24 Feb Nearly one in three parents will have to re-mortgage their home should Labour tax private education
39 per cent of UK parents will ‘definitely’ or likely have to withdraw their children from private schooling should Labour win the next election and impose 20 per cent VAT on independent education, new research has found.
Based on current ISC/IFS figures, this will push 242,000 kids into an already over-stretched state education system and could wipe out £3.98bn in fees paid to UK private schools.
Nearly 15 per cent of parents’ plan to move their children into state education as early as after prep school. Almost one in ten parents say that moving their child into state education will mean the money they save on VAT will be enough to afford to move their children back into private education later on in their schooling for GCSEs or A-levels.
Sir Keir Starmer’s policy to tax children’s education has been met with significant criticism from both parents and private schools nationwide, with questions over the ethics of this policy and fears that the change will make fees unaffordable for large swaths of parents. Over 97,000 parents have already signed a petition urging Labour to halt their proposal of VAT on school fees.
The new research on 1000 UK parents with children in private education in the UK, commissioned by leading finance advisor, Ashbridge Partners, found that parents will have to go to great lengths to afford the proposed increase in fees if they want to keep their children in private school. Nearly a third will have to re-mortgage their home (30 per cent), and more than one in 10 will be forced to sell their property (11 per cent) or take a second job (16 per cent). A handful of parents said they would have to rent out their spare room to cover the extra cost while around 30 per cent are speaking to a finance adviser for help.
London and the south-east, (ranked by the recent ONS House Price Index as the top two most expensive places to buy a property in UK) were some of the worst affected areas by Labour’s proposal. One in five parents in both regions will ‘definitely’ have to remove their children from private education should Labour win the next election, while nearly a quarter (23 per cent) of parents in the south-east will need to take another job to cover the additional costs.
Families nationally have said that cutting back on ‘extras’ will be a necessity with 39 per cent cutting back on school trips, and a quarter planning to cancel or reduce family holidays. 15 per cent will look to trim their household bills, one in ten will downsize the family car, and 6 per cent will reduce pension contributions. The picture was much higher in some regions with more families in the south east (40 per cent), north east (48 per cent) and Wales (50 per cent) planning to reduce school trips, with well over a quarter in the south west (30 per cent), Yorkshire (34 per cent) and midlands and Wales both (28 per cent), cutting down their spend on family holidays.
Paying fees upfront
An overwhelming 97 per cent of parents are not planning to pay school fees upfront, even though this could protect them against a rise in school fees and Labour’s measure. Half of these parents (50 per cent) said the reason was because they are unable to afford this option, which was the same for London and the south east, while 15 per cent of UK parents would rather ‘risk it’ and see if Labour gets into power. However, Ashbridge Partner’s report found that private schools could do more to support parents by offering for fees to be paid in advance. Only 6 per cent of parents have been contacted by their school since Labour announced its plans, offering the opportunity to pay fees upfront head of a UK general election.
Mark Ashbridge, founder of Ashbridge Partners said: “It is surprising how few schools are offering parents the choice to pay for school fees upfront. Paying fees in advance may be one of the best ways to protect your finances from the risk of the rising cost of private education while securing your child’s future place in their school. It could negate the impact of Labour’s proposed VAT introduction should anti-forestalling rules not be imposed.
“If you haven’t had communications from your school on this matter, contact them to understand what options they may offer for advance payments. When considering paying fees upfront, weigh up the benefits of this against the risk of then needing to withdraw your child from that school for any reason. As our research shows, many parents are simply unable to pay in advance however, for those who can, it could be worth hedging your bets and paying a proportion of the fees in advance to manage any risk.
“If you have an attractive financial opportunity to pay upfront and you are comfortable with the risks then consider how you will fund it. Asset sales may have capital gains tax implications so discuss with your accountant before taking any action. Increasing a mortgage also requires planning and a window of time to make the necessary arrangements.
“Our research also found that around a third of parents will seek to cash in on investments or liquidate assets to help cover additional costs on fees. This could also be an effective way to finance rising school fees where income is short or additional mortgage finance cannot be secured. Everyone’s situation will be different so take advice from your finance advisor.”
