Private Schools Should Be Taxed

The fresh publication of Ken Barclay’s review of non-domestic rates, carried out for the Scottish Government as an expedition in search of improved taxation policy, is every bit as thrilling and radical as it sounds. As you would probably expect from a former RBS bigwig, the review is far from calling on First Minister Nicola Sturgeon to don military garb and fly the red flag over Holyrood. The recommendations are welcome, certainly, but inoffensive to middle Scotland: business rate relief for expanding companies; granting tax exemptions for child care facilities; taking tax exemptions away from publicly-run businesses such as leisure centres. The Earth will go on spinning, should these recommendations be implemented at some point.

One recommendation, though, stood out for being slightly more politically daring – even comparable to a UK-wide VAT policy change advocated for in the most recent Labour manifesto: “Independent (private) schools that are charities […] benefit from reduced or zero rates bills, whereas council (state) schools do not qualify and generally will pay rates. This is unfair and that inequality should end by removing eligibility for charity relief from all independent schools. They will of course still retain charitable status and other benefits will continue to flow to them from that status.”

The review goes on to predict that charging private schools business rates rather than continuing to subsidise their activities via charity tax exemptions will raise £5million for public spending in Scotland per annum. A drop in the ocean in the grand scheme of things, yes, but a modest step towards solving the chronic underfunding of Scottish state schools is certainly to be more welcomed than no action at all.

If the SNP Government adopted such a policy, it could begin a historical reversal of policymakers looking the other way while private schools become increasingly uninhibited in publicly marketing themselves as businesses offering high-income parents a commodity.

Charging private schools – the clue is in the name – business rates would not even be an act of tax-and-spend redistribution: as the review notes, state schools are already paying them. It is a national embarrassment that we have fumbled into a contemporary policy position, whereby state schools in our most deprived regions are being levied business taxes while Fettes College, Kelvinside Academy and Merchiston Castle School are continuously exempted. Expect this recommendation to be opposed by the newly-bolstered Conservative MSPs and the right-wing pundit ecosystem which pollutes political discourse in this country, but know that when the first press release or Spectator column utters the phrase “a tax on aspiration”, they are – by their own standards – acknowledging that such a tax on aspiration is being levied upon our state schools today.

The defence that private schools are the reserve of Theresa May’s ‘just-about-managing’ middle class is a claim which is becoming increasingly ludicrous. In a decade, the average private day school has raised its fees 29% in real terms. Like housing ownership, private education is increasingly become the reserve of a narrower and narrower conclave of the highest earners, many of whom hail from abroad, such as the children of Russian oligarchs. From a purely practical perspective, not taxing this lucrative activity displays poor business acumen on the part of the state.

Additionally, the myth of the hard-working family making sacrifices to afford school fees is blemished by the facts: even when excluding boarding schools, typically the most expensive, private day school costs have soared to an average of £11,500 yearly and are still climbing above inflation. The average UK income in 2016 was approximately £24,000. To be able to even consider private education for your child is to be dramatically far removed from the lifestyle choices facing “normal” families.

In an ideal world, the Scottish Government and UK Government would be going further on taxing private schools. These institutions deepen educational inequalities, all although not through nastiness or cartoonish ill will, but through monetising the perfectly natural wishes of parents to see their children do well. It isn’t weird or abnormal for parents of any income to wish to give their kids a superior education along with the social capital adjacent to it. Which is precisely why the state should be crafting realistic private school tax policies which recognise these behavioural norms and implement redistributive features levying charges on schools and on the wealthy parents gifting their children a leg-up, to then redistribute the tax resources. This then enables children not born to our wealthiest citizens to receive a high quality education in the state sector too, benefitting both the individual kids and the wider economy we all – rich or poor – have to live under together.

Jeremy Corbyn, whose Labour manifesto was less radical than both his supporters and opponents pretended, was right to call for VAT to be levied upon private school fees (it’s worth noting that VAT is a reserved issue, the same in all four countries of the UK). Noted Socialist darling Michael Gove, himself an Aberdeen private school alumnus, has even voiced support for removing private schools’ charity status. Eventually policymakers will have to accept the reality that private schools are factories for the children of higher-income individuals to yield higher outcomes than the children of poorer individuals, and respond with redistributive policies which benefit, cough, the many not the few. Like all private enterprises, they rely on basic supply and demand economics: only when our schools in Scotland and in the rest of the UK receive the necessary funding can they become the best in the world, in turn reducing the demand for private education. Private schools are a business, pure and simple, and we should tax them as such.

[Rhys Harper – @RhysRHarper]

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