Education committee to question impact of private school VAT

Mr Ross wrote that the invitation was being extended after two previous invitations to Education Secretary Bridget Phillipson, neither of which received a response.

According to the letter, Mr Ross and the committee is seeking a “UK Government perspective” on what the VAT scheme, which went live in January, means for Scotland.

“The Committee has agreed to look at the impact of VAT charges on independent schools and clearly we need to hear from the UK Government on this issue.

“Approaches to the Secretary of State for Education were sent out earlier this year but have not been answered.

“Because we have had no response to those invitations, we have now invited the Secretary of State for Scotland in the hope that he can provide us with the information we need.”

A UK Government spokesperson said: "We have received the Committee's invitation and will respond in due course."

Lingering questions about impact north of the border

The invitations reflect a longstanding concern that the UK Government has remained largely focused on England in the development and implementation of its VAT scheme.

Since the plan was first announced as part of the Labour Party’s manifesto in 2024, representatives of Scotland’s independent school sector complained that the policy did not account for the very different landscape for private education in Scotland.

Independent schools in Scotland are highly concentrated in the large cities, particularly Edinburgh, and there are many smaller schools that cater to specific religious communities.

Critics have said that the VAT policy is meant to redirect cash from wealthy, internationally-acclaimed schools, but that the majority of these are located in England. Partly because of this, they argue the policy will have a disproportionate impact on independent schools and fee-paying families in Scotland, without a balancing benefit.

As far back as October, representatives from the Scottish Council of Independent Schools (SCIS) warned the UK Government that the VAT decision was not likely to achieve its goals in Scotland.

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Early Labour estimates were that the plan would raise up to £1.5 million for Scotland, but reports commissioned by SCIS suggested the number would be closer to £50m.

But beyond the estimated revenue, the Scottish Government appears to still be unsure whether any additional finances will be coming north as a result of the VAT plan.

According to a spokesperson for HM Treasury, the addition of VAT to private school tuition is expected to raise £1.8 billion per year by 2029 and will “support the government’s education priorities, as committed in the manifesto”.

If spent correctly by the UK Government, then Scotland stands to receive a portion of that invested revenue through the Barnett formula, a method that distributes new funding to devolved governments based on a proportion of UK investment equal to each devolved country’s population.

As of Tuesday, sources close to HM Treasury confirmed that the Barnett formula will be applied and that it will be up to the Scottish Government to decide how to spend the available funds.

However, the Scottish Government began raising concerns in January that there is a chance Scotland will receive no financial benefits. These concerns have been repeated throughout the summer.

During a discussion in the Scottish Parliament in June, Conservative MSP Miles Briggs asked Cabinet Secretary for Education Jenny Gilruth about the Scottish Government’s assessment of the VAT policy’s impact.

Mrs Gilruth said that, while the Scottish Government supports the policy, she has questions about how Scotland will be impacted.

“We were originally told that the VAT on that sector would mean consequentials for Scotland—the member has asked me a number of written PQs (Portfolio Questions) on that.

“That seems to have changed in relation to how the budget allocation has been made, so we are now no longer able to make that differentiation.

“That is quite challenging, because we understood that there would be additional moneys coming to Scotland as a result of that budgetary movement, but that has not been the case."

A Scottish Government spokesperson explained that Mrs Gilruth's concerns result from an apparent change in approach by the UK Government, which calls previous guarantees into question.

The spokesperson said:

“The UK Government has advised the Scottish Government that they have not ring-fenced the monies raised from the removal of the VAT exemption for application to schools. This is a change to the UK Government’s position, as it had previously been indicated that these funds would be ring-fenced to support teacher numbers in England.

Under the Barnett formula, the Scottish Government sees its block grant altered each year depending on the overall change to UK Government spending in areas of devolved competence. As such, there is no direct allocation to Scotland based on the sums raised by the removal of the VAT exemption on independent schools.”