Ways to cut the deficit without really trying, part 94: tax school fees

By VoteRedGoGreen

Watching the Tory conference, I’m astonished by some of the contortions being made to cut the deficit, and still have enough left over for their massive Inheritance Tax giveaway to millionaires. Freezing public sector pay, for example, may get them plaudits from Daily Mail columnists, but it strikes me that setting the cutoff for the freeze at £18,000 per year includes a lot of people who earn below the national average wage. This means that caretakers, cleaners and catering staff will see their pay fall in real terms – and if you’re in one of these ancillary jobs, how does your job differ whether you’re in the state or private sector?

The Tories are only interested in cuts because they’ve wanted them all along, and because they are hard-wired into a low-tax mindset.

However, there are new taxes that we could consider that would have no effect on the lives of the many, whilst taking chunks out of the deficit so that public services can continue their work.

Currently, £5.2bn per year is spent by 7% of the wealthiest families on private school fees. Not only this, but private schools in effect receive a subsidy from the taxpayer because they are able to register as charities – often on very shaky foundations.

I should make clear that I am in general an opponent of private education, and think that in a perfect world they would not exist; however, outlawing them is arguably illegal under the Universal Declaration of Human Rights, and is certainly something that any government would shy away from. Whatever the merits of abolition, private schools in Britain are here to stay.

Many people disagree with me, even within the Labour Party – which is fine. Nevertheless, what is unarguable is that private education is a luxury good in any meaningful sense of the term. In raw microeconomics, a “luxury” is a good where demand rises disproportionately as income rises – who can doubt that this is true of private schooling? Even in layman’s terms, it’s hard not to agree that private schooling is a luxury, if only because a free alternative is available to everyone. It certainly isn’t a “necessary” or “staple” good, like housing, food or clothing.

We should aim to tax those things which are luxuries in preference to those things that are necessities, and we should also aim to tax those things which are deemed to be damaging – hence so-called “sin taxes” on booze and tobacco.

I know that it’s not a universally popular view, but I would make a case that private education is, in one view, damaging: it skews the playing field for university places and jobs for all children, because the quality of education provided is all too often clouded by social cachet, personality traits received, and by pure snobbery; it deprives the majority of children of resources, particularly good-quality teachers and facilities which are held down in the private realm; and it exacerbates social inequalities generally, providing opportunities for some on the basis of parental income rather than on merit alone.

A 25% tax on school fees would raise at least £1.2bn, on the figures presented above; not only that, but if charitable status were removed, fees would almost certainly have to be higher anyway. So – assuming that the same number of parents wished to educate their children privately – there would be a higher amount of money spent, and so a higher tax base. £1.2bn doesn’t wipe out the deficit, but it’s a significant lump chewed off.

I know what will be said in the comments: “It’s an assault on the middle class!”

No it isn’t – how could 7% of people spending money on something which is plainly one of the most expensive luxuries be “the middle class”? There will be examples, too, of “poorer children” who will be hit, because they have achieved some miracle and been able to attend private school. There may be such examples, but they are isolated and one thing they don’t amount to is a trend. Targeting school fees is one of the clearest ways possible of hitting the very wealthiest.

And there will be assaults on the quality of state education in the UK, but don’t believe it: Britain has one of the best performing state education systems in the developed world. It is a myth peddled by the press and swallowed by pushy wealthy parents that the majority of comprehensives are sink institutions of violence, mediocrity and unhappiness.

Taxing school fees is just one way that we can cut the deficit without really trying, and it certainly doesn’t hit the hard-working, hard-pressed majority like George Osborne’s slash and burn programme does.