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Labour has U-turned on its plans to remove the charitable status of private schools.

Shadow chancellor Rachel Reeves announced in 2021 that her party was ideologically opposed to fee-charging schools avoiding tax by operating as charities.

However, it has now emerged that, while Labour still plans to force independent schools to pay VAT, it will no longer remove their charitable status.

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Labour is claiming that politicians talking about the charitable status was only ever a shorthand for changing the taxes schools paid.

A party spokesperson said: “Our policy remains. We will remove the unfair tax breaks that private schools benefit from, to fund desperately needed teachers and mental health counselling in every secondary school.

“This doesn’t require removing charitable status, however, driving high and rising standards for every child against the backdrop of a broken economy requires political choices. Labour isn’t afraid to make them.”

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Sky News understands that the change was made to Labour policy as removing the charitable status of schools would require complex legal procedures, while applying VAT is a fairly simple process.

Labour’s plan to put VAT – equivalent to 20% – on school fees has sparked outrage from some in the Conservative Party who believe it will prevent parents from sending their offspring to schools which charge tens of thousands of pounds a year to educate them.

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Speaking in 2021, Ms Reeves said: “Right now, private schools enjoy charitable status which makes them exempt from both business rates and from VAT at a cost to the taxpayer of £1.7bn every year.

“But… here’s the truth: Private schools are not charities.

“And so we will end that exemption and put that money straight into our state schools.

“That is what a Labour government will do.”


Sam Coates

Sam Coates

Deputy political editor

@SamCoatesSky

Labour has changed its policy on private schools.

It will continue to charge business rates and VAT, raising up to £1.5bn. This will fund 6,500 new teachers, mental health support workers and early speech and language training.

However, it will no longer be removing charitable status.

Asked why, the source did not say – saying they “didn’t want to get into the weeds of charitable status” and declined to say when the decision was made.

There’s a clear political logic though. This allows the measure to be done in a finance bill – i.e. quickly. Removing charitable status from schools is a highly complex affair.

The independent school sector says they started seeing the rhetoric change on this policy almost a year ago, after the November budget, when it was raised by Jeremy Hunt.

The sector is worried at the remaining uncertainties – will private schools be able to claim gift aid, tax exemptions on annual profits, for example.

“This is the worst of all worlds for schools. They must keep their charitable obligations without the benefits. This is a lot of stick, not a lot of carrot,” said one source.

Charitable status qualifies schools for an 80% relief on business rates.

Julie Robinson, chief executive of the Independent Schools Council, remained critical of the policy.

She said: “If Labour takes away the tax relief associated with charitable status for independent schools, the policy would create a two-tier system within the charity sector, setting a worrying precedent that any charity seen as not reflecting the political ideology of the day could be subject to additional taxes.

“We would love to work with Labour to build more effective ways to achieve our shared goal of improving education for all young people.”

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Labour’s policy costings only ever took into account charging VAT on school fees and ending the business rates exemption, rather than the other tax breaks.

But shadow education secretary Bridget Phillipson had spoken of “scrapping charitable tax status for private schools to fund the most ambitious state school improvement plan in a generation”.

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Why Boris’s best mate is off to Reform

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Why Boris's best mate is off to Reform

👉Listen to Politics at Sam and Anne’s on your podcast app👈       

Former Conservative chairman and friend of Boris Johnson – Sir Jake Berry – is defecting to Reform UK, causing more problems for Tory leader Kemi Badenoch.

On today’s episode, Sky News’ Sam Coates and Politico’s Anne McElvoy discuss if his defection will divide parts of Reform policy.

Elsewhere, the Anglo-French summit gets under way, with Prime Minister Sir Keir Starmer hoping to announce a migration deal with French President Emmanuel Macron to deter small boat crossings.

Plus, chatter around Whitehall that No10 are considering a pre-summer reshuffle, but will it have any value?

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Australia to test CBDCs, stablecoins in next stage of crypto play

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Australia to test CBDCs, stablecoins in next stage of crypto play

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Starmer and Macron agree need for ‘new deterrent’ to stop small boat crossings

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Starmer and Macron agree need for 'new deterrent' to stop small boat crossings

Sir Keir Starmer and Emmanuel Macron have agreed the need for a “new deterrent” to deter small boats crossings in the Channel, Downing Street has said.

The prime minister met Mr Macron this afternoon as part of the French president’s state visit to the UK, which began on Tuesday.

High up the agenda for the two leaders is the need to tackle small boat crossings in the Channel, which Mr Macron said yesterday was a “burden” for both the UK and France.

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The small boats crisis is a pressing issue for the prime minister, given that more than 20,000 migrants crossed the English Channel to the UK in the first six months of this year – a rise of almost 50% on the number crossing in 2024.

Sir Keir is hoping he can reach a deal for a one-in one-out return treaty with France, ahead of the UK-France summit on Thursday, which will involve ministerial teams from both nations.

The deal would see those crossing the Channel illegally sent back to France in exchange for Britain taking in any asylum seeker with a family connection in the UK.

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However, it is understood the deal is still in the balance, with some EU countries unhappy about France and the UK agreeing on a bilateral deal.

French newspaper Le Monde reports that up to 50 small boat migrants could be sent back to France each week, starting from August, as part of an agreement between Sir Keir and Mr Macron.

A statement from Downing Street said: “The prime minister met the French President Emmanuel Macron in Downing Street this afternoon.

“They reflected on the state visit of the president so far, agreeing that it had been an important representation of the deep ties between our two countries.

“Moving on to discuss joint working, they shared their desire to deepen our partnership further – from joint leadership in support of Ukraine to strengthening our defence collaboration and increasing bilateral trade and investment.”

It added: “The leaders agreed tackling the threat of irregular migration and small boat crossings is a shared priority that requires shared solutions.

“The prime minister spoke of his government’s toughening of the system in the past year to ensure rules are respected and enforced, including a massive surge in illegal working arrests to end the false promise of jobs that are used to sell spaces on boats.

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“The two leaders agreed on the need to go further and make progress on new and innovative solutions, including a new deterrent to break the business model of these gangs.”

Chris Philp, the shadow home secretary, seized on the statement to criticise Labour for scrapping the Conservatives’ Rwanda plan, which the Tories claim would have sent asylum seekers “entering the UK illegally” to Rwanda.

He said in an online post: “We had a deterrent ready to go, where every single illegal immigrant arriving over the Channel would be sent to Rwanda.

“But Starmer cancelled this before it had a chance to start.

“Now, a year later, he’s realised he made a massive mistake. That’s why numbers have surged and this year so far has been the worst in history for illegal channel crossings.

“Starmer is weak and incompetent and he’s lost control of our borders.”

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