Labour admits department’s bill would shoot up, seemingly because of increased compensation paid to diplomatic families
Labour’s tax raid on private schools will cost the Foreign Office an extra £1 million this year, the Government has admitted.
Catherine West, the minister for the Indo-Pacific, said the department’s bill would shoot up as a result of the decision to charge VAT on fees.
It is likely to stem from increased compensation paid to diplomatic families who send their children to boarding school in the UK when they are posted abroad.
The Foreign Office currently spends about £14 million per year on placements for the children of staff who may be forced to travel at short notice or move somewhere unsafe, in order to provide stability for their education.
The department has now admitted it expects its costs to rise significantly as a result of the Government’s decision to scrap the VAT exemption for private school fees.
In answer to a written question from Dame Harriett Baldwin, the former Tory minister, the Government said it estimated that the increased cost to the Foreign Office could be about £1 million for 2024-25.
It is predicted this will rise to an extra £2.5 million in 2025-26, with the department continuing to assess the longer-term financial impact. This is “based on an assumption of how schools might apply the increase to parents and the impact on fees”.
The department did not specify why the change would lead to a rise in costs. However, it would follow that an increase in fees for diplomats would need to be compensated as allowances have risen with costs in recent years.
The Telegraph has approached the Foreign Office for comment.
The revelations will fuel concerns that the tax raid on private schools will serve to increase the burden on the taxpayer, with critics fearing an exodus of pupils to the state sector.
‘Ideological politics’
The support for diplomatic and military families is provided through a fund called the Continuity of Education Allowance (CEA), which can cover up to 90 per cent of boarding school fees.
It is currently capped at £9,080 a term for senior school pupils and £7,489 for younger pupils, with families paying the remaining 10 per cent. The cost of those placements will now be eligible to increase by 20 per cent VAT under current plans.
There has been speculation that the Government could offer mitigations, such as an exemption from the tax rise, or choose to recalculate the CEA to ensure that families in receipt of the benefit are shielded from the VAT raid. However, nothing has been confirmed, with Rachel Reeves still working on her Budget for Oct 30.
Currently, 4,210 pupils receive support through the scheme, funded by the Ministry of Defence, while a further 514 are assisted by the Foreign Office.
Dame Harriett told The Telegraph: “Labour has now admitted that its education tax is going to cost the Foreign Office millions of pounds every year. In the midst of global danger and insecurity, raiding the Foreign Office budget to pay for ideological politics is unjustifiable.
“Not only is it untenable for Labour to avoid publishing a full impact assessment of their education tax, they must do what is right by those who serve our country overseas by exempting those supported by the Continuity Education Allowance.”
