Labour’s controversial VAT raid on private school fees is facing growing criticism after new claims that more than 65,000 children may already have been pushed out of independent education.
The figure, highlighted by the Adam Smith Institute and reported by the Daily Mail, would amount to roughly one in ten of the UK’s 650,000 private school pupils, far above the Government’s original estimate that around 17,000 children would leave the sector.
The warning has intensified accusations that Labour’s flagship education tax was driven more by ideology than sound economics.
Joanna Marchong of the Adam Smith Institute told the Mail on Sunday that more than 25,000 pupils had already been displaced by last September and warned the total could now be “more than one in ten private school pupils nationwide.”
Critics say the policy is increasingly exposing serious flaws in Labour’s original assumptions. The ASI has repeatedly argued that high levels of pupil migration could wipe out the very tax revenues ministers promised would fund improvements in state education.
In a major policy paper examining VAT on school fees, the institute warned that once migration rates rise beyond 10 per cent, the policy risks generating no net revenue at all because of the cost of absorbing additional pupils into the state sector.
The institute’s analysis argued that at sufficiently high migration levels, the policy could even become a net loss to the Treasury.
That criticism now appears increasingly relevant as independent schools continue to close across the country. According to figures cited by the Mail on Sunday, 115 mainstream private schools have shut since Labour came to power.
Historic institutions are already beginning to disappear. Thetford Grammar School in Norfolk recently announced it would close, with reports warning the move could cost the local economy more than £2 million annually.
Opponents of the policy argue the burden is not falling on the super-rich, but on middle-income families who stretched finances to access independent education, often sacrificing holidays, savings, or working additional hours to pay fees.
The ASI has also criticised ministers for relying too heavily on modelling from the Institute for Fiscal Studies while failing to adequately account for wider economic effects, school closures, labour market impacts, and pressures on local state schools.
Its submissions to government warned that evidence underpinning Labour’s projections was “old” and “thin”, echoing concerns previously acknowledged by the IFS itself.
The debate has become even more politically awkward for ministers because private special schools remain effectively insulated from the VAT policy. Local authorities, which fund the overwhelming majority of SEND placements in such schools, are able to reclaim VAT costs directly from government.
Critics say the result is a contradictory system in which ordinary working and middle-class families are taxed for choosing independent education, while councils continue paying tens of thousands of pounds per pupil for private SEND provision because state capacity is inadequate.
The Department for Education has defended the policy, insisting it will eventually raise more than £1.8 billion annually by the end of the decade and arguing that fears of overwhelming pressure on the state sector have “failed to materialise”.
But with closures mounting, pupil departures accelerating, and fiscal concerns growing louder, Labour’s education tax is increasingly becoming a political liability, and one critics believe could ultimately damage both independent and state education alike.
