Rachel Reeves ‘ignored legal threat from private schools group’ over VAT raid before Budget

Independent Schools Council will launch action after telling the Chancellor in August that it was concerned about discrimination

Rachel Reeves has been accused of ignoring a legal threat sent by private schools in August warning that her VAT raid may amount to “unlawful discrimination”.
The Independent Schools Council (ISC), which represents more than 1,400 private schools, announced on Thursday it will launch legal action against the Government’s tax raid.
The group has hired Lord Pannick KC, the leading human rights barrister, to spearhead the legal challenge alongside Paul Luckhurst, from Blackstone Chambers, and Kingsley Napley, a legal firm.
The ISC will seek to prove that Labour’s policy undermines some pupils’ human rights under the European Convention of Human Rights (ECHR) and the Human Rights Act 1998. It is preparing to send a letter-before-action in the coming weeks and must bring the High Court challenge within three months.
The Telegraph has seen a legal letter sent by Kingsley Napley in August outlining the private school group’s concerns over the policy.
It confirms the Government was made aware that pushing ahead with the VAT raid risked a potentially costly legal challenge brought on behalf of around half of private schools in the UK.
The letter, sent directly to Ms Reeves, the Chancellor, and Bridget Phillipson, the Education Secretary, claimed that plans to hit private schools with VAT would constitute “arbitrary discrimination in access to education on various grounds”, including faith and special educational needs (Send).
It stated that the ISC’s member groups had already instructed Lord Pannick “to consider their legal position” and warned that “the Government should be mindful of… the legal risks arising out of the proposal”.
The document also called for an urgent meeting and written response from both the Chancellor and Education Secretary, warning that the policy was being rushed through “in haste without fully listening to the views of the independent sector”.
The Telegraph understands that neither Ms Reeves nor Ms Phillipson met with officials from the sector, nor did they personally provide a written response to legal concerns.
Kingsley Napley, writing on behalf of the Heads’ Conference and the Independent Schools’ Bursars Association, criticised media briefings by Labour in the run up to the general election “and soon thereafter” insisting that the VAT raid would not come into force until September 2025.
The legal letter, written a week after Ms Reeves announced at the end of July that she was in fact bringing the policy forward to Jan 1 2025, said the hurried timeline would have “catastrophic consequences for schools and pupils”.
“The purpose of this letter is to draw the Government’s attention to the serious unintended consequences of its VAT proposal,” it said.
“Removing the exemption only in respect of independent schools would clearly treat them differently, and less favourably, than those other education providers on the VAT exempt list.
“Our clients are concerned that proceeding at speed on the basis of an incomplete understanding of the complex needs of children and families in the sector will inevitably lead to unlawful discrimination.”
The legal threat also warned that hitting private schools with VAT would create “a number of potential ‘victims’ in an ECHR sense” by making their education unaffordable. It said this included 99,000 pupils in private schools who receive Send support but do not hold a tailored care plan that would make them exempt from the VAT raid.
It also criticised the Government for nearly halving the standard 12-week window for official consultations, and noted that the Treasury only sought to make “technical amendments to the VAT legislation in order to ensure that it works as intended” rather than views on the proposal as a whole.
Kingsley Napley asked for a response by Aug 19. It received one on Sep 5 from James Murray, a Treasury minister.
He said: “I note that in your letter you raise concerns that the VAT policy breaches provisions of the European Convention on Human Rights. The Government has considered the policy’s interaction with human rights law, and is confident that the policy is consistent with all of the UK’s human rights obligations.
“You also raise concerns over the impact that a January 2025 implementation date will have on schools and pupils.
“Whilst I appreciate that this is midway through the school year, a start date of January 2025 gives schools and parents nearly six months to prepare for the changes.”
Ms Reeves defied calls to delay the tax raid on Wednesday, confirming in her maiden Budget that the Government will hit private schools with VAT on the first day of 2025.
She insisted ministers would push ahead with the plans to raise money for the “94 per cent of children in the UK who attend state schools”.
The Treasury’s internal forecast suggested the VAT raid, plus Labour’s plans to remove business rates relief for private schools in England with charitable status, would raise more than £1.8 billion each year by the end of the decade.
The figure is significantly higher than an independent report by the Institute for Fiscal Studies, leant on heavily by Labour, which said that the policy could raise around £1.3 billion to £1.5 billion annually.
Labour has pledged to spend the money it hopes to raise on 6,500 new teachers for the state sector and 3,000 new nurseries in primary schools, alongside other measures to improve state education.
Julie Robinson, chief executive of the ISC, said the decision to launch legal action against the plans “has not been taken lightly and has been under consideration for many months”.
“At all points throughout this debate, our focus has been on the children in our schools who would be negatively impacted by this policy,” she said.
“This focus remains and we will be defending the rights of families who have chosen independent education, but who may no longer be able to do so as a direct result of an unprecedented education tax.”
The Government was approached for comment.