Should Private Education Be VAT Exempt? IEA Debate
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The Labour leader Sir Keir
The Labour leader Sir Keir Starmer has announced that he would implement a VAT on private schools if he was to be elected as prime minister on the 4th of July. To discuss whether private schools should remain VAT exempt in the UK, the Institute of Economic Affairs recently hosted a lively debate on the topic. Arguing for the motion that private schools should maintain their VAT exemption was Max Marlow, Director of Research at the Adam Smith Institute. Opposing the motion and arguing that VAT should be applied to private school fees was Daniel Freeman, Managing Editor at the IEA.
Marlow contending that education is a public good that benefits society and should be tax exempt to incentivise private provision and competition. Freeman argued for a simpler, broader tax base by removing VAT exemptions and applying it universally, using the revenues to cut other more harmful taxes. They grappled with defining public goods, distortionary effects of tax exemptions, and the practical impacts on enrolment if VAT were imposed on private tuition.
With two strong arguments coming from both free market think tank perspectives, this debate raised deeper philosophical questions around the role of the state in education provision and principles of optimal tax policy design. The exchange highlighted the complexities and tradeoffs involved in this controversial issue.
01:15:05 - Max Marlow's argument that education is a public good that benefits society (For VAT exemption)
01:46:33 - Daniel Freeman's case for applying VAT universally to broaden the tax base (Against VAT exemption)
02:35:25 - Discussion of what constitutes a "public good" and positive externalities
05:55:10 - Potential impacts on enrolment and affordability if VAT imposed (Against exemption)
18:48:37 - Whether tax simplification could actually lead to lower VAT rates (For broad VAT base)
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Marlow contending that education is a public good that benefits society and should be tax exempt to incentivise private provision and competition. Freeman argued for a simpler, broader tax base by removing VAT exemptions and applying it universally, using the revenues to cut other more harmful taxes. They grappled with defining public goods, distortionary effects of tax exemptions, and the practical impacts on enrolment if VAT were imposed on private tuition.
With two strong arguments coming from both free market think tank perspectives, this debate raised deeper philosophical questions around the role of the state in education provision and principles of optimal tax policy design. The exchange highlighted the complexities and tradeoffs involved in this controversial issue.
01:15:05 - Max Marlow's argument that education is a public good that benefits society (For VAT exemption)
01:46:33 - Daniel Freeman's case for applying VAT universally to broaden the tax base (Against VAT exemption)
02:35:25 - Discussion of what constitutes a "public good" and positive externalities
05:55:10 - Potential impacts on enrolment and affordability if VAT imposed (Against exemption)
18:48:37 - Whether tax simplification could actually lead to lower VAT rates (For broad VAT base)
FOLLOW US:
SUBSTACK - https://insider.iea.org.uk/
TWITTER - Twitter: iealondon
INSTAGRAM - Instagram:
FACEBOOK - Facebook: ieauk
WEBSITE - https://iea.org.uk/
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