On 23 May 2024 the House of Lords is scheduled to debate the following motion:

Lord Lexden (Conservative) to move that this House takes note of the contribution of independent schools to the education system, and the impact VAT changes would have on those schools.

1. Independent schools

1.1 Definition

Independent schools, also known as private schools, charge fees for pupils to attend them.[1] They do not have to teach the national curriculum, but must be inspected regularly.

Some schools specialise in teaching children with special educational needs and disabilities (SEND). In some cases, local authorities fund children with education, health and care (EHC) plans to attend independent special schools.[2]

1.2 Statistics

Approximately 6–7% of pupils in the UK are educated in independent schools.[3] This equates to around 560,000 to 570,000 pupils.

The Independent Schools Council (ISC), a member association for independent schools, covers 1,411 schools; around 86% of independent school pupils attend a school that is part of the ISC.[4] Every year the ISC conducts a census of its members. The 2024 survey found that in its member schools:[5]

  • The number of pupils decreased slightly between 2023 and 2024, by 0.1%.
  • 20% of pupils received support for SEND. Of these, 6.9% had an EHC plan.
  • There were the greatest number of schools and pupils in London, at 318 schools and 116,133 pupils. This was followed by the South Central region then the South East. Wales and the North East had the fewest, at 19 schools and 7,304 pupils and 17 schools and 7,420 pupils respectively.
  • 5% of pupils received some type of fee support from the school in 2024. 7.8% received means tested support and 10.6% received non-means tested scholarships. The total value of means-tested fee support provided by schools was £539mn in 2024.
  • The total number of non-British pupils whose parents lived abroad was 26,195 in 2024. This represented 4.7% of all pupils.

There is significant variability in the independent school sector. The size of ISC schools ranges from fewer than 50 pupils to nearly 2,500.[6] Half of ISC schools have fewer than 300 pupils and around half are non-selective. Fees range from less than £10,000 to over £30,000 per year.[7]

Average annual fees, excluding boarding costs, were £15,200 net of bursaries and scholarships in 2022–23.[8] This was 90% more than average state school spending per pupil, which was £8,000. Three quarters of the children attending independent schools come from families in the top three income deciles, and most of these from the top decile.[9]

Independent special schools represent a third of special schools and educate 5% of pupils with EHC plans.[10] In 2022, local authorities placed over 20,000 children and young people in independent special schools. Most of the funding for these schools comes from the state.

1.3 Impact

Economy and public finances

In December 2022, the consultancy Oxford Economics published ‘The impact of independent schools on the UK economy’, a report commissioned by the ISC. The report found that ISC-affiliated schools contributed £14.1bn to the UK economy in 2021.[11] Extrapolating this to all independent schools, it estimated the total economic impact to be £16.5bn. This is measured in gross value added (GVA). Of the £14.1bn GVA contributed by ISC schools, £6.9bn came from the employment of teaching and support staff. Economic benefit is also generated by the money independent schools spend on construction, IT support, equipment, catering and self-employed music and sport instructors, among other things.[12] It estimated that this amounted to £1.8bn in 2021. Oxford Economics argued that a further £5.5bn was generated from spending by teachers and support staff.

The fact-checking website Full Fact has highlighted that not all of this economic impact would disappear if independent schools ceased to exist.[13] It states that if parents did not spend money on fees they would spend it on other things, which would also generate economic benefit. In addition, teachers and other staff would find jobs elsewhere.

It has also been argued that independent schools save taxpayers money because the children attending them do not have to be educated by the state. Oxford Economics found that this saving amounted to £3.8bn from ISC schools. This figure included teaching and other recurrent costs as well as capital costs associated with the use of land, construction of school buildings, and property maintenance.[14] Full Fact has stated that this calculation assumes all these pupils would need to be educated in newly built school sites, “which wouldn’t necessarily have to be the case”.[15] Oxford Economics states that their calculation does not include central administrative costs and “is therefore likely to slightly understate the full amount of the saving”.[16]

The Institute for Fiscal Studies (IFS) has highlighted that the cost to the government of educating pupils who would otherwise attend independent schools would be less than the approximately £8,000 per year average state school spending per pupil.[17] This is because large elements of state school funding are targeted at social deprivation and low prior attainment. Factoring in this reduced need and average capital spending over the last 20 years, the IFS estimates that each additional pupil would require, on average, between £4,900 and £6,900 per year, with a central estimate of £5,900 per year.

Social impact

Several studies have looked at the extent to which attendance at independent school influences careers and earnings. In 2022 the IFS published research undertaken by Professor Francis Green of University College London’s Institute of Education as part of the ‘Deaton review of inequality’, funded by the Nuffield Foundation.[18] This examined how the division between state and independent schools affects inequality in the UK. It found that once socio-economic background and family income and wealth were accounted for, academic outcomes were better for pupils attending independent schools.[19] Professor Green argued that “this private school education premium helps to explain the huge successes in accessing high-status universities and jobs”. He cited research showing that even after controlling for other factors, attendance at independent schools is correlated with employment in a high-status occupation.[20]

A 2019 report by the Sutton Trust, a social mobility think tank, and the government’s Social Mobility Commission found that a large proportion of those in the top levels of politics, business and the media had been educated at independent schools.[21] Among other things, it found:[22]

  • 39% of the government’s cabinet at the time of writing had been privately educated.
  • 48% of FTSE 350 CEOs were educated at independent schools in the UK, with more educated privately abroad.
  • 44% of newspaper columnists had attended independent schools.
  • 59% of permanent secretaries and 52% of diplomats were privately educated.

Footballers (women and men), members of the shadow cabinet, local government CEOs and university vice chancellors had some of the lowest percentages of members who had been to independent schools, ranging from 2% (female footballers) to 16% (university vice chancellors).

Professor Green states that there is little evidence that attendance at independent schools is correlated to non-academic outcomes such as subjective well-being.[23]

Some have argued that the high proportion of independently educated people in high earning and high status professions means there are fewer opportunities for those who attended state schools to progress into these jobs. Professor Green explains this reasoning, “commonly advanced in political sociology”:

With private schooling sorting access to scarce university places and to scarce entry-level vacancies in jobs with good career prospects, the advantages from a private schooling are disadvantages for those with state schooling. To the extent that this is true, private schooling has a private benefit but no social benefit, and underpins a sub-optimal allocation of talent to jobs in society.[24]

 The ISC has highlighted that many students receive means-tested fee support, meaning that they can benefit from the advantages of independent schooling even though their families could not afford the fees on their own.[25] It states that in 2024, the average means-tested bursary was worth £12,909 and 9,328 pupils paid no fees.

In addition, some independent schools have formed partnerships with state schools. Under these schemes, independent schools share knowledge, resources and experience.[26] Areas for collaboration suggested by the government include:

  • providing training
  • sharing teachers in shortage subjects
  • helping with curriculum design
  • broadening the curriculum, such as forming mixed school classes in subjects such as languages and classics
  • taking a leading role on the governing body of a school
  • providing senior and strategic leadership support
  • providing academic support and mentoring for young people applying or preparing for university
  • working with local authorities to open up opportunities to vulnerable and looked after children, such as offering boarding or day places or extra-curricular activities

The government also encourages independent schools to sponsor academy schools.

The ISC’s 2024 census found that 1,068 ISC schools had at least one partnership with a local state school.[27] On average, each of the 1,068 schools worked with approximately 11 state-funded schools and 403 state-funded pupils. The most common partnership activities were:[28]

  • playing sporting fixtures with or against state schools
  • hosting joint sporting events
  • inviting pupils to attend lessons, workshops or other educational events
  • sharing knowledge, skills, expertise and experience
  • inviting pupils to attend music lessons or performances
  • inviting pupils to attend drama classes or performances
  • hosting joint musical events
  • having members of staff serving as governors at state schools
  • participating in teacher training events with local state school teachers

In 2023 the Private Education Policy Forum, a think tank that aims to “reduce inequalities of access, outcomes and resources for pupils as these arise from private education”, published research concerning partnerships between independent and state schools conducted by Tom Fryer of the University of Manchester.[29] The research, based on freedom of information requests of a random sample of state schools to which 277 responded, found:

  • no schools could provide evidence of evaluating the impact of partnership activity
  • “superficial pupil events”, primarily one-off activities, comprised the majority of partnerships
  • a small proportion of pupil events were more sustained or targeted, such as summer schools or mock university entrance interviews
  • 1% of schools reported partnerships targeted at disadvantaged pupils
  • partnerships were disproportionately in London and the South East

The report argued:

Overall, given the vast majority of private-state school partnerships are relatively superficial associations, rather than more collaborative activities with evidenced impact on pupils or staff, it is unlikely that they contribute substantially to the public benefit.[30]

2. Labour Party VAT proposal

The Labour Party’s 2019 general election manifesto said that if elected the party would introduce policies to change the tax treatment of “elite private schools”, and would consider their role in the education system:

We will close the tax loopholes enjoyed by elite private schools and use that money to improve the lives of all children, and we will ask the Social Justice Commission to advise on integrating private schools and creating a comprehensive education system.[31]

In a debate in 2023, Bridget Phillipson, shadow secretary of state for education, said that if the Labour Party were in government it would take away the current exemption from VAT and business rates for independent schools.[32] A spokesperson said the party would use the money raised to “fund desperately needed teachers and mental health counselling in every secondary school”.[33] In a February 2024 debate on the proposal, Helen Hayes, shadow minister for education, said:

The Labour Party believes in parental choice, but the conversation today has to take place with fairness in mind. In 2022–23, average independent school fees were £15,200, but average state school spending per pupil was £8,000. The gap in funding between independent and state school spending has more than doubled since 2010. With the £1.3bn of funding that would be raised each year from our measure, we could significantly increase school spending, allowing the government to drive high standards across our state schools too.[34]

She argued that the government did not believe “the scaremongering that there will be an exodus of pupils into the state sector”, but that independent school pupils moving to state school would not impose significant costs on the government because “our state schools would be able to cope with an increase in their numbers”. She said that “across England, overall pupil numbers are due to decline by at least 100,000 per year until 2030; the total drop is higher than the number of children currently attending private schools”.

This was reported as a change in policy from its 2021 announcement that it would not allow independent schools to claim charitable status.[35] However, members of the shadow cabinet have said that the party’s policy has always been to remove “unfair tax breaks” for private schools and that this could be done more quickly by changing the VAT exemption without removing the schools’ charitable status.

At present, independent schools do not have to charge VAT on their fees because there is an exemption for the supply of education.[36] This also means that independent schools cannot claim VAT back from their suppliers. The IFS predicts that removing tax exemptions from independent schools, of which VAT forms the significant majority, would result in an effective VAT rate of 15% “after allowing for input deductions, likely VAT on boarding fees and exemptions for specialist provision”.[37]

Tax is a reserved area; therefore, the removal of the VAT exemption would apply to independent schools across the UK. The spending of any additional funds would, however, be a matter for the devolved nations because education policy is devolved.

3. Impact of proposed changes

3.1 Pupil numbers

Assessments vary as to the extent the removal of the VAT exemption would affect pupil numbers. The IFS has attempted to model this scenario, while others have surveyed schools and parents to try to understand the potential impact. Declining pupil numbers would impact the amount raised from the tax and could result in the closure of smaller schools. It would also impact the extent to which the state would have to pay to educate pupils who would attend state schools instead of independent schools. The impact of the policy on public finances is discussed in section 3.2 below.

A 2018 report by the schools consultancy Baines Cutler, commissioned by the ISC, estimated that removing the VAT exemption from independent schools would result in a “drop-off” of 134,800 pupils over the first five years.[38] It estimated that 17.1% of pupils would have left independent school and not been replaced in this time.[39]

The 2023 IFS analysis argued that the effect of the Labour Party’s proposed VAT changes on the number of pupils attending independent schools is “clearly uncertain” and subject to significant error without direct evidence.[40] It said surveys should not be heavily relied upon, as “how people respond to a survey is rarely a good guide to how they behave in practice”. It argued that parents’ responsiveness to fee increases is low because the proportion of children in independent schools has remained steady in recent years despite significant fee increases. It also stated that evidence suggests that parents who choose to send their children to private schools tend to be “concentrated at the very top of the income and wealth distributions and such individuals tend to have relatively complex income and wealth streams”. The IFS also highlighted that the effects of the policy would be more likely to be felt in the medium and long terms, because many parents would be reluctant to withdraw pupils who are currently in school but more would choose not to enrol their children in the first place.

The IFS states that the evidence that does exist “points to relatively low responsiveness”. It estimates an effective VAT rate of 15% on fees would lead to a 3–7% reduction in independent school pupil numbers, a fall of about 20,000 to 40,000 pupils, which would be spread over time.

In April 2024, the Times reported on the results of a survey of high net worth individuals conducted by Saltus, a financial planning firm.[41] 71% of respondents to the survey said that rising school fees would have an impact on their choices around private schooling in the future. It found that 26% of parents in its survey said they “would have to remove their children from independent school if VAT was imposed”.

A statement released by the ISC in advance of the publication of their 2024 census, said that Labour’s VAT proposals had already resulted in a decrease in the number of children joining independent schools.[42] It found that enrolments at independent schools for the 2023–24 academic year fell by 2.7%. This was the largest annual drop since 2011, when the ISC began collecting data on new starters.

3.2 Public finances

Estimates about the extent to which pupil numbers in independent schools would decrease in response to the proposed tax change play a large part in the effect it would have on public finances. The amount raised from the tax would be offset against the extra cost to the government of educating more pupils in the state sector.

In 2023, Ms Phillipson said that charging VAT on independent school fees and imposing business rates would raise £1.7bn.[43] In a recent parliamentary debate, Helen Hayes, shadow minister for education, said the VAT measure would raise £1.3bn.[44]

In the 2024 debate, Ms Hayes cited the IFS research into the tax effect of the proposed VAT change. This concluded that the effect of the change would be a net benefit to the government of £1.3bn– £1.5bn per year in the medium to long term.[45] It argued that “any reduced revenue from VAT on private school fees will likely be made up for by higher VAT revenues on other goods and services, holding overall consumer spending constant”. However, it highlighted many areas of uncertainty, including possible changes to work incentives, the potential for tax avoidance, and different effects on different sized and types of schools. There is also uncertainty about how the marginal cost of educating former independent school pupils in state schools would interact with a forthcoming demographic drop in the number of school children.

The 2018 Baines Cutler report estimated that removing the VAT exemption would result in a net cost to UK taxpayers “for very many years, maybe permanently”.[46] It stated that every student that left independent school would result in an ongoing cost to the government of £10,000 per year and a one-off cost of £10,000, compared to a scenario where no pupils left the sector. The ongoing costs would come from lost VAT (from schools claiming back VAT on their purchases and pupils leaving the sector) and the cost of educating those pupils in the state school system. The £10,000 one-off cost would be for capital investments needed to accommodate more pupils in state schools.[47]

The Adam Smith Institute, a free-market think tank, also estimated that removing the VAT exemption for independent schools “could raise no money at all” and could “end up costing £1.6bn”.[48] The Adam Smith Institute argued that the IFS’s research was, as it acknowledged, based on limited evidence and assumed “only a limited number” of children would move from the independent to the state sector. It challenged many of the IFS’s assumptions outlined in its report, and said that how families have responded to price changes in the past is not a good predictor of how they would respond to further increases in the future.[49] It said policymakers should take account of the possibility of 15–25% of pupils leaving independent schools.[50] The Adam Smith Institute agreed with the IFS’s estimate of a cost to the government of £5,900 to educate pupils who would otherwise attend independent schools. Taking into account further variables, such as reduction in independent schools’ expenditure, it estimated that:[51]

  • In a migration scenario of 5%, there would be a net fiscal impact of £1.02bn.
  • If there was between 10% and 15% migration, the tax would generate no net revenue.
  • In a 25% migration scenario, the tax could generate a loss of £1.58bn.

3.3 School closures

Independent school associations and individual schools have argued that many small independent schools would have to close if the VAT exemption was removed. The ISC has stated:

Ultimately, the policy would threaten the survival of the smallest independent schools, which operate on tight margins and without large endowments. Most independent schools have fewer than 400 pupils on roll, and these small schools, serving their local communities, would be at risk of closure.[52]

In an interview discussing the advantages and disadvantages of the potential change, the Guardian’s education editor, Richard Adams, also said smaller schools would suffer from the policy:

There are actually a large number of private schools which look nothing like [high profile schools with high fees, such as] Eton and Winchester. They’re very small, community-run or run by parents or particular religious groups, for example. And ironically, they may be affected the worst by this.[53]

Mr Adams highlighted that while the Labour policy would exempt special-needs schools, others such as a “a small Welsh-language primary school in London […] or local Muslim or Jewish schools, whose fees may be just a few thousand pounds a year” would struggle if VAT were added.

A poll conducted for the Telegraph found that “almost three quarters of private schools fear they would be forced to close in the next five years if a Labour government introduced VAT”.[54] A spokesperson for the Labour Party responded:

Labour will invest in delivering a brilliant state education for all our children, funded by ending tax breaks for private schools.

Independent schools do not have to pass this change onto parents, and a high-profile independent school [Ampleforth College in York] has already said they will not be doing so.

4. Government response

On 28 September 2023 the prime minister, Rishi Sunak, said the Labour Party’s policy “illustrates that they don’t understand the aspiration of families like my parents who were working really hard”.[55] He said the party “don’t understand the aspiration that people have to provide a better life for their kids” and that they “want to punish them for that as part of some class war”.

Responding for the government in the February 2024 House of Commons Westminster Hall debate on the proposed measure, Financial Secretary to the Treasury Nigel Huddleston argued that independent schools did not detract from the government’s spending on state education; he highlighted that school funding was £57.7bn in 2023/24 and this would rise to £59.9bn in 2024/25, “the highest ever real-terms spending per pupil under the Conservatives”.[56] He said that the “independent sector is a major contributor to our ecosystem” and that “the innovation in the private sector can also help the state sector”.[57] Mr Huddleston argued that the “full knock-on impact” of removing the VAT exemption had not been considered. He said that “large numbers” of private school pupils would move into the state sector, imposing costs on the public.

Cover image from Pixabay.

This briefing has been updated to reflect the findings of the Independent Schools Council’s 2024 census, published on 17 May 2024.


  1. HM Government, ‘Types of school: Private schools’, accessed 9 May 2024. Return to text
  2. HM Government, ‘Special educational needs and disabilities (SEND) and alternative provision (AP) improvement plan: Right support, right place, right time’, March 2023, CP 800, p 87. Return to text
  3. Institute for Fiscal Studies, ‘Tax, private school fees and state school spending’, 11 July 2023. Return to text
  4. Independent Schools Council, ‘ISC census and annual report 2024’, 17 May 2024, p 4; and Independent Schools Council, ‘Research’, accessed 20 May 2024. Return to text
  5. Independent Schools Council, ‘ISC census and annual report 2024’, 17 May 2024, pp 4–51. Return to text
  6. Independent Schools Council, ‘Sector info’, accessed 9 May 2024. Return to text
  7. Institute for Fiscal Studies, ‘Tax, private school fees and state school spending’, 11 July 2023. Return to text
  8. As above. Return to text
  9. Francis Green, ‘Private schools and inequality’, IFS Deaton Review, 2022, p 8. Return to text
  10. HM Government, ‘Special educational needs and disabilities (SEND) and alternative provision (AP) improvement plan: Right support, right place, right time’, March 2023, CP 800, p 87. Return to text
  11. Oxford Economics, ‘The impact of independent schools on the UK economy’, December 2022, p 4. Return to text
  12. As above, p 5. Return to text
  13. Full Fact, ‘Front-page error from the Times about how much private schools save taxpayers’, 3 May 2019. Return to text
  14. Oxford Economics, ‘The impact of independent schools on the UK economy’, December 2022, p 6. Return to text
  15. Full Fact, ‘Front-page error from the Times about how much private schools save taxpayers’, 3 May 2019. Return to text
  16. Oxford Economics, ‘The impact of independent schools on the UK economy’, December 2022, p 6. Return to text
  17. Institute for Fiscal Studies, ‘Tax, private school fees and state school spending’, 11 July 2023. Return to text
  18. Francis Green, ‘Private schools and inequality’, IFS Deaton Review, 2022. Return to text
  19. As above, p 2. Return to text
  20. As above, p 3. Return to text
  21. Sutton Trust and Social Mobility Commission, ‘Elitist Britain 2019’, 24 June 2019. Return to text
  22. As above, pp 4–6. Return to text
  23. Francis Green, ‘Private schools and inequality’, IFS Deaton Review, 2022, p 2. Return to text
  24. As above, p 5. Return to text
  25. Independent Schools Council, ‘ISC census and annual report 2024’, 17 May 2024, p 4. Return to text
  26. Department for Education, ‘Guide to setting up partnerships’, 19 October 2022. Return to text
  27. Independent Schools Council, ‘ISC census and annual report 2024’, 17 May 2024, p 22. Return to text
  28. As above, p 23. Return to text
  29. Tom Fryer, ‘Benefiting the public? A study of private-state school partnerships’, Private Education Policy Forum, August 2023. Return to text
  30. As above, p 3. Return to text
  31. Labour Party, ‘Labour Party manifesto 2019’, November 2019, p 40. Return to text
  32. HC Hansard, 11 January 2023, cols 568–9. Return to text
  33. BBC News, ‘Labour drops plan to strip public schools of charitable status’, 28 September 2023. Return to text
  34. HC Hansard, 21 February 2024, col 324WH. Return to text
  35. BBC News, ‘Labour drops plan to strip public schools of charitable status’, 28 September 2023. Return to text
  36. Value Added Tax Act 1994, sch 9. Return to text
  37. Institute for Fiscal Studies, ‘Tax, private school fees and state school spending’, 11 July 2023. Return to text
  38. Baines Cutler, ‘VAT on school fees’, October 2018, p 8. Return to text
  39. As above, p 21. Return to text
  40. Institute for Fiscal Studies, ‘Tax, private school fees and state school spending’, 11 July 2023. Return to text
  41. Nicola Woolcock, ‘Quarter of parents would quit private schools if VAT added to fees’, Times (£), 19 April 2024. Return to text
  42. Nicola Woolcock, ‘Labour’s VAT plans blamed for fall in private school entries’, Times (£), 10 May 2024. Return to text
  43. HC Hansard, 11 January 2023, col 568. Return to text
  44. HC Hansard, 21 February 2024, col 323WH. Return to text
  45. Institute for Fiscal Studies, ‘Tax, private school fees and state school spending’, 11 July 2023. Return to text
  46. Baines Cutler, ‘VAT on school fees’, October 2018, p 12. Return to text
  47. As above. Return to text
  48. Adam Smith Institute, ‘Applying VAT to independent school fees could cost as much as £1.6bn’, 17 March 2024. Return to text
  49. Adam Smith Institute, ‘Short term thinking: Analysing the effect of applying VAT to school fees’, 17 March 2024, p 11. Return to text
  50. As above, p 23. Return to text
  51. As above, p 3. Return to text
  52. Independent Schools Council, ‘ISC statement in response to Labour’s independent school tax proposals’, 28 September 2022. Return to text
  53. Esther Addley, ‘Thursday briefing: Can ending tax breaks for private schools smash the ‘class ceiling’?’, Guardian, 13 July 2023. Return to text
  54. Louisa Clarence-Smith, ‘Nearly all private schools plan to increase fees Telegraph poll reveals’, Telegraph (£), 24 March 2024. Return to text
  55. Aletha Adu and Richard Adams, ‘Rishi Sunak attacks Labour plan for VAT on private school fees’, Guardian, 28 September 2023. Return to text
  56. HC Hansard, 21 February 2024, col 325WH. Return to text
  57. HC Hansard, 21 February 2024, col 325WHHC Hansard, 21 February 2024, col 325WH. Return to text