Labour’s stance on private schools explained as Keir Starmer U-turns on plan to scrap charitable status

In a shock announcement, Labour has U-turned on its plans to remove the charitable status of private schools despite stating it was ‘ideologically’ opposed to the benefit. In 2021, Shadow chancellor Rachel Reeves announced her party would crack down on fee-charging schools avoiding tax by operating as charities.

It is understood the change was made to their position due to the complex and legal challenges of ending charitable status, among which nearly 1,250 private schools enjoy, according to the government. But what is there position now and what plan did they originally set out?

Here’s everything you need to know.

What was Labour’s stance on private schools?

In 2021, Ms Reeves vowed to scrap charitable status enjoyed by private schools, suggesting such benefits cost the taxpayer £1.7bn, which could be used to fund underperforming state schools.

As charities, private schools do not pay tax on annual profits and benefit from charitable business rates relief, which in some cases, can be up to 80%. Private schools also receive gift aid on donations and are subject to multiple other tax advantages.

In 2022, Shadow Secretary for Education, Bridget Phillipson, emphasised Labour’s position at a party conference in Liverpool. She told the audience: “We need an education system that enables every child to achieve and thrive. Our priorities will define that vision. Conference, that is why we will end the tax breaks private schools enjoy.”

She added: “We will use that money to deliver the most ambitious school improvement programme for a generation. Recruiting thousands more teachers to help children excel in science and maths and thrive with access to sport, art, music and drama.”

Promising a “fresh vision” for education, Ms Phillipson also said the party would increase VAT in private schools by 20%, which according a study by The Institute for Fiscal Studies, would generate around £1.5 billion in revenue. Gift Aid on donations and a range of other tax advantages.

How do private school’s achieve charitable status?

Under current law, and due to the legal definition of ‘charity’, private schools can achieve charitable status by demonstrating they are creating a ‘public benefit’ via education. They can do this by either subsidising or making provisions for financially disadvantaged students or students who might otherwise benefit from attending private school.

What’s the problem?

Current law doesn’t define the extent to which private schools have to subsidise those from a disadvantaged background to gain charitable status. This means some schools may offer ‘partial’ bursaries, that in reality, fail to cover the costs of additional resources, leaving these students financially vulnerable.

What is Labour’s stance on private schools now?

Labour has maintained that despite U-turning on its plan to scrap charitable status, it will still commit to raising VAT in private schools. A spokesperson for the Labour Party said: “Our policy remains. We will remove the unfair tax breaks that private schools benefit from, to fund desperately needed teachers and mental health counselling in every secondary school.

“This doesn’t require removing charitable status, however, driving high and rising standards for every child against the backdrop of a broken economy requires political choices. Labour isn’t afraid to make them.”