Armed forces recruitment crisis could worsen over VAT on private school fees, insiders say

A recruitment and retention crisis in the armed forces will grow unless the government exempts military families from paying VAT on private school fees, insiders have warned.

Sky News understands that more and more families are raising concerns internally about the "damaging" policy after the chancellor failed to offer sufficient protections in her budget.

They say a promise to increase an allowance funded by the Ministry of Defence (MoD) that helps to cover the cost of school fees does not go far enough, and that highly experienced personnel - officers and other ranks - will quit if Rachel Reeves does not perform a U-turn.

Such a loss in skills would weaken UK defences at a time of rising threats, the insiders say.

A soldier with a child at boarding school, who asked to remain anonymous, said: "I will have to leave military service, as I will not inflict another school move on my child."

He said: "On one side, the chancellor wore a poppy during her budget announcement, and then proceeded to deal a damaging blow to members of His Majesty's Armed Forces by not including a simple exemption."

An army spouse, who asked for her identity to be protected because her husband is serving, said: "This is people's children. This is people's money in their pocket."

She told Sky News: "If there is a nice job offer outside the military… that is going to look way, way more attractive than it did a few months ago. The army is in a recruitment and retention crisis, so why would you do something like this?"

Offering a sense of the scale of the potential impact, the Army Families Federation, an independent charity, said nearly 70% of families that shared evidence with it about the policy said without protection from the full cost of the VAT they would consider quitting the service.

The mobile nature of military life - with postings around the UK and overseas - often requires service personnel to move every few years, with any children they have forced to relocate with them, transiting in and out of different schools.

To protect against this disruption some parents decide to send their kids to private school - often to board.

More than 2,000 of these personnel - the majority of them in the army - claim money from the MoD to help cover the cost of private school fees.

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The Continuity of Education Allowance (CEA) funds up to 90% of tuition fees but families must pay a minimum of 10%.

Many of those who take this option will have agonised over the affordability of the portion they will still pay, which can amount to tens of thousands of pounds per year.

They will now have to pay more to cover the VAT on this portion of the bill - or else pull their children out of school, a nightmare option, especially for those serving abroad.

In addition, some other military families that do not qualify for the education allowance - which is only allocated under a very strict criteria - still opt to put their children into boarding school to ensure the continuity of their education at a single location.

They will have no protection from any of the VAT burden.

James Cartlidge, the shadow defence secretary, said he has received a lot of messages from impacted families and is urging the government to give them an exemption.

"The emails I've had are saying: I've got to choose between my child and serving my country," said Mr Cartlidge, who previously served as a Conservative defence minister.

"The government really needs to respond to this quickly."

An MoD spokesperson said: "We greatly value the contribution of our serving personnel and we provide the Continuity of Education Allowance to ensure that the need for the mobility of service personnel does not interfere with the education of their children.

"In line with how the allowance normally operates, the MoD will continue to pay up to 90% of private school fees following the VAT changes on 1 January by uprating the current cap rates to take into account any increases in private school fees."