OBR Forecasts 35,000 Fewer Private School Pupils Due to VAT Changes

The Chancellor, Rachel Reeves, confirmed in today’s budget the government’s plan to end the VAT exemption on private school fees—a policy intended to support the hiring of thousands of new teachers in the public sector. Set to take effect in January, this change is expected to impact private school affordability significantly.

The Office for Budget Responsibility (OBR) projects that the VAT change could result in 35,000 fewer private school students, with “two-thirds of the cost passed on through higher fees.” According to the OBR’s fiscal outlook, the VAT rate effectively applied will be 15.4 per cent, slightly below the standard rate, as some costs are expected to be recovered.

The OBR analysis indicates that the additional fees from the VAT shift will affect the private school sector in three ways: around two-thirds will be passed directly onto families through increased tuition fees, just under a quarter will come from cuts in service provision, and the remaining costs will be managed through operational efficiencies and reductions in profit.

This shift, according to the OBR, will likely result in an estimated six per cent drop in private school enrolments, both from students leaving and from fewer new enrolments.

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