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Report backing Labour’s private school VAT policy written by minister’s close friend

October 8, 2024

Labour’s plan to impose VAT on private school fees has come under scrutiny after it emerged that a key report justifying the policy was authored by a close friend of a government minister.

Matthew Pennycook, a minister in the Department for Levelling Up, Housing and Communities, was reported to have been the best man at the wedding of Luke Sibieta, who wrote the Institute for Fiscal Studies (IFS) paper backing Labour’s VAT proposal.

The report, which found that Labour’s VAT policy would have a minimal impact on state schools and could raise up to £1.5 billion for the Treasury, has been frequently cited by Sir Keir Starmer and other ministers to defend the measure. The VAT on private school fees, along with an end to business rates relief for private schools, is expected to come into effect in January 2025.

Mr Sibieta, a research fellow at the IFS with nearly 20 years of experience, suggested that the policy would likely force around 20,000 to 40,000 pupils, or 3% to 7% of the private school population, into the state sector. His report also projected a net gain of between £1.3 billion and £1.5 billion for public finances due to the removal of tax exemptions.

However, critics have questioned the close personal relationship between Mr Sibieta and Mr Pennycook, whose department will be involved in implementing the tax policy. Mr Pennycook and Mr Sibieta reportedly used to live together, and Mr Pennycook served as best man at Mr Sibieta’s wedding, raising concerns over potential conflicts of interest.

Opponents of the VAT proposal, including the Independent Schools Council (ISC), have warned that the number of pupils leaving private schools could be far higher than Mr Sibieta’s estimates, which could result in the policy generating far less revenue than expected. ISC figures show that private school enrolments have already dropped by 10,000 pupils in September 2024, suggesting that Labour’s predictions may be overly optimistic.

Julie Robinson, the chief executive of ISC, said: “This data couldn’t be clearer: parents are already removing their children from independent schools as a result of the Government’s plans to charge parents VAT. This is just the tip of the iceberg, and many small schools are already at risk of closure.”

Mr Sibieta has defended his analysis, pointing to demographic factors such as a declining birth rate that could also affect private school enrolments. He stressed that it was too early to draw firm conclusions and that the full impact of the policy might not be clear for another two years.

The Conservative Party is expected to use an Opposition Day debate to call for a deferral of the VAT policy until 2028 in areas where state schools are already nearing capacity. Damian Hinds, the shadow education secretary, argued that the policy could lead to a localised crisis in school places, saying it would “reduce choice, increase class sizes, and be disruptive for teachers and pupils.”

As the debate over the VAT policy intensifies, the Government faces calls from education unions and tax associations to delay its implementation until at least September 2025. The IFS has defended the impartiality of its work, with a spokesperson stating: “The IFS is a politically independent research organisation committed to the highest standards of empirical analysis.”

Despite these assurances, the revelations about the close personal connection between Mr Sibieta and Mr Pennycook have raised concerns over the impartiality of the report underpinning Labour’s tax plans, which could have significant implications for both private and state education in the UK.