If a British child goes to a fee-paying school in the UK, that is a child the state is not having to pay to educate at all. Putting ideology aside, that's a benefit to the nation. Also, while VAT may not be being paid on the fees for the schools, every employee of the school will be paying national insturance and income tax; as a charity, one way or the other, the revenue will either contribute to building the institution or somehow flow back into the economy elsewhere.
The public school system does bring money into the UK. Many of the children of the world's elites go to school in the UK, building relationships with each other and the British kids they mix with. That's soft power and an investment in our diplomatic reach down the line, which as a pretty small island with little in the way of natural resources is pretty important.
In many respects, I don't think the VAT decision is that big a deal; for the vast majority it will not be a factor in whether they go, which means it's good for the treasury. On the other hand, where it will have an effect is the cut off line for kids in the UK where it's marginal where its affordable for the kids to go there. The only social effect of this will ironically be simply widening the gap as far as social mobility is concerned. I don't entirely disagree with it, but I would have liked to have seen a VAT exemption for British children attending these schools.
Wanting rid of public schools is understandable from a very narrow idealistic point of view, but in the real world it's a destructive thing. Beyond that, In the final analysis, equality in education is impossible; if you have two children in the same school, the child whose parents take more interest in their children's education will always tend to have better educational outcomes than the child whose parents don't care. And ultimately, if the government actually delivers decent education for everyone, the sector would become redundant without anyone having to actively seek its destruction.
As for Trinity, King's, and all the other colleges and their assets, it's really of no importance how big or small their portfolios are. The bottom line is that the rents they get from those portfolios go into keeping one of the best educational establishments in the world as one of the best educational establishments in the world for the betterment of the students, research and development, mankind, and the local tourist trade paying for the upkeep of the beautiful architecture.
