On the 30th of October, Chancellor Rachel Reeves presented Labour’s first budget in 14 years. It promised to raise revenue for public finances and help the government ‘deliver on their education commitments to young people’.
Faced with several challenges in the education system, which has worsened due to a rising number of pupils enrolled in English Schools (estimated to be 18,200 in 2023) and less real spending per pupil, Labour’s new policy hopes to widen access to quality, state-provided education. While the government argues that a tax lobbied on private schools will raise enough funding for significant investment, the introduction of a 20% VAT on private school fees has raised doubts about whether or not the party will deliver the necessary reform to state education.
Source: IFS
Labour’s policy is a step in the wrong direction. It threatens to displace students with diverse needs from private schools and is unlikely to generate the funding required to enact crucial reform to state education.
The government outlined that the £1.75bn collected from taxing private schools would improve the ‘education and outcomes for young people’. In 2023, the Guardian reported that students attending private school were ‘twice as likely’ to earn top A Level grades in comparison to state-educated peers illustrating the disparities in the quality of education in the UK. A paper by Dr Francis Green demonstrates that, unlike other developed countries, these differences persist in the UK even when social background is accounted for highlighting the gap between the quality of state and private education. The Institute for Fiscal Studies, a think tank, reported that between 2019-20 the gap between net private school fees and state school spending rose from 40% to nearly 100%. Therefore, it appears that the benefits of the policy are clear as an increase in state education investment begins to erode educational inequality, ensuring that non-fee-paying students have access to resources similar to their fee-paying counterparts.
However, whilst the policy promises to generate significant revenue, this may not be enough, with questions continuing to arise about its practicalities. Rachel Reeves argues that the income collected from the new tax will improve state education and ‘provide the highest quality of support and teaching’. However, according to HM Revenue and Customs’ policy paper, private school fees will rise by 10% on average, depending on whether or not they will absorb the tax to stabilise fees. This would mean that some students with diverse needs, who make up 5% of private schools, are forced to withdraw and instead enter a state system that is unable to accommodate them without facing additional strain on their limited resources.
The Association of School and College Leaders highlights that students with tailored needs are disadvantaged in state schools due to inadequate government investment and limited one-on-one teaching support that an overburdened system cannot provide. Moving more children into state schools threatens to add pressure onto teachers who, according to the National Education Union, already work over 60 hours a week due to staff shortages. This would likely make it more difficult for them to deliver quality education as classroom sizes would increase. While the policy increases funding to help the state system better support students with diverse needs, the National Audit Office notes that previous spending increases have not resulted in significant improvements in their education. In a statement to The Guardian, the Department of Education emphasised that an 'inclusive education' plan is crucial for enabling the state system to meet the needs of diverse students, suggesting that funding alone, without accompanying policy reform, will not be enough.
Moreover, Many parents could hire private tutors for children with diverse needs, especially after discontinuing private school fees, easing the demand for state education. However, the British Psychological Society emphasises that attending school is often preferable for students with diverse needs to prevent social isolation. Furthermore, government Education Statistics indicate that, out of approximately 1.6 million pupils with diverse needs, 1.3 million choose to attend school over private tutoring. This highlights the need for the state education system to accommodate all students. Therefore, whilst Labour’s policy promises additional funding it risks overwhelming a system which is already strained which would do little to improve the quality of learning environments.
Also, the Chancellor may have overestimated how much revenue the VAT can realistically provide. The Institute of Fiscal Studies adds that any genuine reform to state education, such as reducing class sizes, upgrading facilities or increasing support for special education needs, would demand an additional £1.3–1.5 billion per year through the new VAT policy. Yet, projections from HM Revenue and Customs reveal that revenue from this tax will only reach £1.72 billion by 2030 Thus, there is a significant difference between the amount of money the state needs and the amount that can be generated through the new policy. Funding needs may be met in the long term, however, the policy specifies that the new tax revenue will also be allocated to ‘public finances’ offering no guarantee that enough funds will be allocated to the state schools that need it even in the long term. This raises further concerns about the policy’s capabilities to deliver the necessary funding needed to reform state education and improve school standards.
Looking at the policy, it’s clear that there is a significant challenge: raising funding for the state system, without lobbying an unnecessary tax on private schools and overwhelming state schools that have limited resources. I would instead recommend a supplementary approach that addresses the gap between the funding required for reform and the funding generated through VAT. Instead of relying solely on taxing private schools, the government could collaborate with multinational corporations (MNCs) to secure additional funding and sponsorships through their corporate social responsibility (CSR) initiatives.
Many MNCs already run successful educational programs that contribute to the development of digital skills in schools. For example, Google's Google for Education initiative provides resources, training, and grants, pledging over $25 million in 2024 to help educators and students across the US build AI-related skills. Additionally, it distributed 50,000 Chromebooks for teacher training in Ukraine to support youth displaced by conflict.
Similarly, Microsoft has partnered with the Lake Washington School District since 2006, providing software tools across all 56 schools to promote better maths and science skills among students. The government anticipates generating £600 million annually over the next seven years from tax revenue, but achieving this solely through a VAT on private school fees seems unlikely. A more effective approach would involve collaboration with corporations, where CSR investments in technology and infrastructure, combined with a targeted VAT on non-essential services, could help generate sufficient funding for real reform in state education. While some might criticise private sector involvement, MNCs are unlikely to replace government responsibility; instead, their contributions can complement and enhance efforts to bring about necessary reform to state education which would improve its quality.
Labour’s proposal to tax private school fees makes an important step towards increasing investment in state education. However, the government has appeared to miscalculate the amount of funding needed to achieve the reform necessary. A more effective solution would involve combining targeted tax measures with partnerships with multinational corporations. By leveraging corporate social responsibility initiatives and investing in technology and infrastructure, the government could generate the necessary funding for state education without overwhelming the system. This approach would help ensure that all students, regardless of background, have access to high-quality learning opportunities and that meaningful improvements to the education system can be achieved.