16:15 - The House having divided: - Ayes: 190 / Noes: 363 - Question accordingly negatived.
Damian Hinds
My right hon. Friend is correct: substantial export earnings come from the sector, and from a globally mobile set of families. But I would go further; in addition to the direct export earnings effect, there is also an indirect effect. For companies deciding where to site their European headquarters, English education is a big factor. That is partly because of our brilliant state schools, which have improved so much over the past 14 years, but the availability of independent schools is also a factor.
Kit Malthouse (North West Hampshire) (Con)
The shadow Secretary of State makes a strong point about the sanctity of zero-rating VAT for education. I am concerned that children’s clothes, which are currently exempt from VAT, may be the next target. Notwithstanding the impact that the change to VAT will have on individual families, does he agree that private and prep schools—my constituency has five—are enormous employers of people involved in building maintenance, such as electricians and plumbers, and that the impact on the wider economy could well be profound?
Mr Speaker
Order. I remind Members to look towards the Chair when they are speaking, or what they say will not be picked up by the mics; I then struggle to hear them. I know that the Minister was struggling as well. If Members keep the chatter down, it will help us both.
The Exchequer Secretary to the Treasury (James Murray)
This Government were elected to break down barriers to opportunity. We are determined to fulfil the aspiration of every parent in our country to get the best education for their children. We are committed to doing so by improving state schools and making sure that every child has access to a high-quality education. We will start to make this happen by expanding early years childcare for all by opening 3,000 new nurseries across England. We will recruit 6,500 new teachers, alongside improving teacher and headteacher training, and we will roll out further mental health support to schools and colleges in England. Those improvements to the state education system will begin our work to make sure every parent’s aspiration for their children can be fulfilled.
We want to get on with these important changes right away, and to do so, they must be paid for. That is why to help fund improvements to our state schools, we have made the tough but necessary decision to end tax breaks for private schools. In the July statement, the Government announced that as of 1 January 2025, all education services and vocational training provided for a charge by a private school in the UK will be subject to VAT at the standard rate of 20%.
Graham Stuart
I know the Minister to be an honourable man, so will he take this opportunity to apologise to the House in the absence of the Secretary of State for Education for the malicious and spiteful tweet that she put out this weekend? That tweet was ill-advised, even if one believes that this policy is the right thing to do.
James Murray
Neither I nor any of my colleagues will make any apology for wanting to improve state education across this country to make sure that the aspiration of every parent in our country to get the best possible education for their children can be fulfilled. That is why we have announced that any fees paid from the date of the July statement, 29 July, relating to the term starting in January 2025 onward will be subject to VAT.
Shaun Davies (Telford) (Lab)
This package of support will put thousands of teachers back into school classrooms in Telford and across the country. Has my hon. Friend received any representation to say that if this change did not take place, those plans by this Government—who were elected by the people of this country—would go ahead by any other means?
James Murray
My hon. Friend makes an important point about the reason why we have taken the tough decision to end tax breaks for private schools. It is to fund our education priorities, because we know that the way to improve opportunities for people right across this country is to make sure that our state schools can provide the best-quality education for all children.
Priti Patel (Witham) (Con)
The Minister was in a similar debate this morning, in which he heard a range of views. He is a Treasury Minister, not an Education Minister or the Education Secretary; will he commit to publishing an impact assessment on the overall cost of this policy? There were parents in the Gallery listening to the debate this morning, and it is clear that there will be a legal challenge to this policy. Will the Treasury also publish the potential cost of that legal challenge and the bill that his Department will be footing in order to meet it?
James Murray
I thank the right hon. Member for her contribution. First, in terms of an impact assessment, while developing these policies, the Government have carefully considered the impact they will have on pupils and their families across the state and private sectors, as well as the impact they will have on state and private schools. In addition to having reviewed analysis published by third parties such as the Institute for Fiscal Studies, the Government have conducted their own analysis of the likely impacts of these policies, which draws on a range of sources.
James Murray
I am not going to give way, because I am responding to the right hon. Member for Witham (Priti Patel).
Mr Speaker
Order. It is a point of order, so you do give way, unfortunately.
Mr Speaker
Order. As you know, that is not a point of order—do not waste my time. Carry on, Minister.
James Murray
As I was saying to the right hon. Member for Witham, the Government will publish a tax information and impact note on the VAT policy change at the Budget, once the independent Office for Budget Responsibility has scrutinised and certified the costing of the final policy.
James Murray
I am still replying to the hon. Member’s right hon. Friend. [Interruption.] Maybe Conservative Members could sort this out on their side of the House before they come into the Chamber, but I will continue replying to the right hon. Member for Witham.
Turning to the legal cases, the Government have considered the policy’s interaction with human rights law and are confident that it is compatible with the UK’s obligations under the Human Rights Act. I hope that addresses the right hon. Member’s concerns.
Mims Davies
I thank the Minister for kindly giving way. This policy will have an economic impact in each and every constituency: on librarians, on maintenance people and on those who work in labs, in catering and as minibus drivers—everything that is predicated on schools such as the ones we are discussing. Will the impact assessment and the Treasury look at the wider implications for employment?
James Murray
As the hon. Member knows, there are established processes for developing tax information and impact notes. This one will be developed in line with the OBR costing in the normal way and published alongside the Budget, so she will see all the information.
Several hon. Members rose—
James Murray
I have given way quite a lot, so I am going to make a bit of progress.
Alongside the announcements about VAT, the Government announced in July that private schools in England with charitable status would lose their eligibility for business rates charitable relief from April 2025, subject to parliamentary passage of the legislation. Those changes were set out in a technical note that was published online alongside draft VAT legislation, which together formed a technical consultation. As part of that consultation, the Government—both at official and ministerial level—have engaged with a broad range of stakeholders, including the devolved Governments.
We have listened carefully to the points that people have raised with us. We recognise that while this policy will raise revenue to help support improvements in the state education sector, it may lead to increased costs for some parents and carers whose children are in the private education system. However, let me be clear: while private schools will now be required to charge VAT on the education services and vocational training they provide, we expect that most private schools will be able to absorb a significant portion of this new VAT charge and keep fee increases affordable for most parents. They will be able to make efficiencies and recover the VAT they incur on the things they buy. Those recovered costs can be used to offset increases for fee payers. We are already seeing that some schools have committed to absorbing the VAT liability entirely, while others are choosing to cap fee increases at 5% or 10% to keep fees as low as possible for parents.
Dr Ben Spencer (Runnymede and Weybridge) (Con)
I had a pop at getting the Minister to give way during the debate this morning, and I appreciate his doing so now. I love the irony of what he is saying, which is, “We need to do this to raise all this money, yet it isn’t actually going to raise all that much money because it can be reclaimed.” On the impact assessment, it is really interesting that one line in the consultation document that went out this summer says:
“The government understands that moving schools can be challenging.”
How many of his own constituents have contacted him to say they will have to move schools as a result of this policy, and how do we measure the damage that moving schools is going to cause for so many children in our constituencies?
James Murray
I have been clear: the Government recognise that some pupils may subsequently move into the state education sector as a result of these policies. However, as is set out in a technical note—and I take it from the hon. Gentleman’s comment that he has read it—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. The government is therefore confident that the state sector will be able to accommodate any additional pupils”
whom this policy will cause to move.
Several hon. Members rose—
James Murray
I will make a bit of progress, because I have been quite generous in giving way so far.
I want to address some of the questions that the shadow Secretary of State asked in his speech, particularly about why we are introducing this policy from 1 January 2025. The reason we are doing so is simple: we want to raise the funding we need as soon as possible to deliver our education priorities for state schools across the country. Importantly, a January 2025 start date means that schools and parents will have had five months to prepare for the VAT change, and His Majesty’s Revenue and Customs stands ready to make sure schools are supported in delivering it.
James Murray
I am going to make some progress.
HMRC will put in place a number of measures to ensure that all private schools can be registered ahead of 1 January, including publishing bespoke guidance on gov.uk ahead of 30 October, updating registration systems and putting additional resource in place to help process applications.
Several hon. Members rose—
James Murray
I am going to make some progress, because I have given way quite a lot so far.
Ahead of this policy being implemented, the Government have carefully considered the impact that these changes will have on pupils and their families across both the state and private sectors, as well as the impact they will have on state and private schools. The Government’s costing of these policies is currently being scrutinised by the independent Office for Budget Responsibility. The Chancellor will confirm our approach to these measures at the Budget, when we will set out our assessment of the expected impacts of this change in the normal way.
We recognise that, as hon. Members have said, these changes may lead to some pupils moving into the state education sector. While the impact of this policy is being fully considered, we know that projections by the Institute for Fiscal Studies indicate that the number of pupils who may switch schools as a result of these changes is likely to represent a very small proportion of overall pupil numbers in the state sector—less than 0.5%—with any displacement expected to take place over several years.
Dr Evans
I am very grateful to the Minister for giving way. This is about children—and even the Prime Minister made a choice to better the education of his children—so putting this in place in January, halfway through a year, is going to have a significant emotional impact on families and children. That is why it should be delayed. If it is good enough for the Prime Minister to make such choices for himself, why cannot this Government make choices for the rest of the nation, and support the most impacted families and children?
James Murray
I have made clear the reason why we are proceeding with this policy to a January 2025 date, which is that we want to raise the money as soon as possible to invest in our improvements to state education. There will have been five months for parents and schools to prepare for the change.
James Murray
I am still responding to the hon. Member for Hinckley and Bosworth (Dr Evans), so please let me come back to that point. HMRC is putting in place bespoke guidance, and it is standing by to make sure that schools are properly registered for the change. All the evidence we have seen from the IFS and so on suggests that the impact on the state sector will be very small, which means that it will not have a material effect on children’s education.
Several hon. Members rose—
James Murray
I am going to make some progress.
To pick up the point made by the hon. Member for Hinckley and Bosworth, I am not denying that some pupils may have to move into the state sector, but we expect much of this to take place at natural transition points, such as when a child moves from primary to secondary school, or at the beginning of their GCSE or A-level years. As I have said, the IFS expects any displacement to take place over several years. We are confident that the state sector will be able to accommodate any additional pupils, and that these policies will not have a significant impact on the state education system as a whole.
Several hon. Members rose—
James Murray
I am going to make some progress. I am sorry, but I have taken a lot of interventions.
I would like to address the issue of special educational needs. It is a point that many hon. Members have raised, and I know that some parents are concerned about the impact of this policy on pupils in private schools with special educational needs. Let me start by saying that we have considered this element of the policy very carefully. Our proposed policy makes sure that pupils will not be impacted where they have acute additional needs and an education, health and care plan in England, or its equivalent in other nations, specifies that these can be met only in a private school.
Marie Goldman (Chelmsford) (LD)
I thank the Minister for giving way on that specific point, because he is relying on those schools still being open because other parents have not left. How will he address the situation in which parents of children needing that extra support rely on such schools for their special educational needs, yet those schools have closed because they cannot afford to stay open any longer?
James Murray
We will take a community-wide approach that sees improved SEND provision in mainstream state schools, as well as ensuring that state special schools cater for those with the most complex needs.
Jen Craft (Thurrock) (Lab)
As a parent of a disabled child, the issue of SEND education in this country is very important to me, as it is to a number of my friends and acquaintances. Let us be clear that the SEND system in this country is broken, and it was the actions of the previous Government that left us with parents being desperate and having to search for alternatives to mainstream education for their children. The vast majority of my constituents who find themselves without suitable education placements for their children, for reasons of disability or educational needs, are unable to afford to send their children to a private school. Does the Minister agree with me that perpetuating a system of inequality is not the solution for our broken SEND system?
James Murray
I thank my hon. Friend for her comments. She is absolutely right to say that we need to improve SEND provision for all children in this country in a financially sustainable way, and she speaks with great experience.
Several hon. Members rose—
James Murray
Let me make a bit of progress.
We want to improve state schools across this country so that when people have children with special educational needs, they never need to send them to a private school because the provision in state schools is better. That is the crucial point behind our approach, which my hon. Friend the Member for Thurrock (Jen Craft) was right to highlight.
Several hon. Members rose—
James Murray
I am going to make a bit of progress, because I have been quite generous in giving way so far.
I was talking about when EHCPs in England, or their equivalents in other nations, specify that a child’s education can be met only in a private school. In cases where pupils’ needs can be met only in a specified private school, local authorities will fund their places and be able to reclaim the VAT. Similarly on business rates, the Government are developing an approach to address the potential impact of these changes when private school provision has been specified through an EHCP. More widely, as we have just been addressing, we as a Government are committed to transforming the system for supporting children and young people with SEND in all schools. We need to deliver better outcomes in a financially sustainable way.
James Murray
I am going to make a bit of progress.
To address some other points raised in this debate, we know that a small number of diplomatic officials and service personnel are posted abroad for extended periods. In such circumstances, the Foreign, Commonwealth and Development Office and the Ministry of Defence provide the continuity of education allowance to ensure that this does not interfere with their children’s education. I can give the reassurance today that the Government will monitor closely the impact of these policy changes on affected diplomatic and military families, with any changes to the scheme being considered as—[Interruption.]
James Murray
I am not quite sure what happened there, but I will carry on. I was making an important point, which is that the Government will monitor closely the impact of our policy changes on affected diplomatic and military families, with any changes to the scheme being considered as part of the ongoing spending review.
James Murray
I will make a bit of progress. In our consultation on the technical detail of this policy, we have been engaging widely and in depth, and the views of MPs are an important part of that. As I said earlier, it has been a tough but necessary decision to end tax breaks for private schools. We believe it is the right decision, and one we need to implement as soon as possible to help raise the funding that we need to deliver our priorities for state education in this country. We are determined to make sure that education, which is available for all, is of the highest possible quality, because that is how we ensure that we meet the aspiration of every parent to get the best possible education for their children.
The Parliamentary Under-Secretary of State for Education (Stephen Morgan)
I thank the Opposition for bringing forward the debate. While the focus has been on private schools and the implications of the planned tax changes, it has allowed us to consider what is important in education. It is important to support the aspirations of all young people and their parents, and it is essential that all young people receive a good education in a safe and supportive environment.
It is certainly true that many parents choose to seek that provision in the private sector. The Government will always support their right to choose where to educate their children, but most parents do not have that choice, and all parents have high aspirations for their children. We therefore need to prioritise our efforts and consider how we can better serve the 94% of children in our state-funded schools.
Ending the tax breaks on VAT and business rates for private schools is a necessary decision to drive high and rising standards across our state schools and give every young person the best start in life. It will generate additional funding to help improve public services, including the Government’s commitments relating to children and young people.
This money will allow the Government to expand early years childcare for all by opening 3,000 new nurseries, thus helping parents back to work. The Government will recruit 6,500 new teachers and improve teacher and headteacher training as part of restoring teaching to the career of choice for the very best graduates. The Treasury is of course responsible for tax policy and has led on the publication of the draft legislation and technical consultation since July. As the Exchequer Secretary set out, VAT will apply to tuition and boarding fees charged by private schools for terms starting on or after 1 January 2025. It is right that we end tax breaks as soon as possible to raise the funding needed to deliver those educational priorities. The Treasury is assessing the impact of these changes in advance of the Budget. The independent Office for Budget Responsibility will certify the Government’s costings for these measures at the Budget and that will also include the interaction with other VAT receipts.
Stephen Morgan
I am going to make some progress. The right hon. Gentleman spoke earlier. I know that many Members are concerned about children with SEND. [Interruption.] Members can shout as much as they like, but I have some really important points to make about SEND. I know I speak for the country—the right hon. Gentleman certainly does not. I assure Members that the Treasury has sought to ensure that these changes do not disadvantage pupils who need provision that is unavailable in the state sector.
Let me be clear: pupils who need a local authority-funded place in a private school, including those with a local authority-funded EHCP, will not be affected by the changes. That is because local authorities are able to reclaim VAT when they are charged. For other pupils, this change should not mean that they will automatically face 20% higher fees. The Government expect private schools to take steps to minimise fee increases, including through reclaiming VAT incurred in supplying education and boarding. I also note that IFS analysis shows that the number of children in private schools has remained steady despite a 20% real-terms increase in average private school fees since 2020 and a 55% rise since 2003.
Members from both sides of the House mentioned transfers to the state-funded sector. There are always some pupils moving between the private and state-funded school sectors. Approximately 50 maintained private schools close every year, for a range of reasons. Where schools do close, pupils may transfer to another private school or move into the state sector. We simply do not accept, in the case of recent closures, that this has had any connection to our policy on VAT. Quite simply, the evidence does not bear that out. The number of pupils who might switch following these changes represents a very small proportion of overall pupil numbers in the state sector. Any displacement is likely to take place over several years, and will mostly come from parents choosing not to place their children in the private sector to begin with, rather than children leaving the private sector. All children of compulsory school age are entitled to a state-funded school place if they need one. I understand that moving schools can be a challenging experience, and local authorities and schools already have processes to support pupils moving between schools.
A number of Members also raised concerns about capacity. There are always a range of pressures on state-funded school places, and the Department for Education works to support local authorities to ensure that every local area has sufficient places for children who need them. That is business as usual and local authorities and schools already have a range of options to increase capacity where it is needed. We are confident that the state sector will be able to accommodate any additional pupils and that there will not be a significant impact on state education as a whole.
I congratulate my hon. Friend the Member for North East Derbyshire (Louise Jones) on her maiden speech. I know she will be a real champion for children and young people in her community. I also welcome my hon. Friend the Member for Bury North (Mr Frith) back to this place and congratulate my hon. Friend the Member for Glasgow East (John Grady) on his maiden speech—he spoke eloquently and with passion about his constituency and the needs of his constituents. It was also a real pleasure to hear the maiden speech from the hon. Member for Isle of Wight East (Joe Robertson), who described so well his beautiful constituency, a place I enjoyed holidaying in as a child. I look forward to working with him on issues affecting the Solent region. My hon. Friend the Member for Tipton and Wednesbury (Antonia Bance) gave an excellent maiden speech. It was evident that she will be a strong voice in this place, nationally and for her community. I congratulate the hon. Member for Horsham (John Milne) on his maiden speech, and I wish him well on his unexpected new role in this place and on delivering opportunity for all.
The hon. Member for South Shropshire (Stuart Anderson) and others mentioned military families; I know that colleagues in the Ministry of Defence and the Foreign, Commonwealth and Development Office will closely monitor the impact on affected military families, considering support via the continuity of education allowance scheme. Small faith schools were raised by a few Members; those schools meet the needs of dedicated faith communities, often at low cost. I know that Treasury colleagues have met representatives from those schools to ensure fairness. A number of right hon. and hon. Members spoke about the impact assessment. As my hon. Friend the Exchequer Secretary to the Treasury set out, we are considering the impact of the policies and will publish a tax information and impact note at the Budget in the usual way.
In conclusion, this Government were elected to deliver change across our country, not least in our schools. Our mission to break down the barriers to opportunity is exactly what our country needs. This party is showing that education is once again at the forefront of national life. I urge Members across the House to demonstrate that by voting against the motion.
Question put.
The House proceeded to a Division.
Madam Deputy Speaker (Caroline Nokes)
Will the Serjeant at Arms investigate the delay in the No Lobby?