Labour’s plan to impose VAT on private school fees has come under scrutiny after it emerged that a major report justifying the policy was prepared by a close minister friend.
Matthew Pennycook, minister in the Department for Levels, Housing and Communities, is said to have been the best man at the wedding of Luke Sibieta, who wrote the Institute for Fiscal Studies (IFS) article in support of Labour’s VAT proposal.
The report, which found that Labour’s VAT policy would have minimal impact on state schools and could generate up to £1.5 billion for the Treasury, has been frequently cited by Sir Keir Starmer and other ministers in defense of the measure. VAT on private school fees, along with an end to business rates relief for private schools, is expected to come into effect in January 2025.
Mr Sibieta, a researcher at the IFS with almost two decades of experience, suggested the policy would likely force around 20,000 to 40,000 students, or 3% to 7% of the private school population, into the state sector. His report also predicted a net gain of £1.3 billion to £1.5 billion to the public finances from the removal of tax exemptions.
However, critics have questioned the close personal relationship between Mr Sibieta and Mr Pennycook, whose department will be involved in implementing tax policy. Mr. Pennycook and Mr. Sibieta reportedly lived together, and Mr. Pennycook was best man at Mr. Sibieta’s wedding, raising concerns about potential conflicts of interest.
Opponents of the VAT proposal, including the Independent Schools Council (ISC), have warned that the number of students leaving private schools could be much higher than Mr Sibieta’s estimates, meaning the policy could result in far less revenue generates than expected. Figures from the ISC show that private school enrollments have already fallen by 10,000 students by September 2024, suggesting Labor’s predictions may be too optimistic.
Julie Robinson, ISC’s chief executive, said: “This data couldn’t be clearer: parents are already removing their children from independent schools as a result of the government’s plans to charge parents VAT. This is just the tip of the iceberg and many small schools are already at risk of closure.”
Mr Sibieta has defended his analysis, pointing to demographic factors such as a falling birth rate, which could also affect private school enrollments. He emphasized that it is still too early to draw firm conclusions and that the full impact of the policy may not be clear for two years.
The Conservative Party is expected to use an Opposition Day debate to call for a delay in the VAT policy until 2028 in areas where state schools are already approaching capacity. Damian Hinds, the shadow education secretary, argued the policy could lead to a local crisis at school sites. He said it would “reduce choice, increase class sizes and be disruptive for teachers and students.”
As the debate over VAT policy intensifies, the government is facing calls from education unions and tax associations to delay its implementation until at least September 2025. The IFS has defended the impartiality of its work, with a spokesperson stating: “The IFS is a politically independent research organization committed to the highest standards of empirical analysis.”
Despite these assurances, the revelations about the close personal relationship between Mr Sibieta and Mr Pennycook have raised concerns about the impartiality of the report underlying Labour’s tax plans, which could have significant implications for both private and state education in Great Britain.