The cost of taxing education
This week, the latest BiGGAR report was published. Its remit was to examine the effects of the imposition of VAT on school fees in the Scottish independent sector.
Its findings are stark and a reminder-if any was needed- that the UK Labour Government’s policy is doing untold damage not just to independent schools across Scotland but to state schools too.
This is a sector that has been contributing £668 million annually to the Scottish economy, supporting 10,590 jobs as well as providing a significant benefit to many local economies whose businesses service these schools.
At an evidence session at the Scottish Parliament’s Education Committee which l attended on 18th February, the senior representatives of the Scottish Council for Independent Schools (SCIS) provided a highly informative and very detailed outline not just of the economic benefits of their schools but the fact that they provide £65million in financial assistance to 6,865 pupils (that’s 26% of all those who attend the sector) but also of all their partnership working across the independent and state sectors.
Just a couple of current examples of this partnership working were provided to the Committee to demonstrate the benefits across the whole of Scottish education. At Dollar Academy, the pioneering Futures Institute (FIDA) designed by internationally renowned architect Andrew Whalley and accompanied by the opportunity for pupils to gain a Diploma in International Sustainability will be open to all pupils across Clackmannanshire, and, at Glasgow High School, the S6 START initiative in Design and Entrepreneurship will, similarly, be on offer to local state schools.
These projects are, however, just two examples of the extensive collaboration across the independent and state sectors which has been growing over the last two decades mutually benefitting pupils from both sectors.
A few months ago, when the Scottish Parliament passed into law the Schools (Residential Outdoor Education)(Scotland) Act 2026, l heard at first hand as the Member in charge of the legislation, about the strong support from teachers in both state and independent schools for successful collaboration when it comes to building pupil resilience and outdoor learning outcomes. Post-Covid, many teachers know that these benefits are more important now than ever.
Nor should we forget the extraordinary work that is undertaken in independent schools to provide pupils who have additional support needs with individual care and attention. Of the 73 SCIS schools in Scotland just under a third are specialist in their provision and they benefit many pupils across both school sectors in Scotland. Indeed, just before l stood down from the Scottish Parliament a month ago l met a family who had sacrificed so much to allow their young son to attend an independent school in order to obtain very specialist support for his neurodivergent condition. That independent school closed and the child has suffered. His education has been disrupted but so too has his social network in which he felt increasingly safe and happy.
What is deeply worrying about the latest findings is the clear demonstration of the detrimental effects of the policy to tax education.
There has been a decline of 9% in pupil numbers since imposition of VAT (with some schools suffering closer to a 20% decline). This includes a 13% decline in primary 1 applications and a 15% decline in S1.
In academic year 2026/27, BiGGAR is predicting that the amount of VAT collected will actually be less than the impact on the state sector giving a net loss of £16 million to the public finances. If that trend was to continue for the next decade the net loss to the public finances would rise to £181 million.
Plus, if pupil numbers hadn’t reduced because of VAT on school fees, the sector would be worth £727million which is £58million more than what will happen now. And the human cost, if the decline is not arrested, will be the loss of 3,610 jobs. So much for a policy which, allegedly, was designed to promote fairness and equity.
The independent sector has always been both innovative and resilient. It continues to deliver high quality education and pastoral care, which remains sought after by many families. But it is now under sustained attack including by some parties which also want to increase business rates on the independent schools.
Far from improving state education as Labour told us repeatedly was the policy intent, VAT on fees has actually place additional pressure on state schools and, of course, on taxpayers at a time when that tax burden is already far too high.
As a former teacher and as a politician, I cannot see any justification whatsoever for a policy which is so ill-considered and so vindictive towards parents who aspire to a better education for their children. Sadly, the BiGGAR findings prove the point.
Liz Smith is is a Scottish Conservative and Unionist MSP for Mid Scotland and Fife.
