Dr Michael Gray is the Chairman of Hereford & South Herefordshire Conservative Association and the Executive Headmaster of a 3-18 independent school in the West Midlands.
When Mark and Julia sat down to review their finances, the conclusion was sadly obvious: independent education was no longer affordable to them.
As two hard-working parents, making real sacrifices and with support from the grandparents, they had just about managed to keep their two children at the local independent school. The introduction of VAT on school fees in January 2025 changed everything. Eighteen months on, their experience is no longer exceptional. In fact, it’s become very typical of ordinary middle-class families across the UK.
Now that the policy of taxing independent education is well into its second year, it is time for an honest evaluation. A future Conservative Government should approach this divisive issue based on reality rather than rhetoric, and the evidence now available makes that task considerably easier.
The philosophical case for independent education is a conservative one at its core. We value the primacy of the family and the importance of freedom. Independent education is an expression of parental liberty and the right to choose what is best for one’s child. While many families cannot afford it, this should not diminish the freedom of those who can. Rewarding effort and enabling excellence lie at the heart of traditional conservative meritocracy. A pluralistic and liberal society depends upon choice and the meaningful limitation of state monopolies. The attacks on the independent sector through both VAT and the removal of business rate relief represent a de facto assault on individual freedom, family autonomy and parental choice, as well as a deliberate push towards educational homogeneity and an expanded role for the state.
Notwithstanding the stark ideological divide between conservatism and socialism, Labour’s arguments deserve to be evaluated on their merits and now that the policy is well into its second year of implementation, it can be judged against the available evidence.
Fairness in the tax system?
One justification for VAT on school fees and for the removal of business rate relief is that it would restore fairness to the tax system. The argument, advanced by Bridget Phillipson among others, is that independent schools enjoyed a “tax advantage” amounting to a hidden state subsidy for the wealthy. This claim sounds convincing, but it is, in fact, a fiscal illusion.
Fairness in taxation requires consistency, the avoidance of double taxation, and crucially, not penalising choices that actually save the public money. Parents who send their children to independent schools have already paid income tax and National Insurance on the earnings used to fund those fees. They receive no rebate or reduction in their contribution to state education – a service they have chosen not to use. The state is therefore paid twice: once through general taxation that funds maintained schools, and again through VAT on a private alternative that costs the taxpayer nothing. To describe this as the elimination of a subsidy is disingenuous. It is the creation of a surcharge on self-sufficiency.
The removal of business rate relief for charitable independent schools has attracted far less attention but is worthy of equal scrutiny. Schools with charitable status demonstrably serve a public benefit through bursaries, community use of facilities and partnerships with local state schools. This status is assessed by the Charity Commission and is not a loophole. Withdrawing rate relief on the grounds that these schools are underserving of their charitable status either implies that the Charity Commission is wrong, or that the Government is applying a different standard to this category of charity on ideological grounds. Neither conclusion reflects well.
There is also a broader economic dimension. Applying VAT to education treats schooling as a luxury consumable rather than an investment in human capital. It is for precisely this reason that education remains exempt from VAT across most of Europe.
Improvements to state education?
The second justification for the policy was that revenue raised would improve state education, specifically through funding 6,500 new teachers. This argument rested on three assumptions: that significant new revenue would be generated, that schools would absorb much of the VAT rather than passing it on, and that pupil transfers to the state sector would be modest. Eighteen months on, all three assumptions are in serious difficulty.
On the promise of new teachers, it is admittedly too early to reach a definitive verdict, but the signs are not encouraging. The Treasury does not ringfence VAT receipts for the Department for Education, and in June 2025 the Prime Minister stated that the new VAT revenue had helped deliver ‘the largest investment in affordable housing in a generation.’ There is, as yet, no evidence that a single additional teacher has been employed as a direct result of this tax.
Equally problematic is the claim that schools would absorb much of the VAT. This assumption appears to originate from a 2011 Fabian Society article which asserted, without evidence, that schools were unlikely to raise fees by the full 20 per cent. That unsupported claim became embedded in official policy, with the Government website predicting average fee rises of around 10 per cent. The latest data from Baines Cutler’s Financial Benchmarking Survey (April 2026), drawing on responses from over 450 independent schools, is unambiguous. The report found near-complete unanimity across school types, sizes and regions: fees rose by approximately 20 per cent across the 2024/25 academic year with around 15 per cent attributable to VAT (net of reclaims) and 5 per cent to inflationary pressures.
The third assumption was that pupil numbers would hold broadly steady, with a forecast exodus of only 3,000 students in 2024/25. This has proven equally wide of the mark. ISC census data shows that pupil numbers fell by around 13,000 during that academic year. This will substantially reduce projected tax revenues, and that figure takes no account of the further loss of yield resulting from redundancies caused by the wave of independent school closures now under way, the additional cost of educating these children in the state sector, or the significant reduction in international students choosing to board at UK schools who are now opting to study in countries like Canada, Australia or Ireland instead.
A charge without principle
There is a coherent conservative case – and indeed a liberal one – for leaving well-funded services to the private sphere wherever possible, and for not penalising citizens who exercise choice in ways that reduce the burden on the state. The VAT policy inverts this logic entirely. It punishes independence, burdens self-reliance, and delivers fiscal benefits that are proving illusory.
Fairness in taxation means applying rules consistently, avoiding double charges on the same income, and recognising that different choices can be equally legitimate. By those standards, what has been introduced is not fairness. It is a politically convenient tax on a minority that lacks the electoral weight to resist it.
Morally, philosophically and fiscally, the case for a future Conservative Government to reverse this tax is overwhelming.
Dr Michael Gray is the Chairman of Hereford & South Herefordshire Conservative Association and the Executive Headmaster of a 3-18 independent school in the West Midlands.
When Mark and Julia sat down to review their finances, the conclusion was sadly obvious: independent education was no longer affordable to them.
As two hard-working parents, making real sacrifices and with support from the grandparents, they had just about managed to keep their two children at the local independent school. The introduction of VAT on school fees in January 2025 changed everything. Eighteen months on, their experience is no longer exceptional. In fact, it’s become very typical of ordinary middle-class families across the UK.
Now that the policy of taxing independent education is well into its second year, it is time for an honest evaluation. A future Conservative Government should approach this divisive issue based on reality rather than rhetoric, and the evidence now available makes that task considerably easier.
The philosophical case for independent education is a conservative one at its core. We value the primacy of the family and the importance of freedom. Independent education is an expression of parental liberty and the right to choose what is best for one’s child. While many families cannot afford it, this should not diminish the freedom of those who can. Rewarding effort and enabling excellence lie at the heart of traditional conservative meritocracy. A pluralistic and liberal society depends upon choice and the meaningful limitation of state monopolies. The attacks on the independent sector through both VAT and the removal of business rate relief represent a de facto assault on individual freedom, family autonomy and parental choice, as well as a deliberate push towards educational homogeneity and an expanded role for the state.
Notwithstanding the stark ideological divide between conservatism and socialism, Labour’s arguments deserve to be evaluated on their merits and now that the policy is well into its second year of implementation, it can be judged against the available evidence.
Fairness in the tax system?
One justification for VAT on school fees and for the removal of business rate relief is that it would restore fairness to the tax system. The argument, advanced by Bridget Phillipson among others, is that independent schools enjoyed a “tax advantage” amounting to a hidden state subsidy for the wealthy. This claim sounds convincing, but it is, in fact, a fiscal illusion.
Fairness in taxation requires consistency, the avoidance of double taxation, and crucially, not penalising choices that actually save the public money. Parents who send their children to independent schools have already paid income tax and National Insurance on the earnings used to fund those fees. They receive no rebate or reduction in their contribution to state education – a service they have chosen not to use. The state is therefore paid twice: once through general taxation that funds maintained schools, and again through VAT on a private alternative that costs the taxpayer nothing. To describe this as the elimination of a subsidy is disingenuous. It is the creation of a surcharge on self-sufficiency.
The removal of business rate relief for charitable independent schools has attracted far less attention but is worthy of equal scrutiny. Schools with charitable status demonstrably serve a public benefit through bursaries, community use of facilities and partnerships with local state schools. This status is assessed by the Charity Commission and is not a loophole. Withdrawing rate relief on the grounds that these schools are underserving of their charitable status either implies that the Charity Commission is wrong, or that the Government is applying a different standard to this category of charity on ideological grounds. Neither conclusion reflects well.
There is also a broader economic dimension. Applying VAT to education treats schooling as a luxury consumable rather than an investment in human capital. It is for precisely this reason that education remains exempt from VAT across most of Europe.
Improvements to state education?
The second justification for the policy was that revenue raised would improve state education, specifically through funding 6,500 new teachers. This argument rested on three assumptions: that significant new revenue would be generated, that schools would absorb much of the VAT rather than passing it on, and that pupil transfers to the state sector would be modest. Eighteen months on, all three assumptions are in serious difficulty.
On the promise of new teachers, it is admittedly too early to reach a definitive verdict, but the signs are not encouraging. The Treasury does not ringfence VAT receipts for the Department for Education, and in June 2025 the Prime Minister stated that the new VAT revenue had helped deliver ‘the largest investment in affordable housing in a generation.’ There is, as yet, no evidence that a single additional teacher has been employed as a direct result of this tax.
Equally problematic is the claim that schools would absorb much of the VAT. This assumption appears to originate from a 2011 Fabian Society article which asserted, without evidence, that schools were unlikely to raise fees by the full 20 per cent. That unsupported claim became embedded in official policy, with the Government website predicting average fee rises of around 10 per cent. The latest data from Baines Cutler’s Financial Benchmarking Survey (April 2026), drawing on responses from over 450 independent schools, is unambiguous. The report found near-complete unanimity across school types, sizes and regions: fees rose by approximately 20 per cent across the 2024/25 academic year with around 15 per cent attributable to VAT (net of reclaims) and 5 per cent to inflationary pressures.
The third assumption was that pupil numbers would hold broadly steady, with a forecast exodus of only 3,000 students in 2024/25. This has proven equally wide of the mark. ISC census data shows that pupil numbers fell by around 13,000 during that academic year. This will substantially reduce projected tax revenues, and that figure takes no account of the further loss of yield resulting from redundancies caused by the wave of independent school closures now under way, the additional cost of educating these children in the state sector, or the significant reduction in international students choosing to board at UK schools who are now opting to study in countries like Canada, Australia or Ireland instead.
A charge without principle
There is a coherent conservative case – and indeed a liberal one – for leaving well-funded services to the private sphere wherever possible, and for not penalising citizens who exercise choice in ways that reduce the burden on the state. The VAT policy inverts this logic entirely. It punishes independence, burdens self-reliance, and delivers fiscal benefits that are proving illusory.
Fairness in taxation means applying rules consistently, avoiding double charges on the same income, and recognising that different choices can be equally legitimate. By those standards, what has been introduced is not fairness. It is a politically convenient tax on a minority that lacks the electoral weight to resist it.
Morally, philosophically and fiscally, the case for a future Conservative Government to reverse this tax is overwhelming.