Economists debunk Tory claim that axing private school tax breaks would lead to exodus

Labour's bonfire of private schools' tax breaks would raise £1.5billion, economists found.

The Institute for Fiscal Studies debunked Tory claims the move would lead to an exodus of pupils into the state system.

Keir Starmer has pledged to axe tax perks enjoyed by fee-paying schools and use the cash to improve normal schools instead.

But Rishi Sunak and his Cabinet, crammed full of privately-educated Tories, have rejected the idea.

Private schools including Eton College currently do not have to charge VAT on fees. In England and Wales, they also get at least 80% relief on business rates.

Labour's Bridget Phillipson has pledged to raise standards in state schools (Getty Images)

The Institute for Fiscal Studies found removing these tax breaks would push 3%-7% of private pupils back into the state school sector. But even taking into account extra annual spending of £100million-£300m for this influx of 20,000 to 40,000 pupils, the public purse would still be £1.3bn-£1.5bn better off per year, the IFS said.

In a speech last week, Mr Starmer said money raised from removing tax breaks on private schools would be used to give primary schools cash for "world-class early language innovation". The party has previously said the funds raised from ending tax breaks for private schools would also be used to help recruit more than 6,500 new teachers into the state sector.

Luke Sibieta, IFS research fellow and author of the report, said: "Labour's proposals to remove tax exemptions are likely to raise an extra £1.3billion to £1.5billion after allowing for exemptions, deductions and extra school spending to cater for any pupils moving to the state sector. The evidence suggests higher fees are likely to have a weak effect on demand.

"As it is, we expect that the change in private school attendance levels will be small. This leads to surer increases in tax revenues and less need for additional public spending on state schools.”

Bridget Phillipson, Labour's shadow education secretary, said: "This analysis reinforces the fact that all of Labour's policies are fully-costed and fully-funded, because we take fiscal responsibility seriously. The Conservatives have crashed the economy and have no plan for growth which will mean we face tough choices in government.

"Labour will fund our fully-costed plans to drive high and rising standards in our state schools by ending private schools' unjustifiable tax breaks."

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