VAT: Independent Schools
Debate between Ben Spencer and James Murray(1 month, 2 weeks ago)
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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?
Independent Schools: VAT and Business Rates Exemptions
Debate between Ben Spencer and James Murray(1 month, 2 weeks ago)
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James Murray
I am going to make some progress. Those recovered costs can be used to offset the increases to feepayers. 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. Members have asked today why we will introduce this policy in January 2025. The reason for doing so is simple: we want to raise the funding we need as soon as possible to deliver our education priorities to state schools across the country.
James Murray
I do not have much time and I need to address the other points that hon. Members have made in this debate. Importantly, a January 2025 start date means that schools and parents will have had five months to prepare for the VAT change. HMRC is ready to ensure that schools are supported in delivering this change. To respond to the shadow Minister’s comment, HMRC will put in place a number of measures to ensure that all private schools can be registered ahead of 1 January 2025, including publishing bespoke guidance on gov.uk ahead of 30 October, updating registration systems and putting additional resource in place to help process applications.
Ahead of the policy being implemented, the Government have carefully the considered the impact the changes will have on pupils and their families across both the state and private sectors, as well their impact on state and private schools. The Government’s costings of this policy are currently being scrutinised by the independent Office for Budget Responsibility. The Chancellor will confirm our approach to the measures at Budget, where we will set out our assessment of the expected impacts of the change in the normal way.
We recognise, as some hon. Members have raised, the changes may lead to some pupils moving into the state education sector. However, we believe that the number of pupils who may switch schools as a result of the changes will represent a very small proportion of overall pupil numbers in the state sector and such switches will take place over several years. We are confident that the state sector will be able to accommodate any additional pupils.