PARLIAMENTARY DEBATE
Independent Schools: VAT and Business Rates Exemptions - 8 October 2024 (Commons/Westminster Hall)
Debate Detail
That this House has considered the removal of VAT and business rates exemptions for independent schools.
It is a pleasure to serve under your chairmanship, Dame Caroline. This debate matters for various reasons. I have always been and will remain committed to supporting education across the board, including our excellent state schools. I want all schools to be adequately funded to present opportunities for children from all backgrounds. I say that as someone who was proudly educated in state schools and who cares about the life chances of everyone.
I have secured this specific debate to highlight how Labour’s ideologically driven plan to remove VAT and business rate exemptions for independent schools is an inherently flawed policy. If Labour will not abandon the education tax I will also suggest some improvements that the Government could make to lessen the impact of the policy on pupils, parents and school staff in Bromsgrove and across the country.
There are approximately 2,500 independent schools in the UK educating more than half a million children. They are often small schools: more than 40% of independent schools have fewer than 100 pupils according to Department for Education data. The reality is that the policy will not fulfil its aims and will displace children mid-education. State education must be funded by the state, supported by taxpayers. The VAT exemption encourages greater use of independent education, reducing the number of state school pupils, meaning more money available per pupil in the state sector.
The Times recently stated that 71% of parents felt that rising school fees would influence their future decision about independent schooling. Additionally, 26% of parents said they would have to withdraw their children from independent schools if VAT is introduced.
An Adam Smith Institute report provides a detailed examination of the potential economic impacts. If 10% to 15% of students transfer, the net revenue could be negligible. Alarmingly, in a scenario where 25% of students switch from the independent sector to state schools, the tax could cost the Government £1.6 billion.
Currently, independent schools’ significant economic benefits include supporting 328,000 jobs, saving £4.4 billion from the education budget, and supporting £5.1 billion in additional tax revenue. They do this while saving the state £4.5 billion by removing the requirement to fund the education of 7% of children as the result of parents exercising this choice. Furthermore, independent and state boarding schools are a unique subset of the schools system, with the additional feature of attracting overseas students to the UK. Some 62,700 pupils are international students in independent schools, making up 11% of the population. This is a key export for the country, adding £2.1 billion to our economy annually.
One parent wrote to me:
“As a widowed single mother who works full-time, I make enormous financial sacrifices to ensure my child can attend the same school from age 3 to 18. This stability is not only essential for my child’s development but also enables me to work and contribute to society. This proposed VAT would be devastating for families like mine.”
Another mother wrote to me and said,
“We also have a daughter who will need to start secondary school in two years. We had hoped for her to attend the same school as her brother but, with no scholarship likely and the addition of VAT, it is simply impossible. This is a painful realisation, and I worry that she will resent the opportunities that we couldn’t give her (but we could give her older sibling).”
We have yet to talk about the impact on special educational needs and disabilities education. This measure will cause particular problems for children who are in receipt of such bespoke education. Nationally, at least 130,000 pupils in independent schools receive SEND support in mainstream and specialist settings. That is 20% of the pupils in UK independent schools, which is slightly higher than the state school average. Independent schools help to provide additional value-adding capacity to SEND education.
Another mother wrote to me to outline the benefit that independent schools can have for children with SEND needs:
“We moved our autistic child to a small independent school and the transformation was immediate. Classes are small and quiet, and the school is very nurturing and family oriented. It has been wonderful to see her blossom and slowly get more and more involved in school life. We would not have chosen for our daughter to go to private school but there was no suitable state provision available. We are paying a significant amount of money to be able to do this. Adding VAT on top feels like we are being punished twice for having a child that doesn’t fit into the state system, either in mainstream or specialist schools.”
Adjacent to SEND schools, we must consider faith education. This education tax will make independent faith schooling unaffordable for many families, hurting the 370,000 pupils who attend independent faith schools in England according to Department for Education figures. It is important that the House notes that fees at those schools are frequently below the independent school average, and sometimes below state per-pupil funding levels. Often the schools have a suggested fee, but the community supports those who cannot afford the full fee by themselves.
We then get into issues around the implementation of the policy. Implementation in January will put pressure on local authorities to find rare and academically disruptive in-year placements. Those will be difficult, as state schools will be full and many will be oversubscribed, with areas that have a high number of pupils attending independent schools having some of the busiest state schools.
Does my hon. Friend the Member for Bromsgrove (Bradley Thomas) think that it is shocking that not a single member of the Education ministerial team of the Labour Government has bothered to show up today, yet they continue to use the airwaves to spew out spiteful and divisive messages about this Labour policy? The Minister present, the hon. Member for Ealing North (James Murray), does not care about education; he cares about money—he is a Treasury Minister. He knows that the policy will not raise any money, but it is going to cost taxpayers.
I call on the Government to pause and reconsider this education tax, with a view to abandoning it. It is unethical and will damage a British success story. It will not fulfil its stated aims. The policy will not raise significant money, but is being forced through at the expense of state and independent schoolchildren to further the Government’s divisive ideological agenda that so many in this House have recognised.
If the Government refuse to abandon the policy, there are some sensible and practical steps that they can take to minimise the impact that it will have on parents and children. First, delay the imposition of VAT until September and the start of the next academic year. There has been no proper impact assessment of these policies on state schools, SEND provision or faith schooling; a full consultation and impact assessment is needed before changes are announced. Secondly, assess how very small schools can be protected from VAT and tax changes. They are a vital community resource and charge much lower fees; that should be acknowledged. Thirdly, exempt service families on continuity of education allowance from VAT. Those who rely on independent education to serve our country should absolutely not be penalised. Furthermore, the Government should protect children currently applying for an education, health and care plan, as parents should not be penalised for the delays in the process.
I would like the Minister to provide clarity on the following points. Will the Government be issuing guidance for state schools on how to deal with applications from parents, to prevent parents from being asked to prove that they cannot afford to fund independent education? During the general election campaign, the right hon. Member for Islington South and Finsbury (Emily Thornberry) commented that state sector classes must increase and that they will just have to cope. What assessment have the Government done to determine whether state sector classes have the resources available?
When it comes to students transitioning from the independent to the state sector, what provision will there be to prevent disruption to their education in subjects that may not be taught at their new state schools? In the event of academic performance failures due to the disruption caused by transitioning between schools, will academic leniency be granted to students? I also seek clarity on what funding and support will be made available for students with special educational needs who are transitioning between the independent and state sectors.
I hope that the House will clearly appreciate that this short-sighted policy will hit hardest those in society who it claims to be supporting, that it will damage the wider education sector as a whole, and that it will worsen academic and social inequalities while being a net cost to society, the education sector and the British taxpayer.
Will the Minister confirm whether a low-income family whose child is in receipt of a bursary would be liable for VAT on the total school fees? Would a staff member in receipt of an employee discount on fees also be liable? With boarding schools already at 86% capacity and some already withdrawing from the market, will the continuity of education allowance for military families still be able to house the 4,200 who currently use it? Will arts schools be exempt? If so, and we are starting to exempt schools, is this even legal? If we do not exempt art schools, that means people who have the talent to go will have to be in the vicinity of the school or travel. That is going to withdraw a huge amount of opportunity from those in the arts sector.
What mitigation is there going to be for the financial planning of international pupils? They have a choice of a global market. As my hon. Friend the Member for Bromsgrove (Bradley Thomas) mentioned, this is a £2.1 billion export market. Again, is it going to be legal to exempt certain schools, such as those involved with SEND provision? What impact will there be on council budgets? There is an issue for those of us who represent vast rural communities: if children are taken out of the private sector and put into the state sector, the state will to have to fund the transport for those children to go to school. Upon whose budget will that fall? Fundamentally —there is evidence of this from every council—if primary schools are already close to capacity, will the state pay to put those children into private places? Will parents then be taxed on that as an in-kind benefit or will the law be retrospectively changed—which, of course, would suit the Prime Minister and a lot of people with free wardrobes?
The parents who have contacted me in desperation over this proposed change are not wealthy. They are scraping together the fees so that their children can attend a school where they can thrive. One told me that she had sold her house and given away the family pet in order to move into a flat. She changed job to be able to afford the fees, and she now buys everything second hand. Another said that they had also sold their home and moved house to afford the fees at their local Steiner school as their children had also failed to cope with mainstream schooling.
The introduction of VAT on private school fees may not have much impact on parents who can afford £50,000 a year for a child. However, one school in my constituency, whose fees are just £10,000, said that it will face closure if it loses just four more children from its roll. All those small schools are trying to absorb as much of the cost as possible, with teachers taking salary cuts and much-needed building repairs being put on hold indefinitely. Will the Minister think about the impact the tax will have on the children who cannot get an EHCP? They cannot cope with the rigours of the state school system and they will quite probably end up dropping out of school completely if this goes ahead, with all the implication that has on working parents who then may have to consider homeschooling instead. I urge the Minister to think about a lower fee threshold for the introduction of VAT. After all, those parents are already paying income tax to cover an education that their children do not receive.
Does my hon. Friend agree that the Minister should consider resources for local authorities to cope with the wave of applications for support from SEND children currently being supported in independent schools? They are not applying for EHCPs now but will doubtless need to in future, if they are no longer able to get the care and support they need at their schools. Does she also agree that the Minister should secure a rise in the armed forces allowance to cope with the 20% increase?
I implore the Minister to rethink how the VAT policy will damage families who have tried so hard to find the right setting so that their children can thrive. If he would like to come to South Devon and see for himself what some of these brilliant schools offer, I will be delighted to show him around.
If tax take is in fact the rationale, where is the impact assessment? How much will actually be raised by this policy, and what costs will be associated with its implementation? We have already heard that some 10,000 students have left the private sector and are going into the state sector just this September. What impact will there be on the education of those children?
On Friday I went to see a local headmaster at a private school in my constituency—the only one that I am aware of. At this stage, I should register my interest: I have one child at a fee-paying school. The headmaster said that there are primary schools locally that are totally full and there is no space for those children leaving the private sector to go into local primary education. Where is the impact assessment on SEND children? Some 34% of the intake of that private school are pupils with special educational needs. Partly because of the delay in the EHCP process, will they be penalised? What happens when they get taken out of their educational setting and put into a new school with new friends, or a lack of them? What will be the impact on their personal education? What will be the impact on SEND provision in the county of Norfolk?
What assessment have the Government undertaken before the Budget on these policies and their costs, and what mitigation will they put in place? We have already heard about the impact on military families. Is it right to target the children of our servicemen for this hypothecated tax? Was targeting poor pensioners not enough for this Government?
That brings me nicely on to the impact on bursaries. At the school in my constituency, 20% of fee revenue goes on bursaries. It is exactly that level of support for people with greater financial disadvantage that will be the first casualty of this unfair and ill thought-out policy. Again, it is an odd target for a tax take. What about the impact on local businesses? The school employs 286 people of all different types in my constituency, and job cuts are already under way. I ask the Government to think again. Surely the introduction of this ill thought-out policy halfway through the academic year needs to be revisited.
Then there is the impact on children who are sitting for public examinations. It is always bad when children have to change schools because of circumstances that are forced on them, but even more so when they are sitting for their GCSEs or A levels. At the very least, the policy should not be implemented for people in those years. For pupils applying for education, health and care plans, the delay in the Government process of undertaking those assessments should not mean that costs are forced on parents who are taking active steps to support the education of their children. For military families and for specialist music and dance schools, the Government have put forward no evidence to support their stated policy objectives. The policy feels rushed. The only people here to support it are those who are paid to do so, and it is vulnerable children in our society who will pay the price of these internal Labour politics.
I will make two points. I have a large number of independent schools in my constituency, but I want to speak about our local grammar school, Regent House. It is one of the top schools in Northern Ireland and has a preparatory school attached. I have been contacted by parents of children in the school, who have succinctly outlined their view: this is clearly yet another blow to the working family who are trying their best for their children and making sacrifices, which become more difficult with every passing Budget. Our schooling system in Northern Ireland is different, and I agree with my party colleague, the Education Minister Paul Givan, who has outlined reasons why the change cannot go ahead. Some 2,500 pupils in Northern Ireland attend grammar school preps, Christian schools and other independent schools, and their parents top up to allow them to have this privilege.
Let us be clear about what is happening: these are not people with lots of money. These are people who use their money to send their child to a good school to provide them with an education. Taxation is decided at Westminster, as the hon. Member for Edinburgh West (Christine Jardine) said, and that is important. The headmaster of one independent Christian school said,
“We have some pupils in our Christian schools who are entitled to free school meals, so by no means are many of our parents rich.”
The options facing those parents are to send their children to the mainstream school against their religiously held views or to homeschool them, and there is very little regulation of homeschooling in Northern Ireland. A private school in Northern Ireland is not a status symbol, as many believe, but a human right based on people’s right to their faith. The Government will massively overstep if they use a massive, sweeping brush to address something that requires a fine brush.
A school in my constituency on the border in Holywood has a different approach to learning, under which children are excelling. Other international schools need to be able to provide schooling for children who move around with their parents’ work and who need access to a different format of education—one where there is some continuity. None of those are status symbols, and they need to be considered separately. I fully agree with the arguments that have been made today, and I ask the Minister to consider them.
Ministers think this policy will impact only on the rich, but, for nearly a decade, a genuinely working-class community in the Cheshunt and Turnford area has benefited from the state and independent sectors working together. I therefore urge the Government—I would like to hear from the Minister today on this—to allow independent schools to offset the financial support and resources they provide to state schools against their VAT liability.
I want to highlight two issues that relate particularly to the educational ecosystem of Surrey Heath, but which will, I think, also resonate widely across the country. The first is special educational needs. Of the 820 students in private schools across Surrey Heath, 230 have special educational needs of varying degrees of severity, and, of those, 138 are not in possession of an EHCP. That figure indicates the disproportionate service and choice that small, local private schools provide children and families with special educational needs.
For those children and families, private provision is more than just an alternative to the state sector; it is a crucial lifeline for children who struggle in mainstream education or who cannot secure one of the limited places in a special educational needs school provided by Surrey county council. Parents and headteachers have made it clear to me that families with children with special educational needs already face significant financial strains, and an additional 20% will be the tipping point that forces already stretched families to withdraw their children and turn again to an overstretched county-run system.
My second point relates to military families. As we have close ties to Sandhurst, Pirbright and nearby Aldershot, around 10% of pupils in my constituency come from military families. Those families already report that they are struggling with fees because of the increasing gap between the continuity of education allowance paid by the Ministry of Defence and the rising cost of private education, and adding 20% would widen that gap further still. Many families would reach their tipping point and be forced to withdraw their children from their current schools, with all the attendant risks.
I speak as someone who was for 14 years the governor of two special schools near my constituency. I am proud of what the last Labour Government achieved: £1 billion into services for disabled children and young people and their families, and lots of new rights for those people. Under the Conservatives, we have gone backwards, and the situation in the special educational needs sector is dire. As a result, young people cannot get the EHCPs they need.
We do have a problem as a result of the policy, however. Parents who cannot easily afford to send their children to private schools are digging deep into their pockets, as my constituents in Chelsea and Fulham have written to me. That is the situation we are faced with. Local councils are sending kids to private schools because they cannot do otherwise, and the schools are small and cannot easily absorb the VAT. I am pleased that the Government recognise the particular challenges facing children with additional needs and have agreed to exempt those with EHCPs from VAT. I am pleased that the Government have committed, as the Minister said when discussing SEND in a debate before the recess—
Labour Members are notable by their absence. I can only imagine that they are ashamed of this policy to charge VAT on education. Parents across the country and in Mid Bedfordshire deserve to be able to send their child to the best school for them. Parental choice is crucial to ensuring that our children get the best start in life, but too many parents in Bedfordshire are already struggling to get that for their children. The Department for Education has acknowledged that Bedford borough’s secondary schools are effectively full. A new school will not come along until 2027, and it is anticipated that even that school will be filled by future housing growth.
Just over 15% of children in Bedford borough, and nearly 10% of children in central Bedfordshire, did not receive an offer for their first choice secondary school. That situation will get worse as our population grows. Across Bedfordshire, 19 independent schools currently support 5,744 pupils. It is a policy of envy—the Labour Government want to drive pupils away from the independent sector and into state schools. That means less choice for parents and bigger class sizes, reducing the quality of education for all.
The Government have talked about growing the economy, but imposing VAT on independent schools will fundamentally damage the economy in Bedfordshire. Independent schools contribute £800 million to the east of England’s economy, supporting 47,000 jobs. In a recent visit to Orchard school in Barton-le-Clay in my constituency, I was struck by its wider economic impact. It employs local people, uses local suppliers, and supports local businesses.
As independent schools try to absorb rising costs to minimise the impact of these taxes, they are faced with difficult choices about how to continue the important charitable work they do, including fully-funded bursary places—as many as one in 14 pupils at one senior school in my constituency. Like others here, I am particularly concerned about the impact on children with special educational needs.
Finally, the policy is simply unworkable. The Government are asking staff and bursars to rethink how they operate invoicing and fee processing halfway through an academic year. At the very least, I urge the Government to move the start to the beginning of the next academic year. This is not about embossed stationery, swimming pools and astroturf; it is about children and their education. I urge the Government to think very carefully about this decision and to do as the headteachers at my roundtable on Friday suggested: put children at the centre of this policy.
However, as the hon. Member for Chester South and Eddisbury (Aphra Brandreth) said, this is about the education not just of those at independent schools, but of the hundreds of thousands in the state system. Their education will also be damaged because of the capacity crisis. Class sizes will grow. There is an SEN crisis everywhere. Local authorities are in panic; headteachers are in panic; parents are in panic and, most shamefully of all, children are panicking. Will they be removed from their school in the middle of a school year, be taken from their friends and have their education damaged? It is extraordinary.
I give one example: I have had a letter from a constituent who has two children with SEN provision. She cannot afford the extra 20% so she has to put her children into the state system. There is no capacity within an hour’s drive, so she has a quote from the local taxi firm. The cost to the local authority will be over £20,000 in taxi fares per child. That is not only damaging to the education of children; it is an economics of utter tomfoolery and madness.
A constituent of mine is worried about this exact issue. She got in touch to say:
“My son has been diagnosed with ADHD and high-functioning ASD…he has already been let down by the state education system. His first school reported us to social services, rather than offering the support he needed. His second school refused to help us secure an EHCP, and instead suggested we monitor his intake of E-numbers.
Given these challenges, we made the difficult decision to enrol him in private education.
We are not part of the elite; we work very hard and have had to borrow a significant amount of money to cover his tuition fees for next year.”
The proposed removal of business rates relief will exacerbate the financial challenges faced by independent schools, and the loss of those schools will devastate local communities, limit educational choice and further diminish the capacity for SEND education. The Labour Government’s lack of impact assessment and weak fiscal evaluation will ultimately be detrimental to many families in my constituency.
Representing a constituency with six mainstream independent schools and numerous small SEND providers, I can clearly see that there is a huge amount of anxiety among mums and dads and school teachers about the impact the policy will have. The first key factor is that where private schools are full, the state schools are usually also full. Parents are finding that if they need to move, there is simply not the capacity in the state system locally because of the demographics of pupils.
We have to ask ourselves: does the harm done by this policy produce a benefit in the state sector that would justify it to our constituents? The Government’s proposal amounts to less than half of the cost of a single classroom teacher per state school across the whole of England—not even sufficient to make up for the numbers of children displaced by the impact of this policy. So it is no great financial gain for state schools that may be feeling pressed—and, as has been said, it makes us the only country in the developed world to tax schooling.
More concerning, however, are two impacts. The first is the reclaimability of VAT that bringing schools within scope entails. It is likely that the Government will have to repay far more VAT to independent schools than they will raise by this policy. Secondly there is the impact of business rates; we have not spent a lot of time on them in this debate, but, at a time when we know that the average state school in England has a surplus balance of more than £162,000, we have to ask whether, given the harm it does to the sustainability of our private sector, this policy is possibly justified at a time of declining state school roll numbers.
“We receive no revenue or capital funding from the Department of Education to run our school therefore our parents have no choice but to pay fees when, out of religious conviction, they chose to send their children to our school. We are not an elite school, nor do we practise academic selection in any form. We believe this policy lacks fairness. Some of our school parents are on low incomes, demonstrated by pupils being entitled to free school meals. An added cost of 20% will deprive them of their religious based choice to send them to a Christian School.”
That is important not only in a Northern Ireland context, but in the context of this Government’s intention to add VAT to independent school fees, because under section 75 of the Northern Ireland Act 1998, public authorities must
“have due regard to the need to promote equality of opportunity”.
Adding this VAT fee to a religious-based school deprives the protected characteristic of religious belief. The administrator also believes that the addition of VAT may well be an infringement of parents’ religious freedom and liberty. Article 2, protocol 1 of the European convention on human rights states:
“No person shall be denied the right to education. In the exercise of any functions which it assumes in relation to education and to teaching, the State shall respect the right of parents to ensure such education and teaching is in conformity with their own religious and philosophical convictions.”
The detrimental effect of this ill-conceived policy is nowhere better illustrated than in the cohort of pupils whose parents are in receipt of continuity of education allowance. CEA is critical for military and diplomatic service families, who need boarding schools to provide a stable education. A societal and moral contract exists between the state and our military, a golden thread that runs through our society and binds the two together. The Government’s proposals threaten not just to shake that bond, but to break it. To date, the Government have provided no assurances that the policy will exempt those service families in receipt of CEA. Combine with that the rushed decision to implement the plan by January 2025, and it is little wonder that service families are deeply distressed by the ongoing uncertainty.
If the Government fail to grip the situation, the cost of a suitable education for many armed forces children will become unaffordable. Many parents will be forced to withdraw their children from the school they currently attend and, in the worst-case scenario, many will make the decision that service life is no longer compatible with their family and leave, risking our national security.
By failing to act with competence, the Government are failing to uphold the contract between the state and our armed forces. My request to the Minister is to provide the service community with reassurances that they will not be left high and dry.
My constituency of Huntingdon has three independent schools and the issue we are debating today will significantly affect Kimbolton school in the west of the constituency. The absence of any secondary school places at schools within a commutable distance of Kimbolton has caused concern for many of the parents who have contacted me. Cambridgeshire, and specifically Huntingdonshire, has grown significantly in recent years; with large areas of development already approved, as well as changes to planning regulations and the Government’s commitment to greater Cambridge, we will see tens of thousands of homes built in the county during this Parliament alone.
As secondary schools in Huntingdonshire already have waiting lists for every year group, and local parents are troubled by the governance and educational environment at the three schools within the Astrea multi-academy trust, an exodus from the independent sector might exacerbate existing issues and create unnecessary pressures. Thus far, the Government have done nothing to address or assuage these pressures and concerns.
The views of the students impacted are among the voices that we rarely hear. Harriet Dolby, the former head girl at Kimbolton school, who left the school this past summer, told me of her concerns about how the school’s culture could be irrevocably altered. She said:
“Kimbolton School has made such a significant impact on my life, giving me opportunities I would not have been able to get anywhere else, growing my confidence and helping me to gain positions of leadership, which have set me up with skills for the future. However, I am concerned that Kimbolton will not be able to make that positive impact on as many people’s lives in the future. 20% VAT on school fees will be too much of a stretch for too many parents and will likely damage the family feel made possible by having pupils from a wide range of family backgrounds. I am worried that the Kimbolton School that my siblings will attend won’t be the same school that I attended because of this VAT.”
I have little confidence that the Government will deviate from their present course, but mitigation of the concerns is much needed. The Government are wedded to their aspiration tax. It will level the playing field but, sadly, that level is likely to be lower and not higher.
I support all our schools and I am proud to have a range of independent schools in the Runnymede and Weybridge constituency. I declare an interest: my children, like one in five children in my constituency, go to an independent school.
I want to take the opportunity that we have today with a Treasury Minister responding to the debate, because Treasury Ministers are all over numbers and impacts. I am pleased to see that it would seem that, following the election, the Treasury has looked at Labour’s manifesto commitments and actually thought about them, to the extent that we are starting to get various leaks and stories that it will abandon them. I hope that the Treasury will do the same thing with this awful policy.
I know that a Treasury Minister will not make a decision without an impact assessment and I am sure that the Exchequer Secretary will express his concerns about the absence of an impact assessment for this policy. However, while he is considering what the impact of the change—I hope he comes to the Dispatch Box to tell us the numbers around it—let me share some information from my constituency, where about 7,500 to 8,000 children attend independent schools.
My schools tell me that about 5% to 10% of these pupils will move because of the imposition of a tax on education. That means there will be far more pressure on our local state school system and there will also be disruption for those children. It also means that the 10% to 15% of children with special educational needs who do not have EHCPs will start seeking them, which will mean more cost for the taxpayer and more transfers between schools, which would be a backwards policy. Most egregiously of all, the Government are going to do that halfway through the educational year, with no consideration for our constituents’ GCSE, A-level and baccalaureate exam results. Will the Minister think again and persuade the Secretary of State for Education to abandon this ridiculous policy?
Make no mistake: I recognise it is a privilege to have that opportunity. Like many parents, I want to give my children something I did not have growing up—an excellent education. My schooling in Lambeth, where I grew up on a council estate, left a lot to be desired. As I grew older, I realised that an excellent education was the way out. With my children, I spent what I had to give them the best possible education. Crucially, our decision for our family did not impact anyone else.
Sending children to independent school—a personal and privileged choice—is not a bad thing that should be taxed and regulated out of existence, as Labour also want to do with smoking or by introducing a two thirds of a pint measure. It does not mean that state schools are poorer. In fact, we pay our taxes and opt out, leaving more space and school resources for others. Independent schools also offer bursaries and donate the use of their facilities to other local schools. Those who think differently have an ideological obsession, and I am afraid that this new Labour Government share it. They are not thinking about lifting schools up, but tearing some down. Remember, in 2019, it was the Labour party that voted to abolish independent schools.
Instead of the complete destruction they desire, the Government have settled, for now, on taxing these schools to the brink by imposing VAT on fees and removing their charitable status. What they picture are Eton schoolkids fresh from the family estate, high on their parents’ aspirations. They do not picture the kid done good from a council estate who also has high aspirations, the shopworker doing the extra shifts to give her kids the chance she never had or the parents giving up everything to get the extra SEN care they want to provide for their child.
This is ideological, not practical. It is knocking people down, not lifting our country up. Worst of all, it is ill-considered. As one local headteacher told me, this policy is nothing short of cruel.
As the MP for Wimbledon, I am proud to represent a constituency with such a rich and diverse education offering, including fantastic primary and secondary schools in both the independent and state sectors. I am deeply concerned about the impact that the removal of the VAT exemption will have on many of these schools. Private school enrolments have already dropped in expectation of the tax hike, and there is growing concern that the numbers leaving the private sector and entering the state system will be much higher than the Government estimate.
As the right hon. Member for Islington South and Finsbury (Emily Thornberry) made clear when she said it did not matter if imposing VAT resulted in state school class sizes increasing, this decision is ideological, not practical—levelling down, not up, with red meat to show that the red flag is still flying, or at least fluttering. It will be rushed through in just three months’ time, in the middle of the academic year, giving institutions with no tax expertise little time to register for VAT, let alone assess and adapt.
Labour can only do this because the UK left the EU. Who said there were no Brexit dividends? Not for the first time, my party is in harmony with Brussels, and believes that education should not be taxed. We are a party that believes in giving individuals agency and supporting them in making choices about their and their families’ lives.
For many, such decisions are made because they know their child would not receive the support they need within the state sector. Independent schools in my constituency, such as the Hall school, Willington and the Study, to name but three, do a huge amount to support children with special educational needs. I have spoken to many parents who have made tough financial sacrifices in order to send their children to these schools. They speak of the barriers to their children receiving the support they need, including long waiting lists to receive an EHCP. According to the Independent Schools Council, 90,000 children are receiving SEND support without an EHCP.
In short, this Government should be aiming to improve all schools, regardless of their status, and they should be pursuing policies based on evidence, not dogma.
The Liberal Democrats do not support imposing VAT on private school fees. We do not support treating independent schools differently to other independent education providers for VAT purposes.
VAT is a complicated tax with many quirks and exemptions. Goods and services that are outwardly similar can be given different tax treatments based on the smallest of variations and those different tax treatments can have a large impact on the eventual cost borne by the consumer. Administering VAT and negotiating its various intricacies creates a huge burden for organisations that provide VAT-able goods and services to the public, and that burden is expensive.
All forms of education have always been exempt from VAT for the simple reason that taxing education services would disincentivise people from purchasing them. As with healthcare services—also exempt from VAT—it has never before been considered good public policy to discourage people from purchasing education. Additionally, exempting education providers from VAT frees them from the burden and expense of administering the tax, which means that money that otherwise would be spent on educating children does not have to be spent on tax returns.
The Government propose that their new tax treatment should be applied only to the provision of private schooling, but taxing some forms of education and not others would almost inevitably create loopholes. Creative accountants will find ways of delivering education services that fall outside the VAT legislation, while other education providers—which the Government did not intend to tax—will unwittingly find themselves caught up in it. The risks of those distortions increase if the legislation is hastily framed, with insufficient time for scrutiny.
Of the 615,000 children in private schools in this country, almost 100,000 are being educated privately because they have special educational needs but do not have an EHCP. The Government have announced that they plan to exclude privately educated pupils with an EHCP from VAT on school fees. That is a welcome step, but does not protect those who do not have an EHCP from a steep rise in fees. The parents of many of those children will find that they cannot afford the increase, throwing the future of their children’s education into doubt. Moreover, there will be an increase in demand for local authorities to issue EHCPs stating that the local authority must fund a private school place. Local authority resources for special education needs and disabilities are already stretched to breaking point, and additional demand will be impossible to manage. The inevitable result will be that thousands of children with SEND will be forced into the state sector all at once, which will be enormously disruptive and potentially traumatic for those children, as well as being immensely difficult for state schools to manage.
It is not just children with SEND who will be affected. There will be many thousands of other children across the country whose parents will find that they can no longer afford to keep them in their current school. Those children will experience enormous disruption to their education as they are forced to change schools and, for many, the upheaval of being separated from their friends and a familiar environment. The Government should reflect carefully on whether the benefits of the policy they are intent on pursuing is worth the damage that it will cause to these children’s education and wellbeing.
I have been contacted by many schools in my constituency who say that even a small reduction in their roll as a result of this change will make their situation untenable. Between parents who cannot afford to pay their children’s fees and schools that cannot keep their doors open, the state will need to find space, and resources, for an influx of new students. That influx will not be evenly distributed. In my constituency it is estimated that more than 45% of children attend a fee paying private school. In common with other parts of London, demand for state primary places is down, so younger children will be easily accommodated. However, secondary schools are experiencing great pressure for places, and a rise in requests for in-year admissions will be difficult to meet.
The Liberal Democrats believe that a better alternative to charging VAT on school fees is to encourage private schools to support their local communities, by building links with local state schools and sharing facilities. There are already good examples of these kinds of partnerships happening all over the country and we believe that those can be developed further. Last week, I visited Lowther primary school in Barnes. As I was being shown round the school by Leo, Talia, Elia, Milla, Nick and Abdullah, they were keen to tell me about the swimming lessons they enjoyed at St Paul’s school, a nearby boys’ independent school. The schools link up for a range of activities, and I was very impressed to see the trophy that the children won in the recent Lego competition hosted by St Paul’s. A majority of independent schools have already developed similar partnerships with local schools and the Liberal Democrats want to see that become the norm with every single school.
In conclusion, the Liberal Democrats are opposed to the Government’s plans to impose VAT on private school fees because we believe that it is wrong to tax education, however it is provided. Imposing this increase in fees will cause a precipitate increase in costs for families, resulting in many being forced to undertake a forced, disruptive change in schools. That change will have a disproportionate impact on children with SEND, which will not just create hardship for those children and their parents, but also enormous difficulties for the local authorities and state schools that will be required to provide alternative schooling. There are other routes to equalising outcomes between those educated privately and those educated in the state sector, and the Liberal Democrats believe that communities can be strengthened by encouraging partnerships between different schools, of which there are already many excellent examples.
We can see from the large number of contributions, particularly from Opposition Members, how important this issue is to Members and their constituents, many of whom are greatly distressed by the Government’s proposals. We believe they are flawed in both design and execution, or at least planned execution, which is perhaps why so few Members from the Government party are here to defend them today. The policy will move away from a long-held principle that educational services are not taxed in this country, or in most developed economies. We have five broad categories of concern: the impact on state schools, the impact on overall Government finances, the timing of the proposals, consideration of exemptions, and the impact on SEND and EHCP provision. I shall turn to each of these briefly.
First, it is clear that the policy will have a detrimental impact not only on the independent sector, but on the state sector. The imposition of a 20% VAT tax hike overnight will clearly mean that some families will no longer be able to afford the fees. That is basic economics. In addition, the imposition of business rates will further disrupt the business model of independent schools and make less money available for bursaries and subsidies, which many parents rely on. Inevitably, that will mean children leaving the private sector and moving to the state system, putting an additional burden on many state schools, some of which do not have the capacity. It will also make fewer spaces available at good and outstanding local state schools where spaces would otherwise have been available, because more pupils would have taken the independent route. This is not a fear or scaremongering; this is reality. It is happening now.
According to the Independent Schools Council, more than 10,000 pupils have already been pulled from independent schools. One think-tank has estimated that far from bringing additional money into the Treasury, the policy could cost the taxpayer £1.6 billion, which brings me to my second point about the impact on overall Government finances.
Out of total Government spending of more than £1.2 trillion, is this policy really the top target of the new Government? It smacks of the politics of envy, not of careful deliberation and consideration of evidence. On the topic of overall Government finances, will the Department for Education get more funding from the Treasury if the number of state pupils exceeds expectations, or will they be expected to pay for it within existing budgets? Have the Government set aside capital for additional new school places if that is needed?
Regarding the timing of the proposals, it is unfathomable why the Government are considering introducing this policy in the middle of the school year. Why? It does not make any sense to cause so much mid-year disruption to so many schools, pupils and families.
The rushed policy appears not to have properly considered carve-outs for pupils from military families, students on the music and dance scheme, children attending small or small faith schools, those paying low fees or who are on bursaries, or children in exam years who may have to move to another school that does not offer their current subject, offers different syllabuses, or has different examination boards. I hope that when we finally see the impact assessment, we will see some consideration of those matters.
My fifth category of concern is what consideration has been given to pupils with special educational needs and those with an EHCP or who are in the process of getting an EHCP.
If, as many predict, there is displacement of children with SEND and EHCPs into the state sector, is there capacity? Is there adequate additional financial support for local authorities to deal with the predicted surge in demand? If the answer is no, or I do not know, to any of those questions, the Government must delay this policy.
Before I conclude, I ask the Minister to have the decency to recognise the apparent hypocrisy of so many Members on the Government Benches, including himself, who attended independent schools or send their children to one, yet are now determined to increase the costs on others, depriving many families of the choice that they benefited from.
I also ask him to apologise on behalf of the Secretary of State for Education for her appalling divisive tweet over the weekend, which betrays her lack of awareness of the realities of independent schools across the country. Headteachers, teachers and parents in both the state and independent sectors, unions, tax experts and think tanks are all appealing to the Government to think twice about this policy. I appeal to the Minister to listen and act accordingly.
Every member of the Government cares deeply about education, and we are committed to breaking down barriers to opportunity. We are determined to fulfil the aspirations of every parent in our country to get the best education for their children. We are committed to doing so by improving state schools, and by making sure that every child has access to high-quality education.
We will start to make that happen by expanding early years childcare for all, by opening 3,000 new nurseries across England. We will recruit 6,500 new teachers, alongside improving teacher and headteacher training. We will roll out breakfast clubs to all primary schools, so that no child starts class too hungry to learn.
Those improvements to the state education system will begin our work to make sure that every parent’s aspiration for their child can be fulfilled. We want to get on with those important changes right away, and to do so, they must be paid for.
Those changes were set out in a technical note published online, alongside draft VAT legislation, which formed a technical consultation. As part of that consultation, the Government, at both official and ministerial level, engaged with a broad range of stakeholders, including the devolved Governments, to make sure that we understand the impact of the policy in each nation of the UK.
We have listened carefully to the points people have raised with us. We recognise that, while this policy will raise revenue to help support improvements in the state education sector, it may lead to increased costs for some parents and carers whose children are in the private education system. Let me be clear that while private schools will now be required to charge VAT on the education services and vocational training they provide, we expect most private schools will be able to absorb a significant proportion of this new VAT charge to keep fee increases affordable for most parents. They will be able to make efficiencies and recover the VAT they incur on the things they buy.
Ahead of the policy being implemented, the Government have carefully the considered the impact the changes will have on pupils and their families across both the state and private sectors, as well their impact on state and private schools. The Government’s costings of this policy are currently being scrutinised by the independent Office for Budget Responsibility. The Chancellor will confirm our approach to the measures at Budget, where we will set out our assessment of the expected impacts of the change in the normal way.
We recognise, as some hon. Members have raised, the changes may lead to some pupils moving into the state education sector. However, we believe that the number of pupils who may switch schools as a result of the changes will represent a very small proportion of overall pupil numbers in the state sector and such switches will take place over several years. We are confident that the state sector will be able to accommodate any additional pupils.
I close by again thanking all hon. Members for taking part in this debate. In our consultation about the technical detail of this policy, we have been engaging widely and in depth, and of course the views of MPs are an important part of that. As I said earlier, it has been a tough but necessary decision to end tax breaks for private schools. We believe it is the right decision and one we need to implement as soon as possible to help raise the funding we need to deliver our priorities for state education in our country. We are determined to improve the education that is available to all, because that is how we will ensure that the aspiration of every parent to get the best possible education for their children can be fulfilled.
To sum up, we have heard words such as “cruel”, “sacrifice” and “disruptive”, as well as concerns from families that their children’s performance will suffer in schools. In short, this is a joyless, mean-spirited policy from a joyless, mean-spirited Government, and I think it is evident from the lack of Labour Members present that they probably agree with the sentiments expressed on this side of the Chamber.
Motion lapsed (Standing Order No. 10(6)).
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