UK ELT sector seeks clarity on Labour’s VAT proposal
Published 02/02/2024
The UK ELT sector is bracing for another blow as campaigners seek clarity on Labour’s proposed tax increase for private schools which could also include language providers.
Keir Starmer, leader of the Labour party, announced his plans to hit independent schools with a 20% VAT increase if the party wins the general election. Labour has pledged to end the tax-empt status that services related to private school education currently benefit from.
The new policy could be put in place as soon as the first academic year following the general election, and it is currently unclear if it would also include the the country’s English language schools.
Huan Japes, membership director at English UK, said the proposed policy is worrying English UK members “quite significantly”, but admits that not much is known about how, or if, it will impact language schools.
“Could our industry live with that 20% price hike?” asked Japes. “What would that do to the UK market, particularly at a time when we’re still recovering from the twin effects of the pandemic and Brexit? That would not be at all positive.”
Starmer proposed the money raised – an estimated £1.7billion – go towards better funding state schools and noted he’d like to see “mental health staff in every school, more expert teachers in the classroom, more creativity, speaking skills, confidence”.
However, Japes argued that this justification doesn’t extend to the market that supports students coming to the UK to study English.
“Please retain our exemption even if you take away the exemption for private schools,” pleaded Japes.
“Don’t inadvertently throw the baby out with the bathwater”
“Don’t inadvertently throw the baby out with the bathwater by removing the exemption for all forms of education.”
A further counterargument lies in how English centres would struggle to offset costs, highlighted Japes, as typically ELT schools don’t have a lot of supplier costs that would allow them to claim the VAT back on.
“Most businesses are not shedding out on massive infrastructure or assets or every year. Some will be but it would be hit and miss as to whether you can offset it in any particular year.”
He also argued that such a policy would put the UK’s ELT sector at a “significant competitive disadvantage relative to other English speaking destinations”, such as the US, Australia, South Africa and Canada – countries which do not charge VAT on English language teaching.
Japes, along with English UK members, has been campaigning against the potential end to the tax-empt status on English language schools by meeting with and writing to MPs to outline the sector’s arguments. The response has been “varied”.
“It’s being heard by a lot of MPs who have promised to get back. There’s a little bit of nervousness among backbench MPs as this is a pretty iconic policy for Labour and they don’t necessarily want to rock the boat,” he continued.
“I think our best allies are people who are standing down for the next election.”
It seems the implications of Brexit – of which there are many – are continuing to haunt the ELT sector, even in this latest roadblock.
“There is an EU directive which says that governments cannot require language schools to charge VAT between EU nations, because they want to encourage different EU citizens to learn each other’s languages,” said Japes.
“So, the fact that we’re not in the EU, it means that Labour could [implement the policy] if they wish to.”
Jane Dancaster, CEO, Wimbledon School of English, doesn’t believe the Labour party deliberately means to include the ELT sector in the removal of the VAT exemption, rather that it is an “unintended consequence” which she hopes the current lobbying efforts of the sector can bring to light.
“We cannot pass this on to the client. We can’t put our fees up,” said Dancaster, who also noted the importance of keeping up with global competitors.
Despite the concerns of the sector surrounding Labour’s plans, Dancaster assured The PIE News that the general climate of the sector remains “positive”, highlighting its resilience.
Wimbledon would “weather” the VAT increase if it was implemented, as it had done before the current exemption came into play.
Dancaster also nodded to the positive strides in policy the sector has recently celebrated, including various extensions to the Youth Mobility Scheme, as well as the end to the EU ID card ban for French residents, meaning French school groups will have fewer roadblocks to entering the country.
The news comes at a time when English UK is campaigning to “make the UK the world’s premier destination for ELT again”.
Prior to the pandemic, the ELT sector welcomed around half a million foreign nationals to the UK per year, contributing £1.5 billion to the economy.
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