Labour’s private school VAT raid causes diplomatic spat with France and Germany

A diplomatic row has erupted over plans to include international schools in Labour’s private school VAT raid.

Diplomats are calling for an exemption for bilingual schools, arguing that they “are not typical private schools” since their pupils’ needs cannot be readily met in the state sector.

The French embassy expressed concerns to ministers warning that the tax raid would “adversely affect” French schools.

The Telegraph understands the German and Spanish embassies are also in talks with the Government over the VAT plans, which are set to come into force from Jan 1 2025.

In a statement, the French embassy said that while it “does not seek to interfere in the legislative process”, it hopes the Government will “take into account the very distinctive nature” of the 11 French schools in Britain before implementing the policy.

It said: “These schools are overseen by the French ministry of national education and follow the French national curriculum, preparing pupils for French national exams. As such, they are not part of the British exam system.

“Moreover, these schools receive significant public funding from the French government and an important state-funded scholarship programme is in place for French families meeting social criteria.

“They are not typical private schools. As the decision to impose VAT would adversely affect French schools, we have been in contact with the British Government and hope that the implementation of the reform will take into account the very distinctive nature of these schools.”

French schools operating out of Britain are part-funded by the French government, which also offers financial aid to families from France.

Labour’s VAT plan for private schools applies at the “place of supply”, meaning it will still be charged on bilingual schools operating in the UK.

The tax will not apply to UK schools operating overseas, such as the British School of Paris.

Affordability

The French embassy said it has emphasised to the UK Government that the “very purpose” of Elysee funding for its schools was to “ensure they remain affordable to families abroad, to the benefit of our economic and human ties”.

Vincent Caure, a deputy in Emmanuel Macron’s private office, said he was also “deeply concerned” by the VAT plans.

Mr Caure told The Telegraph plans to hit private schools with 20 per cent VAT “risk increasing the bill for families when they have no alternative”.

“I am deeply concerned about the impact that the introduction of VAT could have on public schools that teach in a foreign language, whether they are part of the French network or other foreign institutions,” he said.

“While I understand the British Government’s intention, I would like to draw attention to the undesirable effects on these specific establishments, which cater in particular for foreign children wishing to be educated in their native language.

“It is essential that French schools are excluded from this scheme by granting them VAT exemption.”

Mr Caure suggested Labour’s move to tax private schools from January “will make London less attractive as a place to live for some French and Franco-British families”.

“For many families, the choice of London is also based on the knowledge that they have access to excellent French-language education. If we restrict access, we jeopardise the attractiveness of London and the United Kingdom,” he said.

The French MP added that while a change of government in the UK signalled a chance to reset ties between France and Britain, “imposing VAT reform on [French overseas schools] would not be in line with this drive to renew relations”.

It could prove a growing headache in efforts by Sir Keir Starmer to refresh the UK’s post-Brexit relationship with Paris. The Prime Minister met with Mr Macron last month, where the pair agreed to deepen ties over defence, security, migration and energy.

The Lycée Charles de Gaulle in Kensington, London is the largest French school in the UK, with around 3,000 pupils in its primary and secondary schools.

In a letter to Rachel Reeves, the Chancellor, seen by The Telegraph, the school warned that imposing VAT on bilingual schools would have a “disastrous financial impact on our families”.

Karen Bargues, the president of the school’s parents’ association, said: “Specific programmes, including preparation for French qualifications such as the brevet and the baccalaureate, are not available in British state schools. This means that parents have no choice but to turn to an establishment such as the Lycée.

“The introduction of VAT on tuition fees at an institution such as ours would have a disastrous financial impact on our families. Such an increase in costs would force many parents to withdraw their children from our school, not by choice, but because of insurmountable financial difficulties.”

One parent at the school, which charges up to £17,000 a year in fees, echoed warnings that hitting bilingual schools with VAT would drive families away from Britain.

“People are here to make business work better and build relationships. To be honest, relations on both sides of the Channel will be affected,” they told The Telegraph.

“The UK Government says it wants to get closer and align with Europe, but this is contradictory. It’ll impact relations. The French have been trying to negotiate but they’re getting nothing, there’s been no movement.”

VAT exemption expansion

It comes amid mounting pressure for the Government to expand a list of exemptions from its VAT plans, after ministers unveiled a similar relief clause for children with severe special educational needs.

The Telegraph revealed last week that the British Army is currently consulting military families amid concern they could be priced out of private schools by the tax changes.

Military families were asked to share their views by Sept 23 in a poll drawn up by the Army’s policy team, which said it recognised that many families “depend on private schools to provide stability to their children whilst they meet the day-to-day demands of service life”.

Around 4,700 children from military and diplomatic families currently receive taxpayer-funded support to help with private education.

David Walker, the director of the Boarding Schools’ Association, said on Friday that any decision not to grant military families an exemption from the tax raid was “beyond the pale”.

“We do not believe it would be fair to place an extra financial burden on parents whose jobs serving our nation means their children need to be educated at boarding schools,” he said.

“We do not believe there should be a tax on children sleeping at all, but taxing families who are actively serving in the military for providing a stable term-time home to their children is beyond the pale.”

A spokesman for the German embassy said: “The German Embassy in London is in contact with the UK Government on this issue.”

The Spanish embassy was approached for comment.

A government spokesman said: “We want to ensure all children have the best chance in life to succeed. Ending tax breaks on private schools will help to raise the revenue needed to fund our education priorities for next year, such as recruiting 6,500 new teachers.”