Continuity of Education Allowance

Thursday 13th October 2011 Written Statements

[The Minister for the Armed Forces (Nick Harvey)]

I am now able to announce the conclusions of the review I led into continuity of education allowance (CEA).

CEA costs the Department about £180 million a year to support the 7,900 children of about 5,500 service claimants; about £70 million of this is to settle the tax liability that would otherwise be incurred by claimants serving in the UK. Parents are also required to contribute a minimum of 10% of the school fees; many pay much more, as the maximum allowance covers less of their chosen school’s fees. The 7,900 service children are distributed across about 440 schools, 25 of which are state boarding schools, and they represent about 11% of the total number of children in boarding schools in the UK. The review found that CEA contributes to operational effectiveness by supporting family mobility and accompanied service. It is greatly valued by claimants; but it is expensive, complex to administer and has had a weak governance structure. The challenge for the review was to develop an approach that would increase value for money and save costs, while still supporting mobility, within the context of service life as we expect it to be in the future. Moreover, we had to ensure that the interests of service children were fully protected. I believe we have achieved this.

First, and of paramount importance, I reaffirm the Government’s commitment to support service personnel and their families. As the recent Ofsted report on children in service families made clear, the combination of deployment of a family member and regular moves of home and school can cause anxiety and stress for service families whether living in the UK or overseas and education is disturbed. While this pattern of mobility remains, as it still does for many of our personnel, it is only right that support should be available to minimise the disruptive effect of frequent moves on family life, including support for those service parents for whom continuity of education for their children is best met through boarding school provision.

We have consulted the service community—claimants and non-claimants—both directly and through the service families federations. We have consulted the principal associations representing boarding, independent and preparatory schools and we have compared our practices with those of other major employers in the public and private sectors and our major allies.

We have exhaustively considered a wide range of options for reshaping CEA and how it is delivered. The main options considered were: different ways in which the Department might contract, or pay, for the service; greater use of state boarding schools; increasing the minimum age to exclude the primary stage of education; reducing the maximum age for child eligibility to the end of year 11; restricting entitlement to those serving abroad and with no access to suitable schools; ceasing entitlement for new joiners; increasing parental contributions; transferring the tax liability to claimants; alternative remuneration/allowance packages; and improvements to governance. Many of these options would bear heavily on claimants and their children; and could not be implemented without allowing reasonable time for adjustment.

Against this background, for at least the near to medium-term, we have decided to maintain the core principles of CEA and restrict changes to those that have merit in their own right. We will maintain current parental contribution rates to overall school fees and the eligibility age range for children, though we will remove eligibility for initial claims for years 12 and 13. There will be no changes in our provisions for special educational needs or day school allowances. Parents will continue to be able to choose the most appropriate school for their children from the current wide range of state and independent schools on our accredited list, but as overall numbers of CEA claimants decline we will encourage those who still need boarding education to use state boarding schools, where the tuition fees are already met by the state. Improvements to governance, rule-tightening and clarification of existing entitlements are being introduced. We will develop a centralised payment system to pay fees direct to schools. Any liability to income tax will not be paid by individual claimants.

In the longer-term, we expect the terms and conditions of service of our personnel, and their living patterns, to be different. Withdrawal of units from Germany, concentration on fewer bases and the expectation that many more of our personnel will have less mobile careers, allowing greater stability of home life, will change the requirement for CEA. We will need to do more to encourage and support stability. The new employment model (NEM) programme, which is due to report in the summer of 2012, aims to define how this will happen and, while the project is pursuing a balance between a wide-range of potential benefits, we will set a clear target that it should reduce expenditure on CEA by at least half by 2020, compared with the pre-strategic defence and security review baseline. In designing the NEM, we may well find that reduced mobility will enable us to achieve the challenging reductions in expenditure without major changes to the allowance itself. But, in addressing this issue, the project will also have to look more radically at the best ways to support personnel and families within future resources, given the high costs of boarding education and the relatively small numbers of personnel who could be expected to be eligible for CEA by the end of the decade.

I believe that this is a good outcome for service families and the taxpayer, balancing the need to support service mobility at present with longer-term structural changes, in a measured and progressive way that takes account of financial constraints, improves value for money and avoids adverse impact on service children.