Private schools to be stripped of tax breaks next year under SNP plans

The Herald Scotland, by Alistair Grant
4.12.19

Private schools will be stripped of controversial tax breaks from the start of the next academic year under plans put forward by the SNP.

Public finance minister Kate Forbes confirmed independent schools would no longer be eligible for charitable relief on their business rates from September 1, 2020.

The move forms part of the Non-Domestic Rates (Scotland) Bill, which is currently being scrutinised by MSPs.

It follows a review of business rates carried out by Ken Barclay, a former Royal Bank of Scotland chairman.

Private schools will be hit with an estimated £37 million bill over five years as a result of the plans, amid warnings some institutions could be forced to close.

Ms Forbes made the latest announcement while giving evidence to Holyrood’s Local Government and Communities Committee.

She said: “The Barclay Review implementation plan was published in December 2017, which is two years ago, and it was clear that we would deliver the change by 2020 to allow time for those schools affected to plan ahead.

“The independent schools provisions are not currently identified for early commencement, but I can confirm that it would be the Government’s intention to commence these provisions from September 1, 2020, subject of course to the committee’s decisions and votes.

“A September 2020 commencement date would be almost three years after the change was first recommended by the Barclay Review, and it would tie introduction to the academic year rather than the start of the financial year which should hopefully help schools with their planning for academic year 2021.

“We’ve always been clear that we will deliver this change as recommended by the Barclay Review, and I hope that confirmation of the Government’s commencement intentions will assist the sector in its ongoing planning.”

Existing rules mean all independent schools are eligible for 80 per cent mandatory rates relief if they are registered as a charity.

Local authorities then have a discretionary power to “top up” this relief, up to 100%. State schools do not qualify for charitable relief.

Based on a commencement date of 2020/21, documents published alongside the new legislation said private schools will pay £7m extra in the first financial year.

This would rise to £7.2m the following year, £7.4m the year after, £7.5m in 2023/24 and £7.7m the next year, taking account of inflation. In total, schools would pay £36.9m more in the first five years.

However private special schools and specialist independent music schools would continue to be eligible for charitable relief under the legislation.

Mainstream independent schools will also retain their charitable status despite the change.

John Edward, director of the Scottish Council of Independent Schools, previously said the move risked seeing some smaller, rural private schools hit with bills equivalent to around £500 or £600 per pupil.

This could force institutions to hike fees, sell off assets such as playing fields, cut teachers or scale back means-tested assistance, he said.

Liz Smith, Scottish Conservative shadow education secretary, said the new legislation “will mean fee increases in the sector which, in turn, will mean some parents will find it more difficult to access independent education”.

he said: “That diminishes parental choice and it will also make the independent schools more elitist.

“In both cases, that is the exact opposite of the aims of the SNP Government and it is also contrary to the unanimous view of the Scottish Parliament in 2005.

“As well as this, the changes would have implications for school places in the state sector which, as everyone knows, is already fully stretched.

“There is still scope before stage 3 for the Scottish Government to revise its position and I hope it will do so.”