‘VAT? What VAT?’: Private school boasting it will absorb Labour’s tax hike propped up by Chinese investors

A Shropshire private school that has boasted it would not pass on Labour’s planned VAT hike to fee-paying parents is being propped up by Chinese investors, Morning Wire can reveal.

Adcote School, an independent school for girls, courted controversy in April for funding a motorway billboard saying “VAT? What VAT?” to advertise its decision that it will absorb the cost of the VAT hike if introduced.

But amid concerns that Labour’s policy, which was confirmed in Wednesday’s Kings Speech, could result in an exodus of students to the state sector, questions are swirling about how the institution intends to cover the costs itself.

According to its latest accounts for the year to August 2023, profit fell by 81 per cent from £328,971 to £60,551, while it still has over £1m in loans to pay back. Directors acknowledged “the negative position of the profit and loss reserve at the end of the year” in the school’s Companies House filings. “We have made enquiries with the funders to ensure there are available resources to support the company for the foreseeable future.”

“From their recent accounts, Adcote are a third below their pupil capacity, have a tiny excess and have £1.4m in outstanding loans, and, as acknowledged by their directors, are financially vulnerable,” said one governor from another independent school, who preferred not to be named.

“Why then did they produce the somewhat goading ad “VAT, What VAT?” given they evidently are not in a financial position to absorb 20 per cent VAT.”

Adcote was bought by Shanghai-headquartered Ray Education Group, an investment firm headed up by James Hu, in 2018. According to reports, Hu, who also sits on Adcote’s board of directors, has served as a secretary on the Communist Party’s Hongkou district committee. It is unclear if he still holds this role. 

The deal was overseen by then trade secretary Liam Fox, the Daily Mail reported, and the company has since funded an international expansion, with the school now boasting Adcote Shanghai, Adcote Suzhou and Adcote Zezhong. 

Ray Education Group’s investment has prompted concern over how British private schools may choose to manage Labour’s VAT hike, given that many have struggled financially in recent years. It has previously said it would invest in UK private schools as part of Xi Jinping’s Belt and Road initiative, according to a report.

“The notable difference, is unlike most private schools, Adcote is now no longer a registered charity… it has Chinese owners,” the governor added. “With Chinese ‘investment’ going into schools that are clearly uneconomic, it raises some questions as to their motives?”

Chinese investors have snapped up a number of struggling British independent schools in the last decade. Bright Scholar, which is owned by the Chinese businesswoman and chair of embattled property firm Country Garden Yang Huiyan, bought Bournemouth Collegiate, St Michael’s School and Bosworth Independent College in 2018 and 2019. Country Garden was founded by Huiyan’s father Yang Guoqiang, a high ranking member of the Communist Party’s advisory council.

Luke de Pulford of the inter-parliamentary alliance on China, said: “If we are worried about Beijing’s influence in our schools, we shouldn’t be making policy that will make them more dependent on Chinese money.

“Our education system remains the envy of the world, but there is no credible plan to save it from authoritarian influence. We should be protecting it.”

Ray Education Group bought Adcote from IQ Schools Group. IQ Schools took the decision to switch the school from being a charity to a private company.

Adcote did not respond to a request for comment. Ray Education Group and IQ Schools Group were approached for comment.