Independent Schools: VAT Exemption

Thursday 5th September 2024 Lords Chamber

Motion to Take Note

14:59

Moved by

[Lord Lexden]

That this House takes note of the contribution of independent schools, and any potential effects that changes to the VAT exemption for independent school fees could have.

[Lord Lexden (Con)]

My Lords, I sought this debate because our country’s independent schools—of which there are some 2,500 in total—face an imminent and dramatic change in their circumstances, which will have serious and far-reaching consequences. The Government are to put VAT on their fees in fulfilment of a pledge given in Labour’s recent election manifesto. This education tax, the first to be introduced in Britain—and, apart from a disastrous recent experiment in Greece, the first in Europe—is being imposed on schools with extraordinary haste.

At the very end of July, the Government announced, wholly unexpectedly, that their education tax would come into effect at the very beginning of next year. Now, 1 January 2025 is just under four months away. Schools and parents have made their plans for the academic year that is now beginning. How on earth do the Government imagine that these plans can be swiftly and easily rearranged? It is of course impossible, and it is quite wrong that schools and parents should have been plunged into such difficulties. Acute concern has naturally arisen. Many parents are deeply worried. Many schools, particularly those of small size which account for the overwhelming majority in the independent sector, face an uncertain future.

I stress one point above all: the effect that the rapid introduction of the tax will have on thousands of children, their well-being and their life chances. They should surely be at the forefront of our minds and, indeed, our hearts during this debate. The number of Peers taking part in it testifies to the strength of concern that exists across the House.

I declare my interests as a former general secretary of the Independent Schools Council and the current president of the Independent Schools Association, one of the council’s constituent bodies. I naturally judge the issues which arise in this debate from their perspective, to which I will return.

Words matter. Labour’s leaders have become fond of saying that they will recruit 6,500 more teachers for state schools

“by ending tax breaks for private schools”.

This clearly implies that independent schools now enjoy some kind of special exemption from tax that they do not deserve. The truth is that all those who provide educational services have always been exempted from VAT, as they should be. That exemption is now to be removed from independent schools, and from independent schools alone, at least for the time being. The current tax regime has helped independent schools to thrive, a state of affairs that the Prime Minister has said enjoys his full approval. Last September he told Jewish News:

“We have got fantastic independent schools, I want them to thrive”.


With this VAT proposal, he is perhaps going a strange way about helping schools to fulfil his ambition for them.

No one, I think, doubts the excellence that abides in our independent education sector. It contains some of the best schools in the world. The majority of their pupils find places at leading universities. They go out into the world well prepared for their careers in a meritocratic, multiracial society. They look to the future, not to a vanished class-ridden past, as is so often asserted by those blinded by prejudice against them. Four out of 10 places in the schools represented by the Independent Schools Council are filled by the children of ethnic-minority families. The Jewish and Muslim faiths are among those who run schools within the council’s ambit. More than 2,000 youngsters from Ukraine have been given places at member schools, and for the most part their families remain in their war-torn homeland. These are among the many valuable and socially beneficial features of life in our country’s independent schools today.

Nor should it be forgotten that independent schools make a significant economic contribution to our country. Research by Oxford Economics in 2022 showed that they add £16.5 billion to the UK economy, sustain 328,000 jobs, provide in one way or another £5.1 billion in tax, and save the education budget £4.4 billion by educating pupils who would otherwise be a cost to the state, a saving that must now be expected to shrink as pupils are forced out of independent schools by the imposition of VAT.

I referred at the outset to the two linked organisations with which I am connected: the Independent Schools Council and the Independent Schools Association. The council represents some 1,400 schools, where around 80% of the half a million pupils in the independent sector are educated—the children at the heart of this debate. The Independent Schools Association has some 670 of those schools, a big slice of the total, in its membership. It is among them that many of the small schools, so prevalent in the independent sector today, are to be found. Some flourish with no more than 200 pupils, others with far fewer. They include performing arts schools, bilingual schools and many special needs schools. They cater for the children of hard-working, local parents who have struggled to have their needs met in the state sector. Many are virtually unknown outside of their local communities, where they are highly respected. The important point is this: the 670 members of the association are far more representative of the true state of the independent sector than the comparatively small number of large, well-known schools—Eton, Harrow and the rest—which exert so much fascination over the media. Those schools are the exception, not the rule; they constitute no more than 10% of the total.

What all the diverse members of the Independent Schools Council have in common is a commitment to high standards for the sake of their children’s future and to working in partnership with colleagues the state sector in a whole host of different ways—from academic teaching, orchestral concerts, drama and sport. There are now well over 9,000 flourishing partnership projects. These typically involve several different strands of activity in and out the of classroom, in which state and independent schools work together for their mutual benefit—I stress mutual benefit. Full details can be found on the Schools Together website.

Meanwhile, independent schools have been widening their intake through fee reductions. In the last year, schools provided a total of £1.1 billion, much of it in the form of means-tested bursaries. How I wish it had been possible to induce our Governments over the years to back an ambitious wider access scheme, with places being made available at all levels of ability, co-funded by the Government, local councils, schools and benefactors. Winston Churchill sometimes spoke privately during the Second World War of constructing a great scheme of educational co-operation. How Churchill would have jeered at Labour’s attempts to depict our independent schools today as the exclusive preserve of the super-rich, in defiance of the facts that I have set out.

Most independent school parents are not rich, let alone super-rich. Labour blithely says that schools will not need to pass VAT on to parents but can absorb it all themselves. They cannot; only a handful have the endowments or reserves that would enable them to pay it themselves. Today, many parents up and down our country are looking at their family budgets and concluding that they will not be able to pay the higher fees that the Government will create for them. They will, with the heaviest of hearts, have to seek places in state schools.

Here is one example of what then will be the inevitable consequence. The head of a small school in Derbyshire with 80 pupils has written to tell me:

“it is clear from conversations I have had with parents that a significant proportion of our families will simply be unable to afford the increase. We could easily lose 17 pupils. This will have a devastating impact upon school income and will close us”.

Labour seems to think that school closures need cause no great concern. It says that over 1,000 independent schools closed during the 14 years from 2010. But some were mergers rather than closures and others were very small schools. Less than half were mainstream schools; schools delivering specialist provision are always prone to fluctuations, and Covid took its toll. There is also a world of difference between sudden state-driven closures and the closing down of schools for reasons of their own, with new ones opening probably in the vicinity. Who will want to open new independent schools today?

The prospect of losing smaller independent schools is simply appalling. So much invaluable support is provided in them for a huge variety of special needs. Many parents have since the election been making clear their heartbreak at the thought of being unable to afford any longer the place where their child with a special need has been wonderfully cared for. The Government-created fee rise will affect more than 90,000 families with special needs. Only children with hard-to-come-by education, health and care plans will be exempt from it.

A special needs co-ordinator who has worked in a state school for nearly 40 years writes:

“many private schools have been formed to cater specifically for special needs. They provide centres of excellence, often where there is a deficit regionally. Why risk losing them?”

Why indeed?

The government-created fee rise will make small community faith schools unaffordable for many Jewish and Muslim families. At present, some 370,000 children attend independent faith schools in England.

The prospect of this fee rise is a source of the greatest worry to our service families, who place our society so greatly in their debt. Some long-serving men and women in our Armed Forces fear that they will have to leave jobs they love. The 4,700 children for whom the continuity of education allowance is being provided must not be made subject to VAT.

It is very far from certain that, by slapping VAT on school fees, the Government will get anywhere near the £1.5 billion they seek to create new teachers for state schools. The additional resources that state schools will need to teach more pupils could absorb much of the revenue gained from the VAT charge, and perhaps even exceed it. Estimates of the number of children who will have to leave independent schools vary. The Government have not undertaken any assessment whatever. They are rushing ahead, without even waiting for the conclusions of the Office for Budget Responsibility, which they have pledged to respect.

I invite support for the following propositions. All children with SEND should be exempt from the VAT charge. It should not be applied to service families receiving the continuity of education allowance. Steps should be taken to protect small faith schools. Above all, VAT should not begin to apply before the start of the 2025-26 academic year. The date now proposed—1 January 2025—has been widely and rightly described as cruel. A full independent assessment of the implications of our first-ever education tax should be carried out before it is introduced.

Is it not our duty to do all we can to protect the interests of all children everywhere? One mother writes to me that

“my child sat and watched an interview with Rachel Reeves, in which she stated that she is concerned with the 93 per cent of children in state schools and not the 7 per cent in independent schools. My child turned and asked why the lady doesn’t care about me”.

Is that not a truly heart-rending comment? I beg to move.

15:11

[Baroness Ramsey of Wall Heath (Lab)]

My Lords, I refer to my interests in the register. I have been lucky enough to play a role in the governance of both state and independent schools. From 2016 until recently, I was chair of Young Epilepsy, which, among many other things, runs a wonderful special independent school in Surrey, called St Piers, for both day and boarding pupils. I am currently a board member of the Lift Schools multi-academy trust—formerly AET—which runs 57 state schools across the country. So noble Lords might think I would find myself somewhat torn when considering the arguments for and against charging independent schools VAT and spending the money generated by so doing on state schools—but I am not.

At Lift Schools, I can see at first hand just how vital that extra injection of money is. In the words of our inspirational chief executive:

“We simply don’t have enough teachers in our schools. This is down to absolute numbers, but it is also down to the fact that the role of a teacher has been stretched beyond anything imaginable 10 years ago. No longer simply an educator, they are social worker, mental health first aider, a parent for some. One of the casualties of this raid on discretionary effort is the wider enrichment that is the norm in independent schools and should be for state schools too—the music, sports, art, drama, debating, foreign trips and field trips”.


As for St Piers and all those other independent schools meeting the needs of children with education, health and care plans, the Government have made crystal clear that fees for these children will be exempt from VAT.

The independent schools that will have to pay VAT are not special schools like St Piers but the ones whose parents choose to pay for their children to have a more well-funded education than the state can afford to provide. I do not criticise parents who wish that the fees they pay to private schools were not going to rise further as a result of the ending of the VAT exemption—of course I do not. But, if we look at the issue in the round from the perspective of the nation’s children as a whole, rather than from only the one in 15 who attend private schools, what do we learn?

We learn from the unimpeachable source of the impartial Institute for Fiscal Studies that the 14 in 15 who go to state school are falling further and further behind, compared with one in 15 at private schools, with their enviable resources. Private schools, the IFS tells us, spent 40% more on their pupils’ education than state schools were funded to do back in 2010—a pretty big gap, I am sure we can all agree. But now the gap is an incredible 90%; it has more than doubled since my party was last in power. In that situation can we really justify a continued 20% tax break for private schools? I think not. Why has the gap got so much bigger? Partly, of course, it is because the previous Government cut state school funding per pupil in the age of austerity, and their more recent increases only brought schools back to where they started in 2010. But it is mainly because private schools have increased their fees, which are 24% higher in real terms than in 2010. By the way, those arguing that charging VAT will mean pupils switching from private to state seem to forget that the 24% increase in fees has led to no reduction whatever in the proportion of pupils going to private schools, which is still steady at one in 15, just as it was in 2010.

But it is not really about the numbers, of course—it is about the children. Let me end by telling noble Lords about my daughter’s first day at her local comprehensive secondary school, and in particular about the instruction she and all new pupils were given that day: no running in the playground at lunchtimes. Why not? Because it was so crowded that they might hurt themselves bumping into each other. Why was it so crowded? Because this hard-pressed state school, desperate for extra cash, had sold part of its land to the adjoining private school. My daughter pressed her face up to the wire fence, gazing at the endless fields stretched out in front of her for the benefit of the one in 15, and thought that that was not fair. She was right: it was not, and it still is not, so let us do something about it.

15:17

[Lord Addington (LD)]

My Lords, this is a debate that I never thought I would be taking part in, the tone of which we should note. We on these Benches do not like what is going on here in education. Different bits of the education sector are being taxed differently. With special educational needs, you can claim some of the money back. Well, that is always going to run smoothly; there will never be a cashflow problem and nobody will ever get it wrong. Also, it is dependent on that wonderful thing, an education and healthcare plan.

If there is a more unloved bit of the education sector than the education and healthcare plan, I have not seen it. It takes about two years to get—if you have the right lawyer and the right type of parents, who fight for it. Schools are blocking it because they do not want it to go through. The weirdest thing about it is that we have broken the £100 million barrier of public money going into resisting it and going to tribunals. Some 90% plus of the tribunals are granted—it is almost a rite of passage.

If the Government had said that they would help the private sector in dealing with special educational needs, having dealt with this first, they would be getting a much more favourable hearing from me. It is an absurdity to base an exemption on something that favours—guess who?—the educated, wealthy parents who can afford the legal fees to get through. There is something fundamentally wrong here.

I am in favour of making sure that we get better provision in state schools to address special educational needs. However, the whole system has gone wrong. If it is based around this, I cannot see how it is going to happen. Let us remember that private education has been looking after X amount of those with SEN for more than half a century; it is a very established pattern.

Also, the schools doing this have a percentage of pupils who do not have the plan, often because their parents are not prepared to put themselves or their children through the delays and the process of getting that plan. They are creating a critical mass for the economic reality of that school. If we lose these, or a percentage of these, what happens to those schools?

I hope that the Government have, at some point, done an analysis of how many pupils they can lose from this sector. The Government have recognised that it is important, so I hope they have. For pupils who do not have a plan for leaving the sector or going back into a state school, it would help to know the economic benefit. I do not know what it is—is it positive or negative? It would help if we could find out.

This contribution from the independent sector is clearly necessary at the moment. I hope the Government will tell us what they are going to do that will mean it is not necessary. Can they please tell us how they will do this, and when it will arrive? I do not like the idea of people having to go to independent schools to get the education they need but, at the moment, it is clear that they do. Will the Government address this problem in the round, and will they tell us when they are going to get rid of the plan?

15:20

[Lord Alton of Liverpool (CB)]

My Lords, in welcoming the noble Baroness, Lady Smith of Malvern, to her new responsibilities, I also say at the outset that I am grateful to her for promising to respond, when she replies, to some detailed questions I have sent to her. I also thank the admirable noble Lord, Lord Lexden, for the customarily powerful and eloquent way in which he introduced today’s important debate. I agree with everything that he has said today.

For family reasons my Cross-Bench colleague and noble friend Lord Pannick is unable to be here today. He has looked at this education tax and its potential conflict with the European Convention on Human Rights. He tells me that it

“is strongly arguable that the imposition of VAT would breach Article 2 of the First Protocol read on its own (access to educational facilities) or with Article 14 of the Convention (arbitrary discrimination in the enjoyment of educational facilities)”.

I serve on the Joint Committee on Human Rights, whose mandate is to monitor potential conflict between government policies and the ECHR. My noble friend Lord Pannick says that

“it would be a very valuable service if the Joint Committee could look at this”.

I agree, and I hope that the Minister will assure us that the Government will not proceed if this is found to be in breach of the ECHR.

We need also to scrutinise some of the other claims that have been made, such as the impact on public finance. The Adam Smith Institute calculates that, far from generating revenue, the policy could lead to a staggering loss of up to £2 billion. The Minister has seen that assessment and the work of the Institute for Fiscal Studies, along with a Times editorial, which all question the Government’s assumptions about raising revenue. Let us also look at what happened in 2015 in Greece when a similar tax was introduced. Some schools were forced to close, while others inevitably passed on the tax to parents. The same thing is already happening here.

Driven by dogma, it is easy to say that this is all justified as a long-overdue attack on the ultra-rich. However, as the noble Lord, Lord Lexden, reminded us at the outset of the debate, this regressive double tax on people who have already paid for universal education through their income tax will not impact wealthy families who pay for education, often, through property purchases in sought-after school districts, merely increasing educational inequalities. This education tax will disproportionately impact middle-income families, such as those of the 168,000 children who receive financial support from independent schools or the 10,000 who pay no fees. These are the families who will suffer, many of whom have made great sacrifices for their children’s education, not those with ultra-deep pockets.

Those affected will include men and women in our Armed Forces—families who make use of the Continuity of Education Allowance. Some say that they are having to consider exiting military service as a consequence. How does the Minister respond to their appeals, and to professionals, including those working in education, policing and healthcare, who rely on the wraparound care provided by many independent schools; or to the single mother whose letter I sent to the Minister, and for whom independent schooling is the only way she can maintain her employment?

As the noble Lord, Lord Addington, reminded us, what about the impact on children with special needs or mental illness? The noble Lord gave a figure which I had not heard before that as many as 90,000 people will be affected by this. They will have chosen an independent school because of its particular expertise or focus on those children.

Finally, introducing this tax midway through the school year, on accelerated timeframes, will adversely affect children, who may struggle to integrate into new schools, with some forced to change curriculum, exam boards or subjects. Top of our concern, and at the heart of this policy, must be the impact on children. It clearly is not. This taxation is punitive, unjust and unfair, may be in breach of the ECHR, and will worsen educational inequalities. For all those reasons, I hope the Government will think again.

15:25

[The Lord Bishop of Southwark]

My Lords, the Government’s intention to levy value added tax in this area was a manifesto commitment at the general election. The Government entertain a well-evidenced belief that parents purchase an economic and social benefit for their children’s future through private schooling. Whatever the experience any of your Lordships have had of such schooling, the undoubted premium placed on forming character or the excellence in pastoral care that some of these schools exhibit, the Government nevertheless have a mandate for change. The noble Baroness, Lady Ramsey, underlined the pressing need for more teachers in our state schools.

However, who will and who will not be affected by this change is a worthy subject of debate. I am happy to say that both the boys’ and girls’ choirs at Southwark Cathedral are almost entirely drawn from state schools, and are consequently unaffected by the VAT change. Furthermore, a number of schools in my diocese offering provision for special educational needs and disabilities have their places funded by the local authorities. But there are cathedral and choir schools, and private schools, with provision for special educational needs that will be severely affected by the change that the Government intend. Many of these are small schools, and therefore the impact will be disproportionately severe.

The briefing provided by the House of Lords Library refers to some 20% of pupils in this sector receiving provision for SEND, which is of undoubted public benefit, but of these, only 6.9% have an education, health and care plan. This suggests that there is a significant element of special needs provision that is currently covered by private funding, and which cannot be absorbed by local education authority budgets if private places become unaffordable. Furthermore, if some small and medium-sized schools that provide SEND then become unviable, the general SEND capacity in the country, already overstretched, becomes yet smaller. A question, therefore, needs to be asked—and I ask it of the Minister—as to the appropriateness of removing the exemption at such short notice in January 2025, as other noble Peers have already said, with little time to adjust budgets.

Finally, there is the distinctive yet gloriously diverse world of cathedral and choir schools, which continue to safeguard and feed the English choral tradition. They are intimately bound up with their localities, drawing choristers from a wide social background, and have a very significant impact on the choral and musical life of this nation. I will cite some detail from one of them: a 100% bursary fee remission for local children who are very talented musically but whose parents cannot afford any fees, with numerous other pupils who are in receipt of 75% or more remission—the focus now being on remitting fees, rather than on awarding scholarships, to increase social inclusion.

I am a grammar school boy and I could not sing the “Eton Boating Song” if you paid me, yet I am deeply concerned about the adverse and unintended consequences which this manifesto commitment will have unless it is applied with much greater sensitivity—and possibly also phased in—affecting, as this does, the enormous variety of private school provision, about which we have heard and which is committed to public benefit.

15:29

[Lord Davies of Brixton (Lab)]

My Lords, I thank the noble Lord, Lord Lexden, for introducing this debate. No one doubts the strength of his feeling on the issue. I suspect that much of his speech overrated the problems that the private sector will face, and my view is that it will survive, but he quite rightly raised a number of practical issues towards the end of his speech which I am sure my noble friend Lady Smith of Malvern will address in her reply. I take the opportunity to welcome her to her place.

I speak as a parent but also as someone who had experience running a public education service, and that drives my view of the necessity for this measure. Of course, the actual discussion will take place when we get the finance Bill, when we will doubtless have this debate again, but it is entirely appropriate that we should discuss it now.

I want to stress that VAT is a tax—no surprise there, but there is a big debate within the public expenditure discussions about the appropriate balance between income taxes and expenditure taxes. There are those who believe that there should be a greater reliance on expenditure taxes. That is an issue, but it means that they are both providing the same function; they are both providing public revenue to provide public services. It is worth stressing that taxes are paid not as a fee for a service but as an individual commitment to society as a whole. It is no more reasonable for those who choose to spend their money on sending their children to private school to have a VAT rebate than for people to expect to get an income tax rebate.

The basic fact about this proposal is that it was in the manifesto. It was not hidden or avoided during the election campaign, and this party was elected with a commitment to implement it. Practical issues were raised, and I hope my noble friend will address them.

I have taken the opportunity to read all the submissions that were sent to me. There was a large number and I cannot claim to have read every last one or through each one entirely—there was a certain amount of copying and pasting—but I got a sense of the expressions of concern that were being made, almost entirely by parents. The issues on which I hope my noble friend will be able to provide some comfort are, first of all, children with special needs and, possibly to a lesser extent, military families.

I want to conclude with a point that makes me angry—so far none of the speakers against this proposal has made the fatal mistake of making this point—and that is the idea that parents who choose to send their children to private school care more about their children than those of us who choose to send our children to state schools. The last Prime Minister made that classic mistake, in answer to Questions in the House of Commons, so noble Lords should not dismiss it. I hope no speaker in this debate will give that idea a scintilla of justification.

15:33

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I add my thanks to my noble friend Lord Lexden for his determination to enable us to debate this issue.

The draft Bill which has been published is, to me, a blunt instrument. It treats the sector as a homogenous whole, so causing unintended consequences that implementing the policy in the middle of the school year will not enable us to unravel, let alone resolve. Time is of the essence, not least the limited time that we have to speak today, so I would like to request that the Minister convenes a round table to explore with interested parties the unintended consequences of the current draft legislation in greater depth.

I declare my interest as a former pupil of a specialist vocational performing arts school. I also have a child at a fee-paying independent day school in Scotland and a sister who is a teacher at another.

In the King’s Speech debate, I highlighted my worries about the impact on SEND children. Others have expanded on this, and I support them wholeheartedly. The Local Government Association has called for SEND provision to be reformed; I trust that we can explore this on another day with a little more time.

The first sentence of the Treasury’s technical note published in July states:

“The government is committed to breaking down barriers to opportunity”.


For our performing arts sector, and the schools which provide highly specialist training in music and dance, even the prospect of a VAT levy has created a barrier to opportunities. The schools that deliver training for the Music and Dance Scheme are currently able to offer places on assessment of talent, not ability to pay. This will not be the case if MDS schools have to levy VAT on any part of their fees. I urge the Government to work with the heads of MDS schools to explore the case for their exemption.

Question 5 of the current Treasury consultation asks:

“Does this approach achieve the intended policy aims across all four UK nations?”


I argue that it does not. The education landscape in Scotland is different. We have no academy schools. We have a different curriculum, which in some schools can force children to limit their choices to six subjects at age 14. Thanks to devolution, unlike in England, the Government cannot control how any money raised would be spent in Scotland. That would be a decision for the Scottish Government. There is no guarantee that it would be spent on education. Given the current state of the Scottish Government’s finances, it is likely to be repurposed, like many other programmes, such as the provision of digital devices to pupils. In Scotland, independent schools have been subject to more scrutiny by the Scottish Charity Regulator than any other part of the sector, with regular reviews to ensure that they meet the “charity test”, a process which does not happen south of the border.

The Government’s policy on VAT was announced in the middle of the Scottish school holidays. The allocation of places happens in April each year, but with one in three secondary schools operating at over 90% capacity, there is no space in the Scottish state sector to accommodate even a small proportion of the pupils who may need to move. Schools and families have not had time to prepare. With the changes being introduced midway through the academic year, the disruption for all will be significant. Already, two independent schools in Scotland have closed. I urge the Government to pause the implementation of this policy until the beginning of the 2025 school year and to use that time to explore with us the many complex issues raised today.

15:38

[Baroness Finlay of Llandaff (CB)]

My Lords, I declare that I am an associate of the Girls’ Day School Trust. I am grateful for the many sacrifices my parents made to allow me to go to Wimbledon High School after I failed my 11-plus pretty badly. I have been the governor of Howell’s School in Llandaff, a Girls’ Day School Trust school.

We should not be pitching one sector against another, but we must realistically acknowledge the unintended consequences of the VAT proposals and the speed with which they are being introduced. Howell’s School, whose pupils come from all walks of life, estimates that 11% of families will no longer be able to afford the fees, causing disruption and distress to those forced to leave a school community where they are happy and established. Howell’s will no longer be able to provide bursaries that have tided children over when disaster struck, such as three siblings I knew well, who were suddenly left orphaned and completely destitute. Continuity of education at the school and care allowed them to achieve, against all odds.

When Ukrainian refugees arrived in Cardiff, the school welcomed eight students aged three to 17 into its community. Some spoke no English; many had experienced significant emotional trauma from leaving behind homes, friends, fathers, brothers and grandparents. All had individualised timetables with extra classroom support and access to a school counsellor.

English lessons were extended to the students’ accompanying mothers and grandmothers, who connected on cultural visits locally as they gradually integrated into the community. The school has, to date, waived £377,000 in fees and incurred an additional £57,000 in expenses to support these girls—and that support is ongoing. Only this week I had a letter from a disabled school leaver, who, with that school’s support, has achieved university entrance to study law. I really doubt that she would have done it without being at the school.

Around 10 % of the school’s applications for places come from children who have struggled in a maintained school because of bullying, anxiety and other mental health problems, a lack of support with additional learning needs, or other reasons. This is similar to figures from across the UK. Parents and grandparents desperate to keep their child going to school do without for the child to have a tailored approach to academic and well-being support, a reduced timetable, and a calm, quiet space of safety.

The fee-paying schools in Wales are integral to their local communities. They are smaller on average than those in England, and they estimate that between 10 % and 36% of pupils will have to move to state schools, suddenly putting pressure on the state sector, with between 3,700 and over 6,500 extra children, and requiring £35 million in pupil funding. Education is fully devolved, but VAT receipts are paid directly to the Treasury. Can the Minister clarify whether the whole of the predicted £1.7 billion revenue has already been allocated for England’s use, or whether it covers England and Wales, and other devolved nations? Can she confirm that funds needed to meet Welsh schools’ needs will come from the additional revenue raised and will include the Barnett uplifts?

I wonder whether the Minister will accept the suggestion made by the noble Lord, Lord Pannick, as outlined by my noble friend Lord Alton, to refer this to the Joint Committee on Human Rights, particularly in relation to devolved nations.

15:41

[Lord Forsyth of Drumlean (Con)]

My Lords, I have only four minutes so I will sum up my view of this policy in three words: wicked, stupid and cruel. I have spent the summer receiving emails from vast numbers of parents. The noble Lord, Lord Davies, told us he had not had time to read all of them. If he had done so, he would be heartbroken.

[Lord Davies of Brixton (Lab)]

My Lords—

[Lord Forsyth of Drumlean (Con)]

I am not going to give way—he would not give way to me.

These are lone parents, single parents perhaps struggling with two jobs in order to pay. They are people who put themselves in danger to defend our country in the armed services. They are parents struggling with children with severe learning difficulties. Who in this Chamber can defend the idea of sending a child who suffers with autism to a completely different environment halfway through term? Anyone who knows anything about autism will know that that would be a cruel and disgraceful thing to do. That is the consequence of this policy.

The messages are coming from health workers, teachers and small businesses, people who are struggling to pay those bills. The noble Lord, Lord Foulkes, is not in his place but he told me he was not going to listen to what I had to say because he has seen people turning up in their Range Rovers to schools. The people I am talking about do not have summer holidays and run old cars to scrimp and save to do their best for their child in their circumstances.

By the way, every single one of these parents is saving taxpayers money. For the noble Baroness to suggest that this was a tax break—it is not one unless you take the view that education should be taxed. What has happened to the Labour Party that set up the Workers’ Education Association and founded the Open University? The Labour Party was elected in 1997 on “Education, education, education” and has now become the party of “Taxation, taxation, taxation”.

I agree that state schools need more resources, but look at the impact that this is going to have on those schools half way through the school year. I guess Emily Thornberry did not get to be Foreign Secretary because she let the cat out of the bag. She said, “It’s fine: if we have larger classes, we have larger classes”. “Let them eat cake”—she did not add. One in four children in Edinburgh go to independent schools. How on earth will state schools be able to cope with people who are no longer able to pay the cost?

I confess that I have not always been a huge fan of the ECHR, but I hope that those people with the resources will put their hands in their pockets and help my noble friend Lord Lexden and others to take this Government to court over this issue, and that the Government will realise that their time is nigh. As for the idea that this will save money—the Government have come up with at least three figures, all reducing in number—they need to read the wonderful analysis by the noble Lord, Lord Hacking, on their own Benches, as to how it will end up costing more than it will save.

I have a suggestion to make to the Government. I know they have made a silly manifesto commitment, and I know they feel that they have to do something, but they should at least take some time and not do this half way through the school year. If that is what they are determined to do, they could perhaps meet their requirement to put VAT at 5% rather than 20%, as we do on heating charges, and phase it in over a reasonable period of time. I fear that this is an ideologically driven policy of the kind that the Prime Minister showed during the election, when he was asked, “If one of your family were desperately ill, would you ever use private healthcare?” and he said no. We do not want that kind of politics in this country.

15:46

[Baroness Bull (CB)]

My Lords, the disparity of outcomes between private and state school pupils is well evidenced, and I welcome the commitment to equalise opportunities by rebalancing investment, but I hope Ministers will heed calls for more nuance in how proposed changes are applied.

As we have heard, “private schools” is a catch-all term, encompassing both schools paid for by choice and schools providing specialist education for pupils whose needs cannot be met in the state sector. I share concerns already expressed in relation to special educational needs, but I will use my time to expand on the concerns that the draft legislation inadvertently captures a small number of schools providing education for another group of children whose needs cannot be met by the state sector—by which I mean schools providing world-class music and dance vocational training to exceptionally talented children, regardless of background or ability to pay.

Successive Governments since the 1970s have recognised that if gifted dancers and musicians are to achieve their potential, they need a level and intensity of training that is impossible to achieve within the structure of a standard curriculum. In 1973, the Yehudi Menuhin and Royal Ballet Schools became direct grant aided, with means-tested DfE support for talented children from low-income families.

I declare an interest here, as I was one of those children. I joined the Royal Ballet School in 1974. The fees were well beyond my parents’ means, but they had no choice, because professional ballet training must start young if a dancer is going to compete in a global marketplace. It takes 10 years of daily practice under expert tuition to achieve the flexibility, speed and strength that characterise world-class performance, and those 10 years must take place before puberty sets in.

DfE’s music and dance scheme was established in 1981 as the successor to direct grant aid. The nine designated schools in England and Scotland have little in common with typical private schools. They recruit on talent first, and the majority of parents would not, in other circumstances, choose private education. At non-specialist private schools, around 7% of students receive a bursary or means-tested support. At music and dance scheme schools, it is 90%. The schools are costly to run, requiring specialist, world-class teachers, equipment, studios and theatre spaces, but there is no wealthy parent body, no large endowments and no eligibility for government building maintenance grants.

Earlier this year, the now Prime Minister spoke of the country’s

“huge talent … waiting to be unlocked”,

promising that people from every background and every region would have the opportunities they deserve. The Music and Dance Scheme is pivotal to this ambition, removing barriers to entry and allowing children from diverse backgrounds to dream of a career at the highest level. But 12 years of funding freeze mean the schools are already operating at full stretch. Further financial pressure will impact on quality of training, reduce diversity in the student body and severely impact the UK’s ability to produce the home-grown, world-class talent for which it is renowned.

This legislation aims to break down barriers to opportunity, but including these specialist schools in its scope will have the opposite effect. Prodigiously gifted children with the potential to become world-class artists need specialist education from a very early age, education that will never be possible in the standard curriculum. Raising barriers to entry will mean that only the most advantaged children will be able to access the training fundamental to career success. I would not have become a ballet dancer.

I join the noble Baroness, Lady Fraser, in asking the Minister: will she convene a round table with interested parties and experts to explore how this legislation can avoid irreparably damaging the schools that underpin the UK’s success on the world stage?

15:50

[Lord Maude of Horsham (Con)]

My Lords, the register carries my declarations that I am chair of governors at Brighton College, a large and successful independent school—which is obviously in Brighton. I was previously chair of governors at my old school, Abingdon, which when I and my brother were there was a direct grant school, a status that was abolished by the Labour Government in the 1970s. It occurs to me to wonder why successive Labour Governments have been more associated with destroying categories of schools—first the grammar schools and direct grant schools and now, in all likelihood, some proportion of the independent sector—rather than creating schools, which would be more natural for a party which, as my noble friend Lord Forsyth suggested, claimed to be for “Education, education, education”.

Of course, this was a manifesto commitment, and the Government will rely on that. I remember being told when I was in government that relying on the manifesto commitment is the last refuge of the scoundrel; it is there but it did not have to be done this way. The precipitate haste with which this has been pursued and the lack of any kind of impact assessment when the effects are manifestly clear just from the speeches being made in this Chamber today—I particularly pick out the powerful speech from the noble Lord, Lord Addington, based on deep knowledge and deep passion on the effects of it—mean that it is important that the effects should be understood. It is assumed that there will be a cash dividend from this but that is by no means clear. You would think that a Government who claim to be committed to the writ of the Office of Budget Responsibility might want to hear what it has to say about this before progressing at this kind of speed.

I want to say a word about some of the other things that the independent sector contributes to the benefit of society. Brighton College was responsible for establishing the London Academy of Excellence in Stratford in Newham, providing an excellent sixth-form education for some of the most disadvantaged children in that very disadvantaged borough. It now ranks among the top 10 schools of all kinds for A-level outcomes this year. The percentage of LAE students eligible for free school meals is more than five times higher than any other school in that top 10.

The LAE was founded by the Brighton College headmaster, Richard Cairns, who has led it from being a middle-ranking school to absolutely top of the tree in just 18 years, and a Brighton College governor. It receives a cash donation from the Brighton College community, and five Brighton College governors serve on various committees there. It would not have happened without Brighton College, and large numbers of bright, gifted children from disadvantaged backgrounds have benefited from it.

Brighton College has offered 24 refugees from Ukraine places with 120% scholarships. It also offers Opening Doors scholarships to disadvantaged children from local families—I am delighted to see my noble friend Lord Soames here as we both had children going through Brighton College and he now serves as president of the college—and many of those children have secured places at top universities.

Finally, I want to say a quick word about the value of education as an export. The Government do not quite understand the prestige and the cachet that attach to British education around the world, both in attracting students from overseas to schools here and in the growing number of UK schools that operate around the world, particularly in Asia. There is a hard-currency benefit to that in terms of cash coming into the country, and there are softer benefits of great value from the lifelong networks that these young people develop and the bonds of affection that flow from them.

I can see that this must have felt like a free hit at the time, but it is not turning out that way. I advise the Government to think again.

15:55

[Lord Griffiths of Burry Port (Lab)]

My heart has been warmed by the illustration just offered by the noble Lord, Lord Maude, and others like it could be multiplied and accumulated. However, on the other side we can find stories that say exactly the opposite and make the opposite case. Not always do private schools favour places in disadvantaged localities in the way that he has described—would that they did.

I passed the 11-plus at the age of 10, but a year later my brother failed, so we lived in two different universes: we had friends who were not the same friends; we dressed differently; he left school at 15, and I had a Rolls-Royce education. However, at the end of the grammar school—which for me was a godsend; it made me—my headmaster took me into his study and said he was forming an Oxbridge class but was not putting me in it, even though he thought I was clever enough, on the grounds that I would not be able to cope with Cambridge socially. It was the right decision and I have never held it against him, but it made me determined to spend the rest of my life, as much as I could in the sphere of education, trying to ensure that educational advantage was offered equally to all, not simply on the basis of money.

I am not even talking about hugely super-rich people. My three children were educated in private Methodist schools: The Leys in Cambridge and Kingswood School. I spent 38 years in school governance, if you add it all up, and the last 20 years as chair of the trustees of the Central Foundation Schools of London, with a school in Islington and another in Tower Hamlets—I know these places to my fingertips. But they are part of the Dulwich foundation. They are beneficiaries. They get a huge amount of money that helps to pay for a teacher and helps with language-learning skills, sport and pastoral work. We appreciate the 5% that we get in each of our two schools from the total disbursement. However, the total disbursement is £7.5 million, and 85% of that £7.5 million goes towards the three public schools at Dulwich. When you look at this year’s A-level results this year and see what our little schools in London got, and compare that to what the rest of the foundation got, you are left with one conclusion: we must build an educational sector that is far more open.

We talk about choice. The people I am thinking about, the 2,500 pupils in our two schools, have no choice. We talk about people doing two or three jobs, but hundreds and hundreds of people in the inner city do two or three jobs with no access whatever to these privileged places. We must be careful about how we lampoon each other.

When I was a governor at Kingswood School, I said, “I can only think of the privileges of this school if you have a social policy that seeks to spread its benefits as widely as you can”. Then, at the Central Foundation Boys’ School in London, we had a boy with three A* grades who had work experience at three stock exchanges—Tokyo, London and New York—and was captain of the football team. He was fantastic, but he was refused at Cambridge because he had not studied the right kind of mathematics at A-level.

We are grossly saddled with disadvantage, and we need to do something about it. If the VAT project does not do it—and I am prepared to admit that doing that so suddenly presents real problems—at the same time, let us not think we have solved any problems by dealing critically with what is on the table now. The battle will remain, and I am committed to fighting it to my dying breath.

15:59

[Lord Taylor of Holbeach (Con)]

My Lords, I am delighted to follow the noble Lord, Lord Griffiths. I have always liked his contributions to debate and today is no exception. I particularly wish to thank my noble friend Lord Lexden for proposing this debate, because it is opportune. It is really important that we talk about this issue. The debate shows that education is seen by all of us here as a public good—something that needs investment.

I think the present Government are mistaken in believing that they have a solution in trying to transfer resources from the independent sector to the public sector. That is the wrong way to go about raising money to reinforce education. There are other ways of raising tax not on the subject itself. If it is education today, it could be medical and social care tomorrow—the NHS equally needs investment; its staff equally need pay. I say to noble Peers opposite and the Government that I really think this is the wrong way of going about the problem.

I will talk a little about my personal history. I am a local person: I was born in Holbeach, lived in Holbeach and went to Holbeach infant school, aged four. I loved my school; I always liked being educated and learning things and it was a very satisfying experience. But, unfortunately, when I got to the end of the school and was due to move on to secondary school, aged nine, I was too young to sit the 11+ and there was no secondary modern in Holbeach. Because my parents were state-educated individuals, I was directed to the Holbeach boys’ school, which contained adolescents aged 15. My parents were horrified that I would not be able to cope with this and they sent me away to school.

Some people may say that that is a terrible thing to do to a child, but fortunately I had a grandmother who sent a brother with me; I am the eldest of five siblings, and my next brother came away to school with me. It was an experience which set me up for life. I am lucky enough to have gone to an excellent public school, with an old boy here, well known to the House—my noble friend Lord Naseby—and Lord Paddy Ashdown, whom many people here will remember. It was a good school. It opened my eyes and gave me opportunities that I would not otherwise have had.

I do not want to penalise people who are not necessarily rich. It has been pointed out time and again, and it is true, that people who look for independent education for their children just want what is best for them. Not everybody is able to do it, but we should not deny it to those people who can afford to do it. This is a misguided policy, and it is clear that the arguments presented about its immediate introduction present a lot of problems for the Government.

16:03

[Lord Roberts of Belgravia (Con)]

My Lords, unlike my noble friend Lord Taylor, I had a terrible time at my public school and was expelled—or, more accurately, I was asked to leave and not come back—so I cannot be accused of being parti pris in this in saying that I support public schools.

There is one iron law in politics and history—namely, the law of unintended consequences. As Winston Churchill said in his eulogy for Neville Chamberlain,

“we are so often mocked by the failure of our hopes and the upsetting of our calculations”.

As the noble Lord, Lord Lexden, and several other speakers in the debate have pointed out, the present proposal is suffused with the dangers of unintended consequences. The Government want public schools to become less elitist and exclusive, but as it will be the less financially secure schools that will have to shrink, and maybe in some cases close, that will leave the rest of the independent sector more elitist and exclusive.

The Government say that they are prioritising economic growth, but they will effectively let parents keep about £400,000 of post-tax income per child, if they take their children away. Studies show that many parents will reduce their work hours, retire earlier than planned or leave the workforce entirely, with serious effects on the economy and the public finances. The Government say that they welcome the huge amount of philanthropic work that public schools do in their local communities, but that will understandably be among the first things to go when schools have to draw in their horns financially to keep school fees down.

The Government want more working-class children to go to Oxbridge, but if middle-class parents have to withdraw their children from public schools and send them into the state system while tutoring them privately, the likelihood is that Oxbridge will become more middle class rather than less. The Government are committed to fighting bullying in state schools, but this measure is likely to unleash more bullying, based on class prejudice against middle-class children who join state schools half way through the school year.

The Government say they want lower class sizes, but this measure will probably raise class sizes in state schools, especially if the new teachers cannot be hired on the expected VAT, which will not be forthcoming if parents withdraw their children from public schools in significant numbers. The Government say that they want to encourage educational charities, yet they are setting a hugely dangerous precedent in taxing them, and it is hard to escape the conclusion that they are doing this for a tribal shibboleth, more for ideological than for practical reasons.

This measure unfairly penalises those incredibly useful people in our society—parents who pay for education twice, once through their taxes for other people’s children, and once in school fees for their own. Instead of spending their money on luxuries, they invest it in their children’s education. This is therefore essentially a tax on those parental sacrifices, and one that comes fraught with myriad unintended consequences.

16:06

[Lord Hampton (CB)]

My Lords, I must join the chorus of thanks to the noble Lord, Lord Lexden, and pay tribute to the noble Baroness, Lady Barran; we may have disagreed at times when she was a Minister, but nobody could doubt her dedication to making life better for young children. I also welcome the new Minister and, as ever, declare my interest as a teacher in a state school in Hackney, where my children have been educated as well. My own education was quite mixed. I went private, and to a local state school—Dyson Perrins CofE high school, Malvern Link. Yes, I thought that might make the Minister look round.

Everyone wants the best for their own children; that is obvious. But history is littered with people who have talked up the state system, then sent their own children private. The best education should be available to everyone, and it should be free, and I am lucky enough to believe that my children have had the best education.

I also believe that those who want to should be able to pay for their children’s education. But there is a climate of fear and division in this country, and an idea that private schools equal success and everybody else is going to school with knife-wielding maniacs, in hideous schools with massive classes. I can tell you from personal experience that you can quite happily teach a class of 32, where everyone learns and makes progress, in safety. This is a battle for the middle ground.

We have all had emails from parents with really difficult stories but I have a suspicion that, for some of them, at the first bump in the road the child was whisked out of school and home educated or sent private. I genuinely believe that an education is more than passing exams; it is about learning to face other people—people who do not look like you, people who do not think like you. That is how we get through life; we have to make the best of the situation.

There is an assumption that private schools are at the heart of the community, that they all provide charity to all around and that it would be a disaster if some of them failed. I cannot help feeling that if some private schools failed, that would release a lot of engaged children and motivated parents who could work with state schools, propelling the attainment upwards. It might even bring some badly needed teachers back into the state system.

If parents are unable to afford the fees, it might be a relief to give somebody else the payment of their children’s education. Who knows, their children might even thrive in a mixed environment. But, for this, there must be space in state schools, SEN support and, critically, the teachers to teach. I join everybody in asking that the VAT exemption come in gradually. Also, the briefings that we have had have been radically different in terms of how much money this will cost and how much we will have to recoup. I look forward to the Minister’s thoughts on that.

With the impact of VAT, the best private schools will survive. Those who want to pay will have the choice. Some of the less good schools will wither on the vine and perish, mourned by very few, but whatever we do, we must be sure that any changes benefit the vast majority of our young people.

16:10

[Lord Balfe (Con)]

My Lords, I thank the noble Lord, Lord Lexden, for initiating this debate which, of course, was tabled before the election. We are now catching up. I agree with noble Lords who said that this was in the manifesto, but it is still a very vindictive policy and the way in which it is being introduced worsens things. Top schools will still be okay. Eton, Harrow, Winchester and the like will not go under. They will stay there. The only schools that will go under are those that are on the margin anyway.

There are good schools in places such as Woking, Guildford and Kent, in areas where there are grammar schools. We already have a lot of schools in the state sector which are as good as public schools.

Two of my children went to public school. I observed the huge struggle that parents had in paying fees. It was quite common for there not to be a summer holiday. They went to a very average public school in Ely. We used to know it in slang terms as “Farmers’ Comprehensive” because it catered for the rural community of the north part of East Anglia. However, many of the parents there struggled very much. Not only that, when two parents sent their children to the school, for one of those parents nearly all their income was spent on those school fees.

I was lucky because my wife earned more than me for a good period of our early marriage. Most of that money went on childcare, first on nannies, then on schooling. It was very beneficial because I was working in Brussels, and we felt that my son would benefit from having male teachers around and not being in a totally female environment. However, we also felt that my daughter, who had mild dyslexia, would benefit from the dyslexia programme of the King’s School in Ely, which she did. She went on to university, got a 2.1 and now holds down a very good job.

There are a thousand stories behind all this. Look at the family reasons. I am the president of BALPA, the pilots’ union. Pilots are often away for a week at a time. Sending their children to weekly boarding helps to round them and to give them a start in life.

The same was true for my wife, who is the daughter of a Foreign Office diplomat. She went to public school at 10 and did not see her parents, apart from during the holidays, until she was at university. This is the sacrifice that many people make for their country and the schooling system helps with that.

Finally, I have one question for the Minister. King’s Ely has a burgeoning group of Asian children. It is likely that, if their numbers go down, the school will pull it up by bringing in more migrants. Have the Government made any assessment of this? How many migrants are we to expect? Will there be visas for parents, noting that health service workers can no longer have family visas? Will the children be able to bring their parents in to help look after them, or is this yet another bit of the puzzle that has not been thought out?

16:15

[Lord Lucas (Con)]

My Lords, I declare interests as proprietor of the Good Schools Guide and having sent my children to both state and independent schools. I do not think taxing education is right, but we do. If I spend £20,000 on holidays, I will pay £3,333 in VAT. If I spend that same amount on schooling, I will forgo twice the value of that, and the state will benefit by twice the amount for the cost of schooling that it would have incurred otherwise. In putting VAT on these parents, we are not making tax fair: we are taking people who are already taxed at twice the rate of other people and taxing them at three times the rate. It will not hurt the rich; it will hurt the people who are struggling to afford the fees as they are. As I know from my work at the Good Schools Guide and through correspondence in this House, most of them are people who, one way or another, have found that the state will not educate their children in a way that they need. As the noble Lord, Lord Addington, said, a lot of this is due to special needs: a lot of the education is not provided through education, health and care plans but just as part of ordinary education.

This is a tax that is focused on people whom we ought to value and not punish. I do not believe that it will raise the money that it said it will either. There are too many leaks. There are families where the local state system cannot provide local schooling, where they will have to ship them 10 miles or so. You might think that 10 miles is fine, but it has to be by taxi—and 200 days a year of taxis, morning and afternoon, costs 10,000 or 20,000 quid, depending on the state of traffic. There will be parents who opt out of working so hard if their children go state. There will be all sorts of leaks. I really hope that the Government will commit to making a clear evaluation of the effectiveness of this policy and whether it actually raises money.

What I am most concerned about is the merciless decision to put VAT on in January, to force children to move schools mid-year, in the middle of exam years, when there is no chance to negotiate proper provision for SEN; healthcare workers who need to find a way to be able to work the hours they are asked to and cannot turn up at 3.30 pm to pick up their kids from school; and the number of letters I have received from members of our Armed Forces. They are not well paid. It is astonishing that we should treat people who dedicate their lives to our safety in this way, and I find it astonishing, given the years I have been here and the respect I have for the party opposite, that it should contemplate treating children with such cruelty. It really is not in the blood of the Labour Party that I know. I really hope that the Government will think again and make the start date next September.

When approaching the question of the educational divide, I hope this will one day be for the Labour Party a matter of hope not hate. There is so much that the independent sector could do—is doing—for children who need particular help. For instance, there are schools that take on children in care, and there are many other things that could be done by the independent sector, if the Labour Party would only harness its power rather than trying to stamp on it. I think we would all gain.

16:20

[Lord Bilimoria (CB)]

My Lords, the Labour Party’s manifesto stated that if it was elected it would remove the exemption from VAT—and business rates, which noble Lords have not mentioned—for independent schools. It said that there would be a benefit of £1.5 billion and therefore it would employ 6,500 more teachers in the state sector.

I thank the noble Lord, Lord Lexden, for his excellent opening speech, and I agree with 100% of his recommendations. I am a governor of Wellington College, where our older daughter was at school for five years under the leadership of Sir Anthony Seldon, the legendary headmaster. I am an international student from India. I came here at the age of 19. I co-chaired the All-Party Parliamentary Group for International Students, and I am president of the UK Council for International Student Affairs. There are many international students at our boarding schools. I attended Hebron School, a British international boarding school in India, and I was back at the school in April for the 120th anniversary celebrations. Recently, I have been appointed honorary president of the British Association of Independent Schools with International Students.

I was a member of the Times Education Commission in 2022, when I was president of the CBI, and we emphasised very clearly that 7% of children go to our private schools. I quote:

“The commission recognises that many independent schools offer an excellent education. When only 7 per cent of children go to private schools the priority must be to improve the state schools that educate most young people in this country rather than bashing the independent sector for the sake of class war”.


Imposing VAT will make it unaffordable for many children to attend private schools, and that will put a burden on the state school sector. We are talking about 600,000 students at independent schools, and 28.5% of them get some sort of support. The total number of international students is 27,000; that is, 5% of these students are international. If we look at the fee gap, it is roughly £16,000 for independent schools and £8,000 is spent on a state school child, so the different is double, and I will come to that at the end.

Independent schools save taxpayers money, as has been said by many noble Lords. Oxford Economics found that this saving amounts to about £3.8 billion just from ISC schools. Now here is a fact: 39% of the current Cabinet, 48% of FTSE 350 CEOs, 59% of Permanent Secretaries and 52% of diplomats were privately educated.

There are 65,000 boarders at ISC schools. The contribution of boarding schools is £3 billion and 64,000 jobs. It is phenomenal. The 26,000 overseas boarders contribute £2.1 billion. Unlike UK students, international pupils who come here have a choice to go to any country. If the fees are increased, there could be a 15% reduction in their number, which would reduce the contribution by £315 million. Here is another fact: international students who come to our boarding schools go on to British universities, so our universities benefit from them as well.

Whatever happens, we must make sure that there is an exemption for children with special needs, whom the noble Lord, Lord Addington, mentioned. Two of my children have special needs. If one of them had not gone to one of the top independent schools, he would not have got three A*s at A-level and a first-class degree from the London School of Economics. We owe that independent school for what he achieved.

We must exempt service families on continuity of education allowance. Independent schools add £16.5 billion to the UK economy, save the taxpayer £4.4 billion, provide 328,000 jobs and produce £5.1 billion in annual tax revenue. I conclude with this, and it is a fact: the state school budget is £60 billion and here we are talking about getting £1.5 billion more. Who is doing the thinking over here? We underspend on our state school children: £16,000 in private schools, £8,000 in state schools. We need to increase investment in state schools and not rob Peter to pay Paul. This is penny-wise, pound-foolish nonsense.

16:23

[Lord Hacking (Lab)]

My Lords, I stand here as a supporter of the Government, but no support can be blind. I cannot support the proposed VAT on independent school fees, whether or not it was in the manifesto. It is immoral and destined to bring about significant social and political damage to my party and the country.

There are many serious worries. For example, the introduction of an education tax will put us at odds with every country in the European Union and all federal and state law in the United States of America. There is also a serious worry about a blatant breach of the education provision in article 2 of the first protocol of the European Convention on Human Rights. Unfortunately, the noble Lord, Lord Pannick, is not among us, but we have heard his views through the noble Lord, Lord Alton, and he supports entirely what I just said.

The most worrying feature is the failure properly to assess the likely level of forced pupil migration from the independent to the state sector—a vital assessment. The VAT proponents have not revealed their calculations, but the arithmetic is such that any pupil migration above 10% will wipe out any profit for the state and become a progressive burden on the state. Since the VAT proponents are still claiming a profit of between £1.3 billion and £1.5 billion for the state sector, the assumption has to be that they are the working on a very low pupil migration figure, possibly as low as 5%.

There are other calculations. The October 2022 parent survey by the Independent Schools Council, conducted among 16,000 parents, found that 18.8% of parents were likely take their children out of independent education. In April 2024, a parent survey by the Times newspaper set a pupil migration figure of 26%. A preparatory school in Surrey forecasted the same 26% migration of pupils. The Hulme Grammar School in Oldham believes that 50% of parents will find it difficult to meet the VAT school fees. Scaling down the figures as far as possible, this means we are risking no less than 80,000 to 108,000 pupils being forced from the independent sector, with all the education disruption and distress this will involve, and with a big burden of new pupils being placed into the state sector.

The task, therefore, upon which I have embarked is to persuade my party not to carry this measure further forward. It must be noted that the well-endowed schools constitute only 10% of the independent sector, as the noble Lord, Lord Lexden, pointed out. The axe will fall not on them, although they will be affected, but on the hundreds of independent schools, some very small, throughout the country which are providing most valuable education to supplement the state sector. Take, for example, the independent schools in Greater Manchester that I recently visited—the Hulme Grammar School, which I have just mentioned, and the Bolton School in Bolton. As I learned, the parents are just working people employed in health, education, catering and hospitality. They are taxi drivers, joiners, carpenters, and all are making great sacrifices to provide a better education for their children. These are the very people my party has pledged to support.

Finally, I can only repeat that this VAT proposal is wrong. Any reasonable assessment of likely pupil migration will show that it will provide no benefit to the state but would be a heavy burden on it. I ask the Minister and the Government to respond positively to all these concerns and, as promised by the Leader of the House, to listen to constructive criticism.

16:28

[Baroness Garden of Frognal (LD)]

My Lords, I find this a sad debate, but I am delighted to follow the noble Lord, Lord Hacking. I thank the noble Lord, Lord Lexden, for his championship of the sector and his spirited introduction.

We had high hopes that the incoming Labour Government would champion education, move away from the stultifying knowledge-based curriculum and look for opportunity for all. The Liberal Democrats would never tax education, and worry that singling out independent schools in this way betrays a vindictive lack of understanding of the breadth and social impact of the sector. I thank all those who have written such moving letters to us about their own stories.

Anyone who knows anything about education knows that changes should only ever be made at the beginning of the school year. As many have said, introducing such a significant measure in January will bring great unnecessary stress, as pupils struggle mid-year to adjust to significant change. I join the appeal to the Minister at the very least to postpone this until September, which will also give the chance for proper scrutiny and impact assessment. I fear that the huge sums the Government expect to raise for teachers will prove far from the reality.

In four short minutes, I will raise the issue of military children. With my RAF husband, we moved 24 times in 30 years. At the age of nine, both our daughters were starting their seventh school, and we took the decision that they should board to get continuity. We could do that only because of the substantial forces education grant. My husband was a high-flyer, but we never had much money. When the school decided to change school blouses and summer dresses, I bought material and sewed six blouses and six summer dresses, because the material cost only about a quarter of the ready-made clothes. I assure noble Lords that this was not for fun: we simply could not afford the uniforms from the shops.

Military children already suffer upheavals and uncertainties, so will the military education allowance be raised to pay the VAT? If not, I fear that, as was mentioned, many military families will be placed in an impossible position and military children will once again be disadvantaged.

The Bill, alas, smacks of prejudice rather than clear thinking. It is of course a matter of concern that the 7% or so of those independently educated end up in much greater numbers in top jobs, but we should look at the reasons why. What is it in private schools that works better than state schools? Surely, we should aim for state education to emulate what works in the private sector, rather than destroy schools that are giving great education, often to difficult and challenged children.

Many independent schools are small, with 200 or 300 pupils. As we have heard, many cater for special educational needs or specialist skills—music, drama, dance and art, subjects that the Conservative Government did much to abolish in state schools. They cater for parents of limited means, who struggle to do the best for their children. This increase in fees could be the straw that breaks the camel’s back. But where in the state sector are the places for additional SEND pupils, or, as the noble Baroness, Lady Bull, pointed out, for the creative stars of the future?

Parents work flat out to keep their sons and daughters in school environments where they can flourish and succeed. If the sums simply do not add up, they will be dismayed if their children have to return to schools where they have struggled and failed. It is a matter of great regret that this unkind and uncosted measure was put in the manifesto. It needs much greater scrutiny if we are not to find many vulnerable children, who were happy and achieving, cast into an uncaring world, with their life chances ruined and parents distraught. I beg the Minister at the very least to delay this until September and to look carefully at the damage the Government are doing. The speakers in this debate have surely given reasons aplenty for a pause and a rethink.

16:32

[Baroness Monckton of Dallington Forest (Con)]

My Lords, I declare my interest as set out in the register: I am the founder and chairman of a charity that, among other things, is a special post-16 institution. Our aim is to prepare young people for employment. The charity is Team Domenica, named after my daughter, who has Down’s syndrome. Also, we have staying with us a Ukrainian refugee child, who attends the nearest public school, free, along with four others.

Non-maintained special schools have been excluded from the new 20% tax. However, these schools are only a very small part of the special educational needs landscape. Department for Education data shows that there are only 52 such schools, educating 3,965 pupils. Yet there are 753 independent special schools, educating nearly 25,000 pupils, all of whom are potentially liable for VAT. Where their place is funded by the local authority, this can be claimed back, but the school still faces the cost of registering for VAT and the burden of managing the system.

Where does that leave specialist colleges such as ours, of which there are 130 in England? At the moment, all Team Domenica’s candidates are over the age of 18, but, if we decide to take on students between the ages of 16 and 18, the VAT would fall upon not only those individuals but on every single pupil at our college. We would also lose our business rates relief, as pointed out by the noble Lord, Lord Bilimoria. In a field where there is already such a grotesque volume of form-filling, we will have the pointless bureaucratic nightmare of recycling money that comes from the state only to return it. The Government would effectively be taxing themselves. This would perversely discourage extending this potentially life-transforming service to some of our most disadvantaged young people. These 130 institutions, of which we are one, are the only alternative to mainstream further education for people with more complex learning disabilities.

On the wider point, which other Members in your Lordships’ House have raised, concerning the 94,000 SEN pupils placed in private mainstream schools, only 7% of them have an education, health and care plan, which means that the overwhelming majority are paid for by the parents, many of whom will already be at the limits of what they can afford. A large number of these pupils will have been taken out of maintained schools and transferred by their parents to the private sector out of desperation, as these children, particularly those on the autistic spectrum, have not been able to cope with the large class sizes.

The general effect of this tax will be to drive more SEN young people into the maintained sector, which is already inadequate at meeting these needs. This will make more parents go to tribunals if the local authority refuses to give their child an EHCP—which happens all too frequently. I have sat in on some of those tribunals. I would like to invite the noble Lord, Lord Addington, who articulated with such passion and anger what happens in those tribunals, to come with me to the next one that I have to attend. This is an exhausting option for parents already struggling to cope. Some 96% of such hearings end in favour of the family, but at a huge emotional cost.

No previous Government have taxed education—it is seen quite rightly as a public good. But to tax parents of children with special educational needs, parents whose lives are already so challenged and difficult, and who often struggle more than people could imagine, is cruel. I hope that this is merely an oversight on the part of the Government, but, if such is the case, that is itself a problem, because people with learning disabilities are too often forgotten. They deserve so much better

16:37

[Lord Black of Brentwood (Con)]

My Lords, I declare an interest as president of the Boarding Schools’ Association and the Institute of Boarding. This is an intensely personal issue for me. My beloved parents sent my brother and me to Brentwood School, an independent school. They were not at all wealthy—my father owned a shoe shop and my mother looked after the family. It was a real struggle for them, but they never regretted it. To their sacrifice, and an exceptional education at Brentwood, I owe everything. My parents were just the sort of people, battling to make ends meet to pay the fees, who would have been hit hardest by this spiteful policy. They would not have been able to cope with a sudden 20% increase, especially halfway through the school year, and we would have been placed in a state school, adding to their overcrowded classrooms. That is what will happen now—one of many reasons why this policy will end up costing taxpayers money. This truly is voodoo economics. Those affected will be young people at their most vulnerable. They are not statistics, but children with whose lives this Government are heartlessly toying.

Fifty years on, I am chairman of governors at the school, and I declare my interest accordingly. Abundantly fulfilling our charitable purposes, we play our full part in helping many from less well-off backgrounds. We spend nearly £2.5 million each year on over 120 bursaries, half of which are fully funded. We have an active programme of partnerships and volunteer programmes with the local community, and we work with many local state schools to provide sporting, musical and science facilities, as well as donating laptops. That is replicated across the sector. However, all that is at risk if VAT, alongside the removal of business rates relief, hits the financial sustainability of independent schools.

A prime duty of government in education policy should be to encourage excellence access—hallmarks of schools such as Brentwood. This policy does the opposite: it is a tax on opportunity and achievement. If I dare use this phrase, it is the first time in five decades that a Government have had levelling down as an aim of education policy, rather than levelling up.

Brentwood is also a boarding school. Boarding schools, both state and independent, are a vital part of the education sector, contributing £3 billion a year to the economy and providing 64,000 jobs, as the noble Lord, Lord Bilimoria, said. They educate 70,000 children a year, with 25,000 coming from overseas, making them part of the incredible international success story of independent education. They play a particularly important role in training young people in music, singing and ballet. As such, they are a crucial part of the UK’s creative economy, especially at a time when music education is collapsing in state schools. They also provide indispensable continuity of education for military families, on whom we depend for our freedoms. The Government say that will not charge VAT on state boarding fees but will on independent boarding fees. Why on earth should they be treated differently, if not simply for ideological reasons? Should not fees for military families, and for students enrolled in music and dance schemes, be exempt, in the interests of wider public policy and at a cost of just a few million pounds?

This cruel policy—in sharp contradiction, I might say, of our obligations under the Universal Declaration of Human Rights—shamefully puts the interests of crude ideology before those of children, many with special needs. The Government must delay its implementation until September 2025, undertake a proper consultation, talk to the sector and come back with plans that are properly thought through, costed and practical. It is time to put children before party.

16:41

[Baroness Butler-Sloss (CB)]

My Lords, I declare my interest that I went to an independent school, as did my children. I must say, like many others have said so far today, that doing that spent all our money. We did not take foreign holidays and things like that, but it was worth it.

I strongly support what the noble Lord, Lord Hacking, said, as well as many other speakers. The Government have not looked across the independent sector; they have concentrated on the great schools. As has been said, the great schools will survive, probably largely because of foreign pupils.

I have had a lot of experience of small independent schools, right across the country, and I have had—like everyone else here, I am sure—endless emails from parents from small independent schools, many of which are likely to close. They are often local, and parents have put their children in them for very good reasons. One example I read was of a nine year-old autistic boy who is extremely clever. In the state sector, he was absolutely hopeless. He was removed and sent to a small independent school, where he was cherished. That sort of child may well cope in ordinary school if he has sufficient help, which this child did not have.

I also have a personal experience. One of my grandsons is profoundly deaf. He is American, and he went to an independent school in Los Angeles because he could not cope with a lot of noise and had to sit at the front of the class to be sure to hear what was going on. I am sure that similarly profoundly deaf children in this country going through ordinary education would not necessarily have a very good time.

I have to say that I am very concerned for the people on modest incomes—many of your Lordships have already been talking about modest incomes—who are still taking the trouble to spend money on education rather than on holidays and other things. That is what is being attacked here with this proposal.

As I said, many small schools are almost certain to close. What on earth will the effect be if, in the middle of the academic year, a considerable number of children have to go into the state sector? We know that many schools in the state sector are overfull already, and the teachers will not be there because the money has not yet been raised. I am particularly concerned with pupils in their GCSE and A-level years; nobody has yet spoken particularly about those two groups. How on earth will they go into the state system with probably a completely different programme, working in a state where they absolutely will not be able to cope with what is going to happen? If they do not look at anything else, the Government must look at January. Finally, I ask them to please look at SEND, at special schools for other needs and at military schools.

16:45

[Lord Kirkhope of Harrogate (Con)]

My Lords, I declare my interests in this subject, first as a former pupil, then a parent and then a governor of the independent Royal Grammar School in Newcastle upon Tyne. I will concentrate some of my remarks on giving a few facts about my old school. Established in 1525, it is coming up to its 500 years. The school has always promoted a rich social diversity. When I attended, a little later than that, we had the benefit of the assisted places scheme, with many students attending based on their potential, not their financial circumstances. The school has had one of the most distinguished academic records of any school in the United Kingdom, particularly in its region, the north of England.

When the assisted places scheme was withdrawn, the school found ways of keeping its diversity by offering support and finding some or all of the fees for many deserving students and later, to this day, seeking bursary advances from institutions, former pupils and others to maintain that broad offer. Nearly 100 students at the school are currently supported by bursaries. Since going co-ed the pupil roll has gone to more than 1,300, and the mix has added to the comprehensive nature of the education provided. But the school has never considered itself as a privileged island, remote from the community. I am sorry that the noble Lord, Lord Griffiths, is no longer in this place because his reference to this is important. The Minister can get confirmation of that from north-east representatives at all levels.

There is a genuine pride of that establishment in the region. The Labour-controlled Newcastle City Council is constantly in touch with the school and using its assistance in various ways. The governing body has local authority representatives from the neighbouring areas, and its contribution to the community includes the sharing of its assets. More than 100 state schools in the north-east of England benefit from Royal Grammar School specialist staff, who assist with subjects including maths, physics, robotics and computer science. In its charitable status declaration, it includes reference particularly to providing facilities of social welfare to the public at large, with a view to improving the conditions of life in Newcastle upon Tyne and the north-east of England. This is really important.

Alumni have included many who have gone on to be leaders in their fields, in academia, medicine, the arts, the law, sport, religion and public service. I was interested to hear the reference by the noble Lord, Lord Alton, to the ECHR; I think I will have to advise my honourable friends standing for the leadership of my party of that point, in case they develop that theme too much, but it is very important. Can the Government please examine carefully whether legality exists in this case? If they persist in their plan, may they please at the very least look at ways in which they can give concessions to reflect the community output of a school based on its belief in encouraging good education everywhere?

Although bursaries are a means of benefiting those from poorer situations—from an RGS education, for instance—they do not benefit those parents who narrowly fail to meet the criteria for such awards or where the limit of grants has been reached. Many struggle to give their children the opportunity to receive this form of education best suited to their needs. Levying VAT on fees will have a big impact on those families and force compromises, including on services offered by the school both internally and externally. Regardless of the commitment of the Government to this policy, I therefore hope that they will find ways to recognise schools such as the Royal Grammar School in Newcastle, with its strong involvement for good education and community concern.

16:49

[Lord Winston (Lab)]

My Lords, I work at Imperial College where I am a champion of the outreach group, which has grown considerably over the years. It started 50 years ago; we called it the Pimlico project. That school has benefited massively from the sort of work that we do with it, and across London we have done this continuously since.

The big problem is outside London, where what I am seeing, as the person who represents the college mostly outside London, is truly frightening: the lack of aspiration and ambition, and the number of kids who do not consider that it is worth being at school after the age of 15, let alone 16, or who are not able to do A-levels because there is not enough money to do that. There is a crisis in our schools, and it is a crisis in the state sector. It is not diminishing. I go into schools in the north-east and north-west of England. I spend much time in East Anglia, 10 or 15 miles from Cambridge, one or the great seats of learning, and it is extraordinary how great that deprivation is. I also work in the West Country and more recently in Wales, particularly in the parts that are difficult to reach in the middle of Wales on the coast. It is a five-hour journey for me, meaning I have to stay overnight. I wondered what the hell I was doing there, but when I saw the sort of things that I could stimulate, I was completely converted to realising that we are doing a useful job.

We are not going to do anything to deal with the massive problem that we have in some of our state sector—not all of it, but where it is poor and diminished there is some urgency. As for the idea that somehow levelling down by taking money from the private schools is going to make a difference, it cannot possibly. The sort of money that is involved is trivial compared with what is needed. Unfortunately, my Government, which I absolutely support, have to recognise that we need to think of much more sensitive ways of dealing with what is in fact needed.

What we are doing with the outreach at Imperial is using the private schools. To take one example, Peterborough is a pretty poor area. Lots of state schools there are not doing very well. We focused on Oundle, which is in the centre up there. Oundle has been amazing. I have visited Oundle maybe seven times in the last 10 years, maybe more. Other members of the college have gone there too. They have connected with the state sector and made a huge difference to the state schools in that collaboration. Those sorts of collaborations are what we should have done in the health service under Tony Blair’s Government, bringing the private sector into the health service, but he felt that the party would never stand for it. We now have another opportunity with education; we have to consider how we can manage that. The attitude of damning the private sector, with all the objections that we have heard—and I agree with them completely; they are really serious—needs to change.

It is all very well to talk about a manifesto commitment. Everybody can believe in their party, but nobody on either side of this Chamber can believe in everything that the party believes; that is madness. Here, we have to think again and recognise that we have to do something about it.

16:53

[Lord Naseby (Con)]

My Lords, I think it is plain to all noble Lords that it is wrong to put a burden on certain families who, faced with increased fees caused by a policy of introducing VAT, find themselves totally adrift. Those children will undoubtedly suffer.

Frankly, independent education has been with us for centuries. I declare an interest as having been at Bedford School, which was founded in 1552. It is a boys’ school of just over 1,000 boys, the best part of 25% of whom board. They do so because their families work somewhere abroad and there is no alternative. There is no state boarding. We must reflect on that dimension.

We also need to recognise that children today, whether in independent or state education, have been through a shattering experience with Covid. I do not know whether noble Lords saw what happened in individual homes; I certainly saw what happened in my daughter’s home and my son’s home. Sections were set aside for remote education for my two granddaughters. That sort of thing was done throughout my former constituency in Northampton South. Whether we like it or not, those children suffered. That must be recognised.

I was a boarder. My parents worked in Lahore and Ottawa. Where else could I go other than to a boarding school? We are an exporting, trading country. For heaven’s sake, there are thousands of parents abroad supporting this country. We must remember that. On top of that there is also the military and everybody else. Boarding is vital.

The Harpur Trust, which looks after the three major independent schools and one small one in Bedfordshire, says that £2.7 million is spent on bursaries, as well as for 52 disadvantaged young people from Bedford to go to university. There are school uniform grants to every young person in Bedford on free school meals moving from primary to secondary school. That is a terrific achievement. My own school has a partnership with Mark Rutherford School and a new project in the last few years, Ready2Lead, covering eight secondary schools. The school’s Quarry Theatre opened to the public in 2015 and will celebrate 1,200 shows in July. So it goes on. Here is a small quote from a Mrs Barker, the head teacher at Scott Primary School:

“We are so grateful for the opportunity that Bedford School are offering”.


This is not the right policy. We need to be practical, exempt boarding fees from whatever comes out, and be sensible and move this to the end of the school year —it is pretty difficult to change course in the middle. If we are really short of money, why is gambling—bingo and betting—exempt from VAT? Is that more important than the education of the young people of this nation?

16:57

[The Earl of Clancarty (CB)]

My Lords, I am grateful to the noble Lord, Lord Lexden, for the opportunity to speak in this debate. This is about schools, but I will start by talking briefly about higher education, as it has a bearing on the debate. Ideally, all education should be free, and that ought to include higher education. I strongly believe that it was a grave error of the Blair Government to introduce tuition fees and effectively commercialise universities. Despite the problems we now face, if Germany can successfully operate a free higher education system, for example, why can we not do so if we believe in the principle of free education? I raise higher education in this debate because of the respective choices that face parents and students in every area of education, which may have little to do with principle but everything to do with necessity.

We have already heard from my noble friend Baroness Bull about the particular performing arts schools where, unless the state decides it is going to start operating its own tuition-free ballet school, for example, there is no option for the parents and students concerned—just as there has been no option since 1998 in higher education except to get a loan.

I agree entirely with the noble Baronesses, Lady Fraser and Lady Bull, about the need for certain exemptions. The Labour Government’s own dance and drama awards have potentially been caught up in this too. I hope the Minister can say that the 15 providers for performing arts training through these awards will not attract VAT.

To make the wider point, not every parent has sent their child to an independent school because it is what their parents did, but because what was required for the particular child has not been readily available in the state sector. They will scrimp and save to do so and make use of bursaries which will likely now be less available. This is true for the arts, which have been significantly diminished in the state sector, as the noble Baroness, Lady Garden, said, but have flourished in many independent schools. Nevertheless, let me remind the House what Keir Starmer said in his speech at the Guildhall on 14 March:

“Every young person must have access to music, art, design and drama. That is our mission”.


He went on:

“we are launching a sector plan to support the entire ecosystem of the creative industries”.

Schools are of course a major part of the ecosystem. The goal should be that the state sector arts education be at least as good as independent schools are now, and make that offer unnecessary. However, when you realise that, for example, independent schools spend on average five times as much on music as state schools currently do, this is a hefty challenge. Will the Government rise to this challenge and keep their promises on art education in view of their intentions for the private sector?

I make one further point, in the interests of co-operation—there is considerable adversity in this debate. I believe in good education for everyone whatever their background. However, I also believe in advances in education—Education, if you like. What independent schools have been able to do, unencumbered by the accountability measures and the narrow tunnel into which state education has been pushed, is experiment, and that should be valued. As my noble friend Lord Aberdare pointed out in the 11 to 16 year-old school education debate on 26 July, some independent schools have developed their own curriculum offers and assessment methodologies. The Government, the state sector and, indeed, Becky Francis could be learning from these developments in the independent sector so that education as a whole may benefit.

17:01

[Baroness Lawlor (Con)]

My Lords, I am very grateful to the noble Lord, Lord Lexden, and I congratulate him on tabling this Motion for us to debate. I am very concerned about the impact it will have on independent schools. I oppose the plan and I hope that we and the Government will think again, given all the reasons we have heard today about the impact on parents, schools who face closure and the wider benefits to the community, which will be lost.

This matters more than ever before. Independent schools show not only what can be achieved. They offer competition and an alternative to the state sector. I believe this is, more than ever, important. We are confronted today, not just in this country but in others too, by the total state and its domination over life and liberty, over every area of our lives and our children’s lives, through ever-higher tax, the arrogation to itself of ever greater powers, and ever more spending on what the state, rather than the people, decrees.

That will now be extended to independent schools which, unless the Government change their intended policy, will be obliged to pay VAT. Many are charities that originated in municipal, private and church charity under, and helped by, the historic charity laws of Elizabeth I when education was specifically mentioned as one of the purposes of charity, along with three others.

Indeed, in 1870, when the state itself moved in to provide for public elementary schooling where previously there had been a grant system, the Prime Minister of the day, William Gladstone, insisted that parental freedom and freedom of conscience must continue to be catered for, and that the state should supplement not supersede existing voluntary schools, which were independent of the state. He was a Liberal Prime Minister who led a debate against the left—the ideologues—in his own party, who wanted a uniform, Prussian-type military system of education as a state system. He would not sacrifice parental choice to a uniform system. He won the day and the law provided that the state with its board schools would supplement not replace voluntary schools of all persuasions—Anglican, Catholic and Dissenter.

In today’s secular world, your Lordships may no longer think such freedom of conscience matters, but we face an ever bigger state. We also face threats not only to freedom of conscience but to the academic and intellectual freedom of those who teach. The Government now appear intent on suspending indefinitely the operation of freedom of speech in universities, the Higher Education (Freedom of Speech) Act. They are intent on reviewing a national curriculum which the coalition worked so hard to ensure would provide a minimum of knowledge in each subject on which teachers themselves would be free to build and develop. They also intend to get rid of the Ofsted snapshot.

These matters are more important than ever; we are confronted by the total state. I urge the Government to treat this measure in the spirit of all Governments of the past: to encourage diversity and to leave it alone. The Labour Party under Mr Blair, the Liberals under Gladstone and the Conservative Party have all championed diversity, not uniformity.

17:06

[Lord Kempsell (Con)]

My Lords, in the debate on the gracious Speech before the Summer Recess, I suggested that the Government’s proposal to impose VAT on school fees would ultimately narrow opportunities across the country rather than widen them. What I did not predict is that the Government would make such a quick success of wreaking havoc on the lives of children who are now living with uncertainty about the implementation of this measure.

I want to focus on one such group in particular: Armed Forces families. More than 4,000 military children receive support with school fees via the continuity of education allowance. From Cyprus to Sierra Leone, from South Sudan to the Falklands, the operational demands on these families have a huge impact on their education. Army families, for example, are highly mobile; they are asked to move every two years on average. They receive support so that their children can have continuity by attending boarding schools, minimising the need to constantly switch schools. That funding is capped and there is also a parental contribution, so these are not fully funded places. Of course, these families are far from wealthy, but they are highly concerned that they will be priced out by the Government’s plan.

Just last night, I received an email from a service family who described their tears of worry at the Government’s policy. It says: “My child should have stability in being able to stay in the English education system at the same school, but the Labour Government apparently wish to break their heart and soul”. I must warn Ministers that their plan is already doing damage to morale among service personnel, and that is not acceptable.

Worryingly, nearly 70% of Army families surveyed say that if there is no exemption or mitigation to cover the costs of the VAT, they would have to consider leaving the Armed Forces. With the global security situation as it is and the current operational tempo, this surely cannot be what the Government intend by this policy.

I also highlight the many self-funding Armed Forces families who do not claim the continuity of education allowance, who rely on these schools to make their role feasible—on overseas deployments there is obviously no access to alternative state provision. I asked a Written Question on this matter over the summer break and no detail has been forthcoming from Ministers. I wrote to the Treasury but have not received a reply. The school year has already started and the Government are leaving Armed Forces families in the dark. I join calls from across your Lordships’ House today for Ministers to clarify the situation for Armed Forces families. They should commit to exempt all Armed Forces families, whether in receipt of support or not, from their plan to place VAT on school fees. If the Government are not willing to do so, they should design a rebate or mitigation that means that Armed Forces families are not forced to consider whether they can continue in service. It is not sufficient, as the Treasury says in its technical notes, to wait for the spending review to evaluate the impact on military families as this is having an impact now.

As my noble friend Lord Roberts so aptly said, private school VAT will become a case study in the unintended consequences of ill-thought-out policy. Indeed, it has already been scrapped in other countries, the unintended consequences having been noted in Greece, where the policy was withdrawn. It will flood the state sector, cause successful schools to close and have a negative impact on communities. I fear that most of all it will clobber Armed Forces families, who are doing nothing other than serving their country and from whom I have had a huge number of representations.

I fear that behind this policy lies the worst kind of political grandstanding. It does not reach the standard even of sixth-form politics but feels like 1970s-style divisive class politics reheated for today, and leaves a bitter taste.

17:11

[The Earl of Devon (CB)]

My Lords, it seems that this is a debate somewhat about privilege and so I should declare some privileges as I start. The first is the privilege to listen to such an interesting, balanced and informative debate. The second is the privilege I enjoy, having gone to Eton College, which got a rather stupid student into Cambridge University. The third is the privilege I had of sending my children to state primary and secondary schools in Devon, where the education was excellent and they did very well. Fourthly, I should note the privilege I currently have of hosting Kenton Primary School at Powderham Castle—it moved in this week and therefore I am the landlord of a state primary school.

I am not an education expert and was not going to speak in this debate but I was encouraged to by the experience of the people I know locally, particularly families with SEN children and military service families. On SEN children, I really cannot add much more than what the noble Lord, Lord Addington, said, except to note that Covid has obviously been brutal on children’s mental health. It has also been brutal on the mental health services that support our children. The thought that those wholly stretched services are going to have to deal with a whole raft of additional applications for education, health and care plans at short notice when they are considerably understaffed beggars belief, and I cannot believe that the Labour Government really intend to do that in January and cause so much additional burden and stress for these families who are in great need.

On military families, I spoke to my sister this morning. Her husband commands in the south Atlantic and she is flying off to the Falklands tomorrow. She has just packed her children off to boarding school, where they are safe and will have a consistent education. They have no idea how they are going to afford that education on their military salary. I think it is particularly cruel to those people who give so much for the defence of our realm for us to be putting them in this state at this time.

Lastly, it is difficult to say anything new after such an erudite debate, but Mrs Helen Mason, who has informed me a lot about the condition of SEND children, points out that Articles 28 and 29 of the UN Convention on the Rights of the Child may well be implicated in this policy. I ask the Minister to comment on that.

17:14

[Lord Fairfax of Cameron (Con)]

My Lords, I too thank my noble friend Lord Lexden for bringing forward this debate. Like many others, I agree with every word that he said.

I had intended to speak in this debate in any event, but the pitiful letters that I and many others have received have stiffened my resolve. While this misconceived and ill-thought-through measure was in the Labour Government’s manifesto with the aim of reducing educational inequality, every indication is that its rushed implementation without proper consultation or financial assessment may achieve precisely the opposite, as well as bringing extreme pain to many families and children.

The Government’s vindictive proposal is to impose this measure with effect from 1 January next year. That is an exceptionally short time and is likely to lead to many seriously negative effects. Some independent schools will be unable to plan properly in the short time available and may be forced to close. Children, particularly those with special needs, may have their education catastrophically disrupted mid-year and their exam attainment prejudiced. Local authorities and state schools may not have time adequately to plan for the likely mass transfer or attempted transfer of pupils to them from the independent sector. I say “attempted” transfer because of course, many schools have already told inquiring parents that “there are no places available”.

As some speakers have said, there is great uncertainty about the likely financial impact of this policy. The Labour Party is praying in aid a net benefit of £1.5 billion but others, including the Adam Smith Institute, suggest that the measure could raise no money at all or even cost the Government £1.5 billion per year.

Because my noble friend Lord Lexden has already quoted them, I will not repeat the Oxford Economics figures—on the contribution of independent schools to the UK economy and so on—but have the Government and the Minister ever heard of the Laffer curve effect? Contrary to stereotypical perception, this measure will not hit the Etons of the independent school world but the small, far from rich independent schools, about 50% of which have fewer than 100 pupils. Those are the schools that are financially vulnerable and may be forced to close because of this measure.

Internationally, neither the US nor the EU imposes VAT on independent schools; and as noble Lords have heard, Greece tried it in 2015 with catastrophic results and had to reverse it. So, if the Government bring in this measure, they will be an international outlier. As others have advocated, there is a strong case that three categories in particular should be exempted, which I would support: children with special educational needs, small faith schools, and service and diplomatic families.

I have to hand it to the new Labour Government: in their short time in office, they have already succeeded in alienating pensioners, Jewish people, entrepreneurs and now children and parents using independent schools. That is quite an achievement in three short months. Our children’s education is far too important a subject to be upended by this mean-spirited, ideological and ill-conceived measure.

17:18

[Lord Etherton (CB)]

My Lords, I too am grateful to the noble Lord, Lord Lexden, for securing this important debate. I agree with many of the concerns expressed by previous speakers, including the need for more comprehensive consultation; the need to delay the imposition of VAT until next September; and an exemption for schools providing for children with special educational needs and disabilities, as well as for small faith schools and boarding schools for the children of soldiers and diplomats, who rely on boarding education for their children in order to carry out their duties.

I shall concentrate on the contributions made by some independent schools for the benefit of state schools and deprived children. The helpful briefing of the ISC states that there were 9,248 partnerships between ISC schools and state schools or community groups in the 2023-24 academic year. Last year, ISC schools gave £1.1 billion in assistance, more than half of which was means-tested. My point, in short, is that this contribution must in some meaningful way be recognised if the proposed new VAT regime is imposed.

I wish to give as a live example one metropolitan independent school—not Eton or Harrow. It supplies teachers directly to state schools: last year the equivalent of three full-time teachers. Substantial amounts were applied in partnership projects, equivalent to approximately 2.7% of total turnover. In addition, the school spends approximately £3.5 million a year on bursaries—8% of turnover. The majority of this comes from donations. Critically, more than 50% of parents give donations for bursaries and partnerships. Taking an overview, more than 10% of the school’s turnover was applied last year to bursaries and partnerships, a significant proportion of which came from donations from parents.

The obvious concern is that parents who pay VAT at 20% will be less inclined to give donations that would have been applied for bursaries and partnerships. I suggest that the Government should consider carefully ways in which, if VAT is imposed on the fees paid to independent schools, allowance is made to recognise the significant amount paid by some independent schools for the benefit of less-advantaged state schools and pupils and, indeed, to incentivise the giving of such assistance.

I put forward for consideration by the Government two possible approaches. One is to have a reduced rate of VAT where a certain percentage of the independent school’s turnover is applied in bursaries, partnership projects and other assistance. The second is to treat money, or money’s worth, applied for bursaries, partnership projects and other assistance as deductible from the fees paid by parents in order to arrive at a net figure for the purposes of VAT.

Assuming as I do that the Government’s intention is not a spiteful attack on independent schools but a genuine attempt to improve state schools, it seems obvious that the Government should not disincentivise the financial assistance for state schools and disadvantaged pupils currently derived from parental donations in the independent education sector, but encourage such donations alongside the intention to impose VAT on independent schools’ fee income. If, as I hope, these ideas are of some interest to the Minister, I suggest that a meeting with her, attended by those with appropriate expertise, be arranged.

17:22

[Lord Fuller (Con)]

My Lords, I attended an independent school and was a governor of another one for about 10 years in the 2010s. I thank the many people who have written to me explaining their personal circumstances and detailing the effect the proposals will have on them as families and on their children. For the most part, these correspondents are not wealthy people. They include police officers, soldiers, airmen, nurses and firefighters—working people with aspiration and ambition for their children, many of whom have their own challenges. I empathise with them all but wish to make a different point.

First, I wish to talk about the schools themselves and their staff. Nearly all these organisations are charities; they are run for charitable purpose, not to generate healthy bank balances. Even schools with 500 pupils may run a surplus of just £250,000 a year to fund reinvestment. They do not have fat on their backs. In these cases, the fees from perhaps only half a dozen boarders make the difference between profit and loss, surviving or failing. Their finances are finely balanced and under pressure.

In the shires, these schools are often located in market towns: places such as Loddon, Holt, Ely, Uppingham, Oundle—I notice that the noble Lord, Lord Winston, is not in his place—Oakham, Felsted and Framlingham. They are lovely places with wonderful high streets and a much wider range of pubs, cafés and restaurants than their populations would normally sustain. But they are not market towns; they are factory towns. The schools are their factory: factories of education and learning. Two boarding schools in Norfolk, Langley and Gresham’s, employ 450 people each and the latter spends £25 million a year in Holt and is just about to refurbish and repurpose a grade 2 listed building which otherwise would be lost to the nation. They underpin local economies.

I was in my local pub in August, and I bumped into a man wearing a Langley School polo shirt. It turned out that he was responsible for running the minibus network, with 27 minibuses, the drivers, himself, a secretary and some maintenance staff—a 35-person sustainable transport business. His colleagues were cooks, cleaners, matrons and groundkeepers, not just the teachers. They are working people, and I want to speak for them, because this proposal risks putting them all out of work, and will not raise a penny for the Exchequer.

It is simple: if you force an organisation to levy VAT on sales, it can reclaim VAT on its purchases, and net off. Charities cannot do that. If you start to treat charities as businesses, do not be surprised if they start acting like businesses. If schools are forced to close, we are looking at the loss of PAYE and the payment of benefits, in areas where there are few other employment opportunities. Cancelling a bursary for the child prodigy, or a scholarship for an exceptional sportswoman from a disadvantaged family, helps nobody. It will drive inequality harmful to our national sporting life. We will all be poorer for it.

There is so much more I could say, but this proposal will drive more elitism and social inequality, and lead to less opportunity, less charitable purpose, less choice, fewer exports and stunted economic growth. It will have a catastrophic effect on the economic base of our market towns, and on working people and struggling parents. It will put additional burdens on local authorities, with listed buildings left to moulder and the disruption of house prices.

I was just a boy in the 1980s, but I remember wholesale factory closures. For four decades the Labour Party made a rallying call around that. But make no mistake, the Government are mandating factory closures in market towns across our nation. The perverse consequence will be that the lowest paid and the most challenged will pay the price, damaging our place in the world and the promotion of our values to other nations.

17:26

[Lord Shinkwin (Con)]

My Lords, I am grateful for the opportunity to speak in the gap. I too thank my noble friend Lord Lexden for securing the debate. I can hardly remember a time when the House has been so united in rejecting policy based on class envy at the expense of the life chances of vulnerable children.

I declare an interest: I am the beneficiary of a public school education. That was not the intention; it happened by accident—literally by accident, because as a child, as a result of brittle bones, I had too many accidents and too many fractures. My orthopaedic surgeon at the time told my parents that I had to carry on walking if my bone density was not to deteriorate further and my brittle bones worsen. The state system said I had to stay in my wheelchair if I was to remain at a state school. The only alternative was a segregated school for what were labelled “handicapped children”, where the headmaster boasted to my mother that one of the pupils had recently achieved one CSE.

My parents, being teachers in the state system at the time, knew that a solid education would determine the difference between my being able to realise my potential or sink in a pool of chronically low aspiration. Thanks to my parents’ huge sacrifices, their decision to join the staff of an independent school, and my gaining a scholarship, I was able to benefit from smaller class sizes, a safer environment that enabled me to walk at school, and educational opportunities I would not otherwise have enjoyed.

None of this is in any way intended to detract from the wonderful work our state sector teachers, SEND specialists and support staff do today. It is fantastic to know that laws passed by your Lordships’ House prohibit the disability discrimination I faced. Yet like other noble Lords I fear that an unintended consequence of this dramatic change will be to deny the more than 110,000 pupils with SEND currently at independent schools the educational opportunities that I had—opportunities that mitigated the potential life chance limitations imposed by my disability. I cannot believe that that is the Government’s intention.

I close by supporting the call of my noble friend Lady Fraser of Craigmaddie in asking the Minister to meet with those noble Lords who have expressed concerns relating to children with SEND, specifically to explore how, together, we can address the unintended consequences of this policy for disabled children and their families.

17:30

[Lord Wallace of Saltaire (LD)]

My Lords, this has been a passionate debate about a policy which we do not know the details of yet, and which, as many noble Lords have said, has a lot of consequences about which one cannot be entirely sure at present.

I am a disciple of slow government. Many of the things that I objected to most about the last Conservative Government involved Ministers dashing in and pushing ideas which they had not thought through and which ended up being disastrous. I fear that this is one of those. Certainly, it ought not to be implemented within a few months of being decided.

I am also in favour of a simplification of the British tax system. As your Lordships know, the British tax system is far more complicated than that of any other European country, with a much longer tax code. This, I fear, is a further complication, with a great many administrative costs around tax moving backwards and forwards, being remitted and so on and so forth.

There is a major problem of inequality and unfairness in the provision of education in this country. It is the result both of the steady increase in private school fees above inflation over a very long period and of the cumulative cuts in funding for state education over the last 20 years—which has doubled the gap between what we spend on children in state schools and children in the private sector, with the quality of the facilities in private schools increased even further by donations supported by their charitable status. There is a desperate need for better funding of state schools as a result.

My party has been in favour of education for all, funded out of general taxation, for a very long time. Titus Salt, a Liberal MP who built Saltaire, built a village with a school at its centre. His successor as Liberal MP for Bradford, WE Forster, introduced the first Elementary Education Act. I do not recognise the description of that Act given by the noble Baroness, Lady Lawlor. Of the debate within the Liberal Party, including on the Prussian elements, I recall that it was between nonconformists and Anglicans over the quality of religious education. The noble Lord, Lord Roberts of Belgravia, a historian, will remember that a number of Tories in both Houses opposed the Acts on the principle that education for the working classes might encourage them to become discontented with their station in life. I fear that there were those in the Conservative Party of the last 20 years who had something of that in their attitude to the funding of state education.

Clearly, we need better-funded schools for all our children, not only for the principle but because they are citizens and because competitiveness requires us to get the skills that we need for all our population. Since we have just seen riots committed by people who were no doubt excluded from school in their teens and have not really had any purpose in life since, there are all sorts of reasons why funding for state education should increase. I was very glad to hear the noble Lord, Lord Forsyth, say that. Every time he hears one of the candidates for the Conservative leadership say, “What we want are further tax cuts and a smaller state”, I hope that he thinks that that would mean further cuts to state education. We cannot say we want a smaller state if we want to have decent education and welfare for our citizens.

We are talking here about a very diverse private sector. I see it in both Yorkshire and London, and I am struck by how different it is. Day fees for private schools in London are twice those in Yorkshire. In West Yorkshire, 4% or 5% of people go to private schools—these are Catholic, Methodist, Anglican, Jewish, Muslim, Quaker; small, large, prestigious. In south-west London, a quarter of students go to private schools. There is a real social divide, and it worries me that the gap in income and wealth in London is also becoming a gap in society, which we need to tackle.

Of course, there are also specialist schools. I declare an interest here: I dropped out of the state sector at the age of nine by getting a full scholarship to a choir school just across the road. It is not entirely clear what will happen to these specialist schools, as the noble Baroness, Lady Bull, said. I was given a full scholarship, and thus free education, as a choirboy. Does that get taxed with VAT or are those schools exempt? When I went on to secondary school, my father’s employer gave me a two-thirds fee scholarship, very generously—good-enough scholarships were then provided by Barclays Bank. I presume bursaries and partial scholarships are subject to tax, but what about Eton’s King’s scholarships, for example, which are full scholarships for very bright young men? I have met one or two of them—one or two when they were Cabinet Ministers. Do those come under the same system or not?

I will not touch on SEN; I am sure the Minister will, because it is clear from all the messages that we have got that SEN raises very considerable difficulties, and the problem again is that state schools are unable to provide sufficient support for SEN in their schools. I have talked to teaching assistants, and I have seen some of my local schools. Titus Salt School has an extremely good stream for dealing with children with Down’s in the school, but there are not very many schools that can manage to do that sort of thing. I look forward to what the Minister will say on SEN.

As a party, Liberal Democrats oppose VAT on schools, but we do favour a much tougher approach to charitable status and the requirement to contribute to public benefit. The charitable status of schools requires a major contribution to public benefit. Some do this extremely well—I have visited the York partnership and have seen other schools—while others are beginning to lose any sense of providing the sort of public benefit that is required and have gone a long way from their original charitable purposes, with international franchising, failure to invest in bursaries for local students or failure to share their facilities with the local community. I am aware of one school in Yorkshire that had such a large proportion of foreign students that it was beginning to lose any possibility of optimising British values or even making sure that English remained the dominant language within the school corridors.

I read this in the Times the other week, written by a Policy Exchange staffer:

“It is through education that children come to understand themselves as citizens of a nation, with a common culture and shared values”.


I hope we all agree with that, and I hope we think that that should be the purpose of all schools, public or private, state or independent. That requires active partnership between the state sector and the independent sector. It requires independent schools to recognise that one of their main purposes and responsibilities is to act as members of their local community and their national community. That said, I think this is the wrong way to encourage that, and that the priority for the Government should be a qualitative improvement in our state schools, their funding, staffing and resources. I regret that we have not yet seen enough evidence of that.

17:39

[Baroness Barran (Con)]

My Lords, I too thank and congratulate my noble friend Lord Lexden on securing this debate and on his exceptionally clear and lucid introduction. I also congratulate noble Lords on the high quality of all their contributions today. Like others, my inbox has been full of correspondence from numerous parents who wrote to me. I thank them too and share with the Minister—her private office inbox may also be full, but they might not have got to her —just some of the questions they asked, because I would be interested to know her response and what she would say to those parents.

Many of them point to the sense of rushed policy and poor planning that we have heard from so many of your Lordships this afternoon. I do not know what the Minister would say to the mother of a child who has just finished their first year of A-levels in subjects that their local state schools do not offer, or to children in year 11 who have been doing the IGCSE syllabus, which again would not be available to them, to the parents of children in state schools who will have bulge classes to accommodate new entrants from private schools, or to the parents of children with special educational needs who now feel that they will need to go through the process, which we heard about so vividly from the noble Lord, Lord Addington, of getting an EHCP for their child in order for their needs to be met.

We have heard from many of your Lordships, including, of course, my noble friend Lord Lexden, about the very important contributions that independent schools make to our education system and economy. That is through bursaries, through partnerships with state-funded schools, such as those that the noble Lord, Lord Winston, articulated, through the provision of places for children in the care system and, crucially, as we have heard from around the House, through support for 90,000 children with special educational needs and disabilities.

We have heard about the range and variety of schools, including from the right reverend Prelate the Bishop of Southwark, and we even had the noble Lord, Lord Alton, channelling his inner Lord Pannick to raise questions about the legality of the policy, which I am sure the Minister will take away and consider. I shall pick up on some of these themes and ask the Minister a number of questions.

In terms of timing, which my noble friends Lord Maude and Lord Lucas and many others raised, could the Minister explain to the House and the parents who will be impacted by this change why the Government judge it to be the right balance to introduce VAT in January 2025 rather than in September next year? We all understand that it raises more money, but the disruption of moving a child part-way through the school year is something that every parent seeks to avoid. The technical note provided by the Treasury states that:

“The Government understands that moving schools can be challenging”.

I have to say that is quite an understatement, even from the Treasury.

Why the rush? It leaves so many unanswered questions and puts so much avoidable pressure on parents, teachers and, most importantly, children. I hope the noble Baroness will consider some of the suggestions about a phased introduction, such as those raised by my noble friend Lord Forsyth of Drumlean.

I turn to the amount of money this may raise, which was touched on by the noble Lord, Lord Hacking. The Government tell us that this change is not ideological; it is about raising an estimated £1.3 billion to £1.5 billion to fund additional teachers and a long list of other things. Will she confirm that, if the tax fails to raise additional revenue, her Government will reverse this proposal, and if not, why not? Will she confirm that the Office for Budget Responsibility will give an annual update on the net financial impact of the proposed change once it is clear how many children have left independent schools and joined the state sector, and not simply—again, I quote from the technical note—

“certify the government’s costings and impact analysis for these measures”?

I turn to capacity in the state sector. The Government have said that they are

“confident that the state sector will be able to accommodate any additional pupils and that there will not be a significant impact on the state education system as a whole”.

I know that the noble Baroness understands that this is not really about the system as a whole. We know that there are parts of the country with plenty of capacity in the state system, but it is about what happens in each local area. It would help reassure the House if she could explain what assessment the Government have made of the impact on children in state schools in areas with very high percentages of children in independent schools—for example, Surrey or, as we heard, Edinburgh? There are also areas such as Bristol, where there is already pressure on state school places, and Salford and Birmingham, where there are many small Muslim and Jewish schools.

Turning special educational needs and disabilities, can the Minister reassure the House that VAT will not be charged on places for children with special educational needs? We heard very powerfully from the noble Lord, Lord Addington, about some of the issues. My noble friend Lady Monckton of Dallington Forest spoke about specialist further education colleges. It would be helpful if the Minister could clarify if they will be impacted by this. Will non-maintained special schools be able to recover VAT? What assessment have the Government made of the demand for additional EHCPs as a result of this policy?

A number of noble Lords, including the noble Earl, Lord Devon, and my noble friends Lord Black of Brentwood and Lord Kempsell, raised the important issue of military families who serve their nation abroad and, as we heard, need boarding places for their children. Can she confirm that their personal contribution will be exempt from VAT?

I look forward to the Minister’s response to the questions from my noble friend Lady Fraser and the noble Baroness, Lady Bull, about the impact on specialist music and dance schools, the future of which is now in peril. I hope the Minister can respond to these questions from the Dispatch Box but, if not, perhaps she could confirm that she will write to me with the answers.

Time does not permit me to cover other points today, so I will close with the feeling these proposed changes give me, and many others, as we have heard in your Lordships’ House today. This feels like a Government who are focusing on division, rather than aspiration; a Government who are seeking to run down private schools, rather than challenging them to contribute more to the overall education sector. The suggestions from the noble and learned Lord, Lord Etherton, were extremely helpful. These proposals will take away parental choice not from the super-rich—from the people the Prime Minister described as having the broadest shoulders —but from those with shoulders already burdened by choosing to prioritise education for their children in the way that they want. That erosion of choice bodes ill for our country.

I will leave the Minister with one last question. I think the House is just asking the Government to listen. I hope very much that she can answer that they will.

17:49

[The Minister of State, Department for Education (Baroness Smith of Malvern) (Lab)]

My Lords, I thank the noble Lord, Lord Lexden, for opening this debate, and I am grateful for the many contributions. I will do my best to respond to as many as I can in the time available, and I undertake to write to noble Lords on those that I am not able to get to.

I put on record that I share the view of the noble Lord, Lord Lexden, that there are many excellent schools in the private sector, as there are in the public sector. My mother taught at one of them in Malvern. I spent time during my teenage years washing up in the kitchen of another. I know that excellent education is provided in those schools, which is why the department will continue to have, I hope, an important and constructive relationship with the ISC and the ISA in thinking through the whole range of issues that relate to independent schools. But some people listening to this debate might have thought that the intention was to completely do away with the private sector. The noble Lord, Lord Naseby, described how independent education has been with us for centuries. It will be with us for centuries more. People will continue to have a choice of whether they want to educate their child in a state or a private school. I will return to that in a moment.

I was a teacher in one of the excellent state schools which educate more than nine in 10 of our children, and I now discover that I attended the same state school as the noble Lord, Lord Hampton. So I will be crystal clear about the focus and priority for this Government. We are determined in government—on these Benches and in the other place—to drive up standards in those schools for the overwhelming majority of the children in this country, so that they may receive the opportunities that, too often, have been the preserve of the rich and the lucky, as many noble Lords have demonstrated.

There has been an assumption from some contributors that only some parents have aspirations for their children. As the mother of two children, of course I understand the absolute passion of parents to do the best for their children—to find the place that suits their children the best. That is not confined to people who choose to educate their children in private schools and are able to. As my noble friends Lord Davies and Lord Griffiths made clear, it is an aspiration shared by many parents around the country and one that this Government are determined to meet. Private education is not an option—

[Lord Forsyth of Drumlean (Con)]

Will the Minister give way?

[Baroness Smith of Malvern (Lab)]

No—the noble Lord has had the opportunity to have his say, and I want to respond to as many of the points that have been made as possible.

Private education is not an option for most of those people and, unlike the last Government, we will not build public policy around the expectation that public services will fail our children. Most parents need local state-funded schools to support them in meeting these aspirations. It is therefore right for the Government to focus on improving those schools—a public good that will benefit all of us.

Several noble Lords, including the noble Lord, Lord Forsyth, have identified the significance of education and the contribution that investment in that education makes. My noble friend Lady Ramsey identified the gap between that investment provided to our state schools and that provided to private schools: there was a 40% gap in 2010 and there is a 90% gap now. The noble Lord, Lord Bilimoria, said that we should spend more on state schools. The noble Lord, Lord Winston, talked about the deprivation and impact on aspiration of those who do not get the education that they deserve, and argued for more investment. That is precisely what this Government want to do—but we arrived into government to discover a £22 billion black hole and, unlike the previous Government, we are determined to make that investment in our schools but make it on a sustainable basis whereby we can outline where that money is coming from. That is why ending the tax breaks on VAT and business rates for private schools is a tough but necessary decision. It will generate additional funding to help to improve public services, including the Government’s commitments relating to education and young people.

VAT will apply to tuition and boarding fees charged by private schools for terms starting on or after 1 January 2025. I assure noble Lords that the impact of those changes has been assessed and that the Office for Budget Responsibility will certify the Government’s costings for those measures at the Budget.

Several noble Lords have asked what the impact will be of introducing the change on 1 January. We are impatient in this Government to ensure that we can start funding the improvements that so many noble Lords have argued for—that is one reason. It is also worth while, when thinking about the impact of the changes, to recognise that, for many pupils, the change should not mean that parents will automatically face 20% higher fees—nor do we expect pupils to move immediately. Most of the analysis suggests that that will not happen to the extent that pupils move at all—and I shall return to that point.

The Government expect private schools to take steps to minimise fee increases, including through reclaiming the VAT that they incur in supplying education and boarding—so the estimate is that the real VAT impact will be 15%. We think that that will happen, because we have seen what has happened in recent times. There have been above-inflation increases in private school fees for very many years. There has been a 55% increase since 2003 and a 20% increase since 2010, and there has not been a large exodus of pupils from those schools, which of course suggests an inelastic demand for private school places. It is reasonable for the Government to model and think about future impact based on previous experience.

We have provided considerable information around the proposal—both in the technical note and the draft VAT legislation. The technical consultation remains open until 15 September, and I encourage those who are interested to contribute to that as well.

The noble Baroness, Lady Monckton, raised a specific issue about the support to implement the VAT regime. The Government recognise that this will be the first time for many schools that they will need to register for VAT, and HMRC will publish bespoke guidance. It will also contact private schools directly with information about support sessions that will help them to go through this process.

The noble Lord, Lord Lucas, and the noble Baroness, Lady Barran, raised issues about what potential there is to raise revenue here. This will of course be part of the OBR assessment that will be published alongside the Finance Bill at the time of the Budget, which will enable us to consider the broad impact of this—not just the taxation impact but the broader cost impact as well. The IFS estimates that it will raise an extra £1.3 billion to £1.5 billion per year in the medium to long term. As I say, these points will be certified by the Office for Budget Responsibility. The Treasury is doing an economic analysis of the impact of this policy change and the interaction with other behaviours that might come about because of the introduction of VAT.

While there will be more detailed information about the revenue raised by this measure, this seems like a reasonable estimate of the revenue that will be raised. Unlike some other noble Lords, I do not see that amount of money as being inconsiderable. Of course there is more that I would certainly hope that we as a Government will be able to find to invest in education, as previous Labour Governments have, but this is an important contribution to some very important changes that we wish to make.

The noble Baroness, Lady Finlay, asked about the devolution consequences of VAT receipts. I assure her that additional funding provided for schools in England will be matched in the devolved Administrations in line with the Barnett formula.

I move to the issue of special educational needs. Understandably, this has been raised by many noble Lords this afternoon, in particular the noble Lord, Lord Shinkwin, in his contribution about the enormous significance of the independent special school that he identified, and the noble Baroness, Lady Monckton. Once again, I say that there is excellence in the private sector in independent special schools. Such excellence is the reason why, when there is a particular need for a pupil educated in the state sector to benefit from that excellence and its provisions for their education, health and care plan, that place is paid for by the local authority. The local authority will have the ability to reclaim the VAT placed on that fee, so there will be no impact on the parents of those children with the most acute special educational needs. I can also confirm, in answer to questions from the noble Baroness, Lady Barran, that further education institutions will not be affected by these provisions, and non-maintained special schools are exempt as well.

I can understand the concern of parents—given what I said previously about everybody’s aspiration—particularly where their children have special educational needs that have not been met or assessed through an education, health and care plan, in wanting to think about the best place for their children to go, but we cannot organise policy on the basis of the broken state of public provision for children with specific learning needs. This is a government failure long in the making. I share the passion of the noble Lord, Lord Addington, about the way in which the current system is working. In fact, the former Secretary of State for Education, after 13 years of her party’s approach to special educational needs, rightly described this issue as “lose, lose, lose”. One reason for needing the additional investment that this provision will provide is to help begin turning round the special educational needs system, which I wholly agree currently fails too many of our students.

In response to those who have asked for further discussions about the position of independent special schools, we are happy to continue having those conversations. However, I reiterate that, for those children with acute needs who are being educated in independent special schools with an EHCP, there will be no impact on them from this VAT change. We will actively listen to the questions and concerns being raised and will meet with our colleagues.

Several noble Lords, including my noble friend Lord Hacking and the noble Baroness, Lady Barran, raised the impact of these changes on state schools. The Government believe that the number of pupils who may switch schools as a result of these changes represent a very small proportion of overall pupil numbers in the state sector. As I have already outlined, those parents paying to send their children to private schools have already experienced considerably above-inflation increases and have not chosen to move their children, but we will of course monitor local demand to ensure that appropriate measures are taken to increase capacity where required.

I take the noble Baroness’s point about the differential impact, potentially, on different parts of the country, and DfE officials will monitor that very carefully, but children move between the private and state sectors every year and local authorities and schools have processes in place to support their transition. In terms of places, of course we are going through a period of demographic change. Even if the pupil displacement is above the estimate of the independent Institute for Fiscal Studies, which suggested that up to 40,000 might move over a period of time, that is still likely to represent less than 1% of the more than 9 million total UK state school pupils. The latest figures published showed that 83% of primary schools and 77% of secondary schools have one or more unfilled places.

I turn to the issues raised by the noble Baronesses, Lady Fraser and Lady Bull, about the enormously important contribution of Music and Dance Scheme schools. We can all see, in the talent of the noble Baroness, Lady Bull, the significance of those schools. We are continuing to engage with the schools currently within the Music and Dance Scheme project. As has already been outlined by noble Lords—and I wholly agree that, for the good of all of us, we need low-income families to be able to send their children to those schools when they have that talent—the children of parents who cannot afford the fees are funded by the Music and Dance Scheme. We will consider, in the light of the VAT charges, how and whether we can change that scheme to compensate for the VAT issue. We are willing to carry on talking, as we have done, to representatives from the Music and Dance Scheme schools about the impact of this change of policy. The same goes, as the noble Earl, Lord Clancarty, raised, for the dance and drama awards, where we will also continue having discussions that we have already started with the schools in that category.

Noble Lords, including the noble Lord, Lord Kempsell, the noble Baroness, Lady Garden, and the noble Earl, Lord Devon, raised the issue of military families. I reiterate that the Government recognise the enormous sacrifices our military families make; of course, that is why the Ministry of Defence and the Foreign and Commonwealth Office provide the continuity of education allowance to eligible officials and service personnel. It is also worth pointing out that very many military personnel send their children to state schools and want to benefit from the improvements that will happen in those state schools. However, the Government will monitor closely the impact of these policy changes on affected military and diplomatic families. The upcoming spending review is the right time to consider any changes to this scheme, but we will continue to look very carefully at that.

Several noble Lords talked about the contribution of private schools, and the defence was that because they contribute through partnerships with state schools or by providing bursaries, we should not interfere with that. I welcome the contributions private schools make to cross-sector partnerships, as outlined by the noble Lord, Lord Maude, my noble friend Lord Winston and the noble and learned Lord, Lord Etherton; I hope that will continue. Certainly, for schools with charitable status, as charities, and in line with legislation passed by the last Labour Government, they must continue to demonstrate public benefit. I hope they will continue to do that through the provision of a small number of means-tested bursaries and through partnership with local state schools. I think they will continue to demonstrate their broad public benefit through those wider contributions.

On the legal position, raised by the noble Lord, Lord Alton—channelling the noble Lord, Lord Pannick —and my noble friend Lord Hacking, I am not going to speculate on the outcome of the ongoing technical consultation. However, legal considerations have been incorporated into the process, as is standard for all legislative changes, and we are confident that the measures are compatible with the Human Rights Act 1998.

I know I have not managed to cover all of the wide range of issues that have been raised, and I undertake to write to noble Lords, but I assure the House that private schools will remain part of our education system. The choice to send your child there will remain. However, most children are educated in the state sector and that is where we must target our support and resources most. We will work closely with schools and local authorities to make the implementation of the new tax rules as smooth as possible. I thank noble Lords for their contributions this afternoon.

[Lord Hacking (Lab)]

Before my noble friend sits down—

[Baroness Smith of Malvern (Lab)]

I have sat down.

[Lord Hacking (Lab)]

These are therefore imaginary words being used in the House of Lords. My noble friend was kind enough to mention the first protocol of the European Convention on Human Rights, but I would be very grateful if she could send a letter, particularly to myself and the noble Lord, Lord Alton, on the advice the Government are receiving relating to that very important issue. I remind her that it was a Labour Government, in 1998, who brought that provision into our law under the Human Rights Act 1998.

[Baroness Smith of Malvern (Lab)]

My noble friend is right, and I am very proud of that. Our position, as I said, has been tested in the legal advice in the consideration of these changes. Our view is that being charged at the standard rate of VAT paid by millions of businesses across the UK is not discriminatory and is clearly proportionate to the objective of better funding for state schools. To the extent that I am able, I will certainly ensure that I write further about that issue to my noble friend and to others.

[Baroness Butler-Sloss (CB)]

May I ask the Minster, before she sits down, about the children taking GCSEs and A-levels? What are the Government going to do to help them where there will be changes in the programmes they are doing?

[Baroness Smith of Malvern (Lab)]

I apologise to the noble and learned Baroness: with respect, I was showing my inexperience in this House and asking my Whip about the situation. If the House will allow, could the noble and learned Baroness repeat her question?

[Baroness Butler-Sloss (CB)]

I was asking about children taking GCSEs and A-levels when this starts in January.

[Baroness Smith of Malvern (Lab)]

I think I covered that point in talking about the arguments for introducing this in January, while also making it clear that it is the Government’s view that introducing the VAT liability does not necessarily imply that a sudden increase in bills will arise; nor does it imply that the whole of that increase in VAT will be passed on in fees. In fact, if we look at the behaviour in the private school sector, we see that, despite very large increases in fees—well above inflation—parents have tended, where they have made that choice, to keep their children in the private sector anyway, and I am sure that the vast majority of parents will continue to do that. The analysis, including that carried out by the Institute for Fiscal Studies, suggests that, even if there is going to be a movement of pupils away from the private sector, that will tend to be not immediately in January but over a much longer period, and I imagine that will be the approach that most parents take.

[Lord Forsyth of Drumlean (Con)]

Before the noble Baroness sits down—since she is now giving way—she made a very passionate point about how all parents have aspirations for their children, wherever they are educated. She has not explained why she wants to tax that aspiration.

[Baroness Smith of Malvern (Lab)]

I explained that, to improve state education—where 93% of our pupils are educated—and meet the aspirations of the parents who send their children to those schools, we need to find the funding. Unlike the previous Government, we are not willing to make uncosted commitments or run this country’s fiscal position into the ground. We are not willing to risk our pensions and our reputation as a fiscally prudent country in the way that the last Government were. Therefore, to make and deliver the range of commitments we have set out, we will be clear about where that money is coming from. This is part of the honesty and transparency around fiscal prudence that the last Government so patently failed to deliver.

18:15

[Lord Lexden (Con)]

My Lords, my purpose in seeking this debate was to bring home to the Government the extent of the damage that would be done as a result of the imposition of VAT on school fees on 1 January 2025. That purpose has been very satisfactorily achieved, on behalf of all the parents and schools up and down our land who have been brought to despair by the Government’s decision to impose VAT so suddenly on them.

Many who have been watching this debate and follow these controversial matters will be disappointed by what the Minister has said. I do not think that the great concern that exists has been in any way significantly alleviated by her comments. We who have sought to represent the difficulties feel, above all, that VAT should not be introduced without, as I said at the start, a full and independent assessment of the implications of our first-ever education tax. This is the essential point on which nearly all speakers agreed. We must ask the Government to think again.

Motion agreed.

House adjourned at 6.17 pm.