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Labour’s plan to impose VAT on private school fees has come under scrutiny after it emerged that a key report justifying the policy was authored by a close friend of a government minister.
Matthew Pennycook, a minister in the Department for Levelling Up, Housing and Communities, was reported to have been the best man at the wedding of Luke Sibieta, who wrote the Institute for Fiscal Studies (IFS) paper backing Labour’s VAT proposal.
The report, which found that Labour’s VAT policy would have a minimal impact on state schools and could raise up to £1.5 billion for the Treasury, has been frequently cited by Sir Keir Starmer and other ministers to defend the measure. The VAT on private school fees, along with an end to business rates relief for private schools, is expected to come into effect in January 2025.
Mr Sibieta, a research fellow at the IFS with nearly 20 years of experience, suggested that the policy would likely force around 20,000 to 40,000 pupils, or 3% to 7% of the private school population, into the state sector. His report also projected a net gain of between £1.3 billion and £1.5 billion for public finances due to the removal of tax exemptions.
However, critics have questioned the close personal relationship between Mr Sibieta and Mr Pennycook, whose department will be involved in implementing the tax policy. Mr Pennycook and Mr Sibieta reportedly used to live together, and Mr Pennycook served as best man at Mr Sibieta’s wedding, raising concerns over potential conflicts of interest.
Opponents of the VAT proposal, including the Independent Schools Council (ISC), have warned that the number of pupils leaving private schools could be far higher than Mr Sibieta’s estimates, which could result in the policy generating far less revenue than expected. ISC figures show that private school enrolments have already dropped by 10,000 pupils in September 2024, suggesting that Labour’s predictions may be overly optimistic.
Julie Robinson, the chief executive of ISC, said: “This data couldn’t be clearer: parents are already removing their children from independent schools as a result of the Government’s plans to charge parents VAT. This is just the tip of the iceberg, and many small schools are already at risk of closure.”
Mr Sibieta has defended his analysis, pointing to demographic factors such as a declining birth rate that could also affect private school enrolments. He stressed that it was too early to draw firm conclusions and that the full impact of the policy might not be clear for another two years.
The Conservative Party is expected to use an Opposition Day debate to call for a deferral of the VAT policy until 2028 in areas where state schools are already nearing capacity. Damian Hinds, the shadow education secretary, argued that the policy could lead to a localised crisis in school places, saying it would “reduce choice, increase class sizes, and be disruptive for teachers and pupils.”
As the debate over the VAT policy intensifies, the Government faces calls from education unions and tax associations to delay its implementation until at least September 2025. The IFS has defended the impartiality of its work, with a spokesperson stating: “The IFS is a politically independent research organisation committed to the highest standards of empirical analysis.”
Despite these assurances, the revelations about the close personal connection between Mr Sibieta and Mr Pennycook have raised concerns over the impartiality of the report underpinning Labour’s tax plans, which could have significant implications for both private and state education in the UK.
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Report backing Labour’s private school VAT policy written by minister’s close friend

The Confederation of British Industry (CBI) has urged Chancellor Rachel Reeves to introduce significant tax cuts for electric car, heat pump, and biofuel manufacturers to accelerate the UK’s path to net zero.
The business group is advocating for slashing the corporation tax rate for companies involved in these sectors to 10%, down from the current headline rate of 25%.
The CBI is also calling for a range of measures to support green investment, including a “green innovation credit” offering a 40% tax relief for companies investing in low carbon technology research and development, as well as an “enhanced green super-deduction” at a rate of at least 120% for businesses building factories for electric vehicles (EVs) and battery manufacturing.
Rain Newton-Smith, chief executive of the CBI, said these moves would solidify the UK as an attractive destination for investment in green technologies, despite the challenging economic environment. “The Budget can provide a tone-setting moment in the Government’s growth mission,” she said, adding that these measures would help foster growth while ensuring economic stability.
The CBI estimates that the proposed 10% corporation tax rate for green technology manufacturers would cost the Government £238 million annually, while the super-deduction would come with a £389 million price tag. Additionally, the CBI is pushing for the VAT on public EV charging to be reduced from 20% to 5%, costing the Treasury £33 million. It also advocates for removing VAT on home improvements like double-glazing to improve energy efficiency.
These proposals come alongside calls from the Institute for Public Policy Research (IPPR) for changes to borrowing rules, allowing the Government to increase public investment by focusing on the UK’s net worth rather than just its debt. According to the IPPR, this could provide £50 billion of additional borrowing headroom, which could be channelled into infrastructure, energy, and healthcare investments to boost productivity.
Carsten Jung, an economist at the IPPR, noted that the UK is stuck in a “low growth trap” due to decades of underinvestment. He said, “The new Labour Government has been elected on a platform to change this,” and urged the Chancellor to shift the focus toward long-term investment.
Ms Reeves has indicated that she may be open to revisiting the Government’s borrowing rules, with a view to fostering public and private investment in green technologies. Speaking to the Financial Times, she said: “I hope that at the Budget the OBR will look at not just the short-term impact of boosting capital investment but also the long-term impact and the catalytic impact of public sector investment crowding in private investment.”
These proposals reflect a growing call for the UK Government to provide the necessary fiscal and policy support to drive the transition to a low-carbon economy and meet its ambitious net zero targets.
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Electric car makers and heat pump firms ‘deserve net zero tax break’

The UK risks losing its leadership position in artificial intelligence (AI) without a clear national strategy for data centres, a key player in the sector has warned.
Data centres, essential for powering cloud computing and AI applications, have become central to the digital economy. However, without a cohesive plan, the UK could fall behind in the global AI race, according to industry experts.
The UK is currently Europe’s largest data hub, with more than 500 data centres, the majority concentrated in the South East. These facilities are critical to everything from personal device browsing to AI learning, providing the power, connections, and security required for massive data processing.
Despite this status, high land prices, competition for grid connections, and local resistance have created barriers to further expansion in the South East. This has led some companies to explore opportunities beyond the industry’s traditional base, with Kao Data breaking ground on a £350 million development in Stockport, Greater Manchester.
Paul Lamb, Kao Data’s CEO, highlighted the importance of a broader strategy: “If we want to be part of the global AI opportunity, we need to deploy these resources in locations that are suitable, sustainable, and have the opportunity for growth.” He noted that the UK lacked a plan a decade ago when cloud computing took off, resulting in a concentration of power usage around west London. Lamb called for a UK-wide data centre strategy to distribute these facilities across the country.
The challenge of further expansion in the South East is evident in places like Abbotts Langley, Hertfordshire, where a proposed data centre development has sparked a local debate over green belt land. The planning application was initially rejected by the local council, but Housing Minister Angela Rayner called in the decision on her first day in office, indicating the government’s commitment to growth.
However, the push for more data centres has also raised concerns. Local residents and council leaders argue that development on green belt land should only be allowed if there is significant community benefit. Stephen Giles-Medhurst, leader of Three Rivers Council, said, “We will make the best case possible to say no to this development because it is an inappropriate site, which causes very high harm to the green belt.”
Kao Data’s expansion in Greater Manchester reflects a potential solution to the challenges faced in the South East. By repurposing an industrial site and leveraging existing grid connections, the new facility aims to support the growing demand for AI-driven data processing. Andy Burnham, the mayor of Greater Manchester, supports the project, recognising data centres as critical infrastructure for regional economic growth.
The UK government recently designated data centres as “critical national infrastructure,” putting them on a par with power stations and railways. However, industry experts argue that a more comprehensive strategy is needed to ensure the country remains competitive in AI development.
As AI becomes increasingly central to global economic growth, the UK must navigate the challenges of expanding its data centre capacity while balancing environmental concerns and local opposition. Without decisive action, experts warn that the UK could miss out on a key opportunity to lead in the AI revolution.
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UK risks losing AI leadership without a national data strategy, experts warn

Perlego, an education technology platform known as the “Spotify for textbooks,” has secured a $20m fundraising round led by Sir Terry Leahy, the former CEO of Tesco.
The digital library service, which offers unlimited access to academic titles via subscription, is expected to announce the capital injection this week.
The new funding round also includes investment from ITHAKA, the organisation behind JSTOR, a prominent digital library for academic journals and books. Perlego’s growing list of shareholders already includes notable names such as Mediahuis, the Belgian publisher that recently bid for The Daily Telegraph, and KPN Ventures.
Founded in 2017, Perlego partners with thousands of international publishers and provides access to academic, professional, and non-fiction content from publishers like Cambridge University Press, Elsevier, and Harvard University Press. The platform’s catalogue is available in six languages and is used by over 250 educational institutions worldwide.
Sir Terry Leahy, who has made a number of technology investments since stepping down from Tesco over a decade ago, expressed enthusiasm for Perlego’s innovative approach to education. “Perlego is addressing one of the most pressing challenges in modern education—access to essential learning materials,” Leahy said. “This investment is a vote of confidence in Perlego’s potential to reshape the educational landscape.”
The new funding will be used to expand Perlego’s international footprint and to enhance its offerings by incorporating artificial intelligence. One key development will be Dialogo, an AI-powered research assistant aimed at improving access to academic content.
Gauthier Van Malderen, Perlego’s founder and CEO, commented on the impact of the investment, saying: “This investment represents a vital opportunity to drive meaningful change in education and AI more broadly. We’re passionate about providing accessible yet game-changing solutions to education.”
The platform’s mission to democratise access to academic resources has garnered attention from major industry players, and the recent funding will further bolster its efforts to advance educational technology on a global scale.
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Former Tesco chief invests in ‘spotify for textbooks’ platform perlego with $20m funding round

Up to 10% of UK farmers may abandon the industry this month as concerns over rising Capital Gains Tax and reduced subsidies mount ahead of the new government’s Autumn Budget, according to Mark Chatterton, Head of Agriculture at Duncan & Toplis accountancy and business advisers.
The looming financial pressures have left British agriculture at a critical crossroads, with many farmers contemplating selling their land or stepping back from active farming altogether.
Chatterton reports that a significant portion of his East Midlands client base is now considering drastic measures such as selling land, passing it on to the next generation, or contracting out to larger farming businesses. The sector, already grappling with poor harvests and shrinking financial support, is now facing the additional uncertainty of potential tax hikes.
“The future of British farming is at a critical crossroads,” Chatterton warns. “This Autumn’s Budget could deliver a devastating blow if Capital Gains Tax is hiked as expected. Farmers are already struggling after poor harvests and diminishing subsidies—another financial hit may push many out of the industry for good.”
Confidence within the agricultural sector is at an all-time low. According to DEFRA figures, nearly half of farmers fear for the future, and the National Farmers’ Union (NFU) reports that confidence is at its lowest level since records began. The Sustainable Farming Incentive, a key support program, is set to expire in three years, leaving many farmers without a clear financial safety net.
The fear of a significant rise in Capital Gains Tax, potentially up to 45%, and changes to Inheritance Tax could further drive farmers to exit the industry, particularly those without clear succession plans. High land prices have provided an opportunity for some farmers to sell, but the uncertainty surrounding the upcoming Budget has accelerated decisions to leave before potential tax changes reduce financial prospects further.
Chatterton emphasizes the need for immediate government intervention to protect the sector. “The new government has vocally affirmed the UK’s agricultural sector as a matter of the utmost national security—and I couldn’t agree more. I’d urge the government to apply firm and consistent support for the sector when it needs it most.”
With speculation growing that the Autumn Budget will include significant tax reforms, the future of the UK’s agricultural sector remains uncertain. Farmers hope the government will turn its promises of support into actionable plans with clear timelines and deliverables. Without decisive action, Chatterton warns, the consequences could be devastating for both farmers and consumers, threatening the stability of the nation’s food production.
As the agricultural industry braces for potential tax hikes and reduced financial support, the next few weeks will be crucial in determining whether the sector can survive or whether an exodus of farmers will leave a lasting impact on British farming.
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Fears of Capital Gains Tax rise pushing UK farmers to exit industry, warns expert

Santander UK has urged the government to prioritise leadership, digital, and sustainability skills in its new National Plan for Skills to tackle the UK’s productivity crisis and prepare the workforce for the future.
In a newly published report, Tomorrow’s Skills, Santander highlights three major societal shifts—changing attitudes to work, the rise of AI, and the transition to Net Zero—that will impact the British workforce. The report calls for increased investment in training and upskilling to address these challenges.
The report reveals that UK workers are spending 20% less time on training than they did a decade ago, despite more than half acknowledging that they need to upskill to stay relevant in their roles. Barriers such as time constraints, costs, and lack of flexibility are preventing workers from accessing training, contributing to the country’s stagnant productivity levels. Moreover, 69% of workers expect to remain in the same field for their entire careers, and 72% believe their jobs will still exist in 10 years—indicating a lack of awareness of the potential impact of emerging technologies and societal changes.
Mike Regnier, CEO of Santander UK, stressed the importance of education and skills development, stating: “The UK cannot afford to fall behind in this critical area if we want our economy to grow and remain competitive.” He called on the government to focus its skills strategy on addressing three key areas:
Changing attitudes to work:
The rise of hybrid working has introduced new challenges for managers and leaders, with generational differences in attitudes towards remote work. While 65% of 25–34-year-olds view hybrid working positively for the UK economy, only 27% of 55–64-year-olds share this view.
The rise of AI:
As AI continues to transform industries, 63% of workers recognise the need for training around new technologies, while 47% of younger workers worry that AI could replace their jobs. Upskilling in AI and digital technologies is seen as essential for increasing productivity and future-proofing careers.
The transition to Net Zero:
As the UK moves towards its 2050 emissions targets, 58% of workers believe they will need new skills to adapt to their roles in a greener economy. The report highlights the importance of equipping workers with sustainability skills to support the Net Zero transition.
In response to these challenges, Santander has launched a new adult education programme in partnership with xUnlocked, Fearless Adventures, and House 337. The programme, available on Santander Open Academy, offers free, video-led training on green, digital, and leadership skills for people over 18. The aim is to help individuals and businesses prepare for the future by developing the skills needed to thrive in a rapidly changing economy.
Steph McGovern, presenter of The Rest is Money podcast and a business journalist, added her support for lifelong learning, saying: “As the needs of the economy change, so too should our attitude to learning. We should think of education as lifelong. We all need to adapt, but workers can’t do that on their own.”
Santander’s new initiative, combined with its call for government action, underscores the urgency of addressing the UK’s skills crisis. As the economy evolves, Santander’s focus on developing essential skills in leadership, digital technologies, and sustainability will be key to driving future productivity and ensuring the UK remains competitive on the global stage.
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Santander calls for government focus on leadership, digital, and sustainability skills to future-proof UK economy

With just over three weeks until the Budget, the Government’s plan to recruit 5,000 new HMRC compliance officers has been welcomed by leading audit, tax, and business advisory firm Blick Rothenberg.
However, the firm warns that this recruitment effort is only a small step toward fixing the deep-rooted issues in the UK’s tax system.
Robert Salter, Director at Blick Rothenberg, noted that HMRC has been under-resourced for years, and while the addition of new staff is a positive development, it won’t be enough to address the larger structural problems plaguing the tax system. “HMRC systems are often poor and don’t provide either HMRC or taxpayers with a good service,” Salter said. He cited HMRC’s tool for determining employment status for tax purposes as an example of a system that frequently produces incorrect results when reviewed against binding UK case law.
Salter stressed the importance of comprehensive training for the new recruits, emphasizing that the complexity of the UK tax system requires a thorough understanding of its many intricate and sometimes counter-intuitive regulations. “Without long-term, in-depth training, the money spent on recruitment could be wasted, and taxpayers may face a worse service due to under-trained officers who misinterpret tax laws or request the wrong information,” he warned.
As the Budget approaches, Salter hopes that Chancellor Rachel Reeves will provide details on how the new HMRC officers will be trained to effectively address the complexities of the tax system. He stressed that while the recruitment drive is a positive first step, it must be accompanied by significant improvements in HMRC’s systems and procedures to truly make a difference for taxpayers.
Blick Rothenberg’s concerns come at a crucial time, with taxpayers and tax advisors eagerly awaiting the potential tax changes expected in the upcoming Budget. The firm’s experts argue that without a clear plan for comprehensive training and system upgrades, the Government’s efforts to improve HMRC’s capabilities may fall short of the intended impact.
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Recruiting 5,000 new HMRC compliance officers just first step in fixing UK’s tax system, says Blick Rothenberg

If you’ve been paying any attention to the news in recent years you will know that Britain has a productivity ‘problem’.
August publications such as the Financial Times, and The Economist will tell you Britain’s ‘poor productivity’ is ‘holding us back’ as a country on the world stage.
Institutions from the London School of Economics, Economics Observatory and the National Institute of Economic and Social Research put it down to a ‘lack of investment’.
And if you look at the latest Office for National Statistics figures you can see it in black and white.
For every hour we work in the UK we make £46.92, while in the US they make £58.88, Germany makes £55.83 and France makes £55.50. If only we could work harder and more efficiently they bemoan.
But what if we look at those same statistics as a customer. Suddenly the UK looks the best value. All things being equal customers can buy an hour of work in the UK for the less than in some of our G7 neighbours.
When customers are global suddenly that ‘poor productivity’ is not a disadvantage its an advantage. The UK looks cheap.
Now some might argue that I am simplifying too much; economists also use a second measure of productivity and that is Gross Value Added (GVA). Simply put, it’s the difference between a raw product and the output after a worker has turned it into something.
This measure works really well in manufacturing. You just take the end price of a car, minus the cost of the raw materials in making that car and then divide the remainder by the hours worked. If the factory becomes more productive and they produce cars in less time then productivity is up.
But here’s the problem with using that measure in the UK. Our economy is 81 per cent services! Our service sector is an unusually high proportion of our economy. In France it is 70% and in Germany 62%.
Now the thing about services is the human hours generally is the product. And the price people can charge for those hours flexes according to the market.
If the raw materials of a car goes up, the overall price of all cars will go up so companies can make a profit.
But in the service sector, companies can cut back much further if the economy is doing badly because the hours are the only thing they are really selling.
So you can see what I am talking about let’s look at an example.
I run a professional services firm. One of the things my firm provides for its clients is PR services. Broken down in very simple terms we might say to a client that we can generate four high quality pieces of coverage for £X per month. And for simplicity I calculate that it is going to take my team 50 hours of work per month to achieve that.
Now this client is a global client and also needs to achieve the same in the US. Their agency takes the same amount of time and achieves the same result but charges twice as much.
According to the economist which company is more productive? That’s right, if you’ve been following you will know that the US agency has charged twice as much for its time even though the output for the end consumer was the same.
I’m no economist but I do understand value and I know that all things being equal something half as much is better value.
But it’s not just me spotting it, our customers do to. Despite my company being an agency of just 15 people, around a third of our customers are headquartered abroad. We don’t market ourselves outside the UK – they just know they get better bang for buck.
That’s also why after seven years in the UK we are looking to expand into North America. We already have interest in us setting up an office in Toronto.
I will be taking an exploratory trip out next month. And guess what, I’ll be taking two of my ‘unproductive’ British workers with me.
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Could everything you have been told about Britain’s low productivity be wrong?

David Sullivan, chairman of West Ham United and one of Britain’s wealthiest individuals, has criticised the Government’s tightening of non-dom tax rules, blaming the changes for driving the super-rich out of the country.
Sullivan, who is the football club’s largest shareholder, has cut the asking price of his 21,000 sq ft London mansion by £10m to £65m, citing high interest rates and upcoming tax reforms as major factors.
The property, located in Marylebone, has been on the market since late 2023. Sullivan told Bloomberg: “What the Government is doing to the non-doms isn’t very nice, and a lot of rich people are leaving the country as a result of what they anticipate in the Budget. Three or four of my friends have already gone to Monaco or Dubai.”
David Sullivan has cut the asking price of his Marylebone town house to £65m Knight Frank
At 75 years old, Sullivan now faces selling the mansion, which boasts luxurious features like a 12.7 metre swimming pool, hot tub, gym, and a sky lounge, at a loss. The businessman, worth an estimated £1.1bn, spent around £75m buying and renovating the property, which has served as the backdrop for films like The King’s Speech and Amy Winehouse’s Rehab music video.
The issue centres around non-doms—UK residents who hold tax domiciles elsewhere—who currently benefit from not paying local taxes on overseas earnings for up to 15 years. The government, however, under plans announced by former chancellor Jeremy Hunt, is set to phase out non-dom status by April 2025. The reforms would limit new arrivals to a four-year grace period before full taxation on global earnings kicks in, while existing non-doms would have a two-year transition period. The crackdown has raised concerns of a significant exodus of the wealthy from the UK.
Sullivan’s frustrations reflect a wider sentiment among the UK’s super-rich, who are worried about potential capital gains and inheritance tax hikes in the upcoming Budget. Christian Angermayer, a cryptocurrency billionaire, recently relocated to Switzerland, labelling the Government’s non-dom tax crackdown as a “huge mistake”. Charlie Mullins, Britain’s richest plumber, has also listed his £12m London penthouse for sale as he prepares to flee the country.
The 21,000 sq ft townhouse on Portland Place includes a commercial kitchen Knight Frank
Rachel Reeves, the Chancellor, is reportedly considering diluting the proposed non-dom reforms amid fears that the measures may not generate the expected £2.7bn by 2028. Treasury officials are concerned that the tax changes could backfire, triggering a mass departure of wealthy individuals from the UK.
Sullivan, who built his fortune in the 1970s through the adult entertainment industry before expanding into property, football, and media, co-owns West Ham United and is joint chairman of the club. His decision to reduce the price of his mansion reflects wider struggles in London’s super-prime property market. According to Knight Frank, only 10 properties priced above £30m changed hands in the year to July, compared to 38 in the previous year.
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West Ham chairman blames government tax crackdown for super-rich exodus ahead of budget