Independent Schools Queensland (ISQ), which represents non-Catholic private schools, released an excellent discussion paper earlier this week prepared by Mikayla Novak on the impacts of broadening the GST to include education. The paper notes that, if GST were applied to school fees, the consequent fee increases would lead to a switch of enrolments from private to State schools. This would come at a high cost to the Queensland Government, at around $360 million per annum, as the Government would now have to cover the bulk of the costs of educating the nearly 23,000 students who would switch to the State system. This point was previously made by Michael Willis in a guest post on this blog earlier this year (see Time for a sensible debate on broadening the GST net).
It is very plausible that there would be many students shifting from private to State schools if the GST were imposed on school fees. It is clear that parents are very sensitive to school fees. Increases in school fees in recent years have seen both a movement from private schools to State schools and from higher-fee private schools to lower-fee private schools, including a shift from higher-fee independent to lower-fee Catholic schools (see this 2013 Courier-Mail report). This is confirmed by recent data from ISQ (see chart below). As I noted in a post last year, one reason Catholic schools can charge lower fees than independent schools is the very favourable funding deal that the Catholic sector secured from the Howard Government (see Catholic schools still benefiting from very favourable funding deal from Howard Govt days).
Great post. There is a bit of anecdotal evidence about that families with kids in many of the independent schools are becoming increasingly sensitive to even small fee rises. Hence the schools are trying to cap the rises as much as possible and keep fees below perceived price thresholds. Applying GST to school fees might just tip a lot more families over the threshold, and result in the kids being enrolled in the state system as Dr Novak has discussed.
For many families, private schools are a discretionary expenditure item. Another compounding impact will be interest rates when they eventually start to rise from their current historic lows. Many households are very highly geared and will face a tradeoff between keeping the house and school choices.
Thanks for the comment, Jim. Interesting anecdotal evidence and great point about the trouble many families will have when interest rates increase.