UK private school exodus expected on higher VAT, but experts say Hong Kong families unfazed

Rachel Reeves, the chancellor of the Exchequer, revealed on Monday a proposal that would introduce 20 per cent VAT on private school fees from January 1, 2025. VAT will also apply to prepayment of fees, an arrangement some private schools may have offered parents in hope of avoiding the tax.

The consultation of the proposal will be open for seven weeks until September 15, during which the UK government will consider stakeholder feedback.

A government document published after the Chancellor’s speech revealed that the UK’s authorities expected the new 20 per cent tax will drive some private school parents away.

“The government recognises that these policy changes may lead to increased costs for some parents and carers, and that some pupils may subsequently move into the state education sector,” it said.

But it added the number of pupils who might switch schools as a result of these changes represent a very small proportion of overall pupil numbers in the state sector.

“Even if pupil displacement is somewhat above the Institute for Fiscal Studies’ estimated range of up to 40,000, this is still likely to represent less than one per cent of total UK state school pupils of more than 9 million,” it said.

There are over 560,000 students in British independent schools, with about 11.3 per cent were from overseas.

The government is therefore confident that the state sector will be able to accommodate any additional pupils and that there will not be a significant impact on the state education system as a whole,” the authorities noted.

Julie Robinson, the CEO of Independent Schools Council, in June and July said in several videos posted on its Facebook page that a sudden increase in fees would make independent provision unaffordable for many families.

“This would have a knock-on effect on the already stretched state sector, as pupil movement would intensify competition for places,” she said.

She added the proposal will push a number of schools into deficit or even closure as small independent schools operate on very tight margins, while noting that some parents choose independent schools for their kids because of special educational needs, disabilities and religion.

Samuel Chan Sze-ming, founder of Britannia StudyLink, a Hong Kong business mainly helping students to enrol in British private schools, said he expected there was little impact on the number of students signing up for independent schools in the UK as most of them were wealthy enough to afford the price hike.

“The proposal has been floated for some time and many parents expected that it will be announced soon and are so ready for it,” he said.

He added that the impact would not be too big and many parents deciding to send their kids overseas were able to afford it.

“I do not think all schools will increase their school fees by 20 per cent immediately and shift all the burden to students. Instead, I think it would be increased in phases with some raising tuition fees by three per cent,” the consultant said.

He said the education quality of the UK’s private schools were still competitive when compared to other countries and attracted parents from Hong Kong, and the city’s currency was still strong when compared to the pound.

He added those top private schools, like Eton College or Harrow School, in the UK would by no means be affected by the proposal, while those small institutions located in remote or coastal areas would be affected the most.

Leo Chan Tsz-chung, founder of Leo Education specialising in British independent schools, said he believed the proposal would deter some parents who were planning on sending their kids to Britain.

“Now, they may have second thoughts or delay their plans as the fees are going to rise. But I think the schools will not add the fees in one go but will do it in phases,” he said.