alton School said Labour’s tax plan “clearly had a terrible impact on intake for September”.
One parent of two children at the school told The Telegraph: “It seems like it’s been the final nail in the coffin. It’s been a topic of conversation for quite some time, and with Labour looking more and more likely to get in, it’s become more relevant.
“I know a decent proportion of parents are now looking at the state sector.”
The decision follows the publication of the latest annual census from the Independent Schools Council earlier this month which said the number of pupils joining private schools has fallen by 2.7 per cent in the last year amid rising fees – the biggest fall since data was first collected in 2011.
The ISC census, based on a survey of 1,411 UK independent schools conducted in January, said the average fee for a day school – which the majority of ISC pupils attend – is now £6,021 per term or £18,064 per annum.
Boarding school fees are the highest at £14,153 a term on average, up 9 per cent last year, while day fees for boarding school are £7,975, up 8.8 per cent last year. Among day schools, the majority charge between £3,000 and £6,000 a term.
In a foreword to the report, ISC chairman Barnaby Lenon said Labour's plan to charge 20 per cent VAT on private fees is “looming large in parents' minds” and private schools are concerned about pupil recruitment and retention.
He said: “A pupil bulge has made its way through the school system, but independent school numbers have not been rising to the same extent, leading to a decline in the proportion of children educated in independent schools from 7 per cent to 6 per cent.”
Most expensive UK boarding schools - in pictures
Labour leader Keir Starmer has pledged to introduce the tax “right away” if the party wins power, as is widely predicted, in the early July election.
He told the BBC Radio 4's Today programme the tax will be introduced “as soon as it can be done”.
“Obviously, there will have to be financial statements, etc,” he said. "It is a question of the timetable in Parliament. But these first steps are intended to be done straight away."
Labour claims charging VAT on independent school fees and imposing business rates would raise £1.3 billion.
However, a recent report from the Adam Smith Institute found that applying VAT to independent fees may raise no money at all – and could even end up costing the government £1.6 billion.
The policy is widely expected to result in a reduction of private school rolls but estimates vary.
The London-based Institute for Fiscal Studies predicts the policy could result in a reduction of only 3 to 7 per cent of pupils.
Most surveys have suggested the true number could be much higher, with several recent polls indicating up to a quarter of private school pupils could enter the state system as a result.
A recent survey of 2,000 people with investable assets of more than £250,000 by wealth manager Saltus predicts that about 21 per cent of parents will have to remove their children from private school as a result of the rising costs.
The only real-world example of a country applying VAT to private schools is Greece, which imposed a 23 per cent tax on school fees in 2015, resulting in "general mayhem", with smaller schools shutting and pressure building up on state schools, Maxwell Marlow, director of research at Adam Smith Institute, told The National.
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Sri Lanka: Dinesh Chandimal (capt), Lahiru Thirimanne (vice-capt), Dimuth Karunaratne, Kaushal Silva, Kusal Mendis, Sadeera Samarawickrama, Roshen Silva, Niroshan Dickwella, Rangana Herath, Lakshan Sandakan, Dilruwan Perera, Suranga Lakmal, Nuwan Pradeep, Vishwa Fernando, Lahiru Gamage
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Key figures in the life of the fort
Sheikh Dhiyab bin Isa (ruled 1761-1793) Built Qasr Al Hosn as a watchtower to guard over the only freshwater well on Abu Dhabi island.
Sheikh Shakhbut bin Dhiyab (ruled 1793-1816) Expanded the tower into a small fort and transferred his ruling place of residence from Liwa Oasis to the fort on the island.
Sheikh Tahnoon bin Shakhbut (ruled 1818-1833) Expanded Qasr Al Hosn further as Abu Dhabi grew from a small village of palm huts to a town of more than 5,000 inhabitants.
Sheikh Khalifa bin Shakhbut (ruled 1833-1845) Repaired and fortified the fort.
Sheikh Saeed bin Tahnoon (ruled 1845-1855) Turned Qasr Al Hosn into a strong two-storied structure.
Sheikh Zayed bin Khalifa (ruled 1855-1909) Expanded Qasr Al Hosn further to reflect the emirate's increasing prominence.
Sheikh Shakhbut bin Sultan (ruled 1928-1966) Renovated and enlarged Qasr Al Hosn, adding a decorative arch and two new villas.
Sheikh Zayed bin Sultan (ruled 1966-2004) Moved the royal residence to Al Manhal palace and kept his diwan at Qasr Al Hosn.
Sources: Jayanti Maitra, www.adach.ae
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Will the pound fall to parity with the dollar?
The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.
Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.
New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.
“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.
The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.
The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.
Bloomberg
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