Independent Schools: VAT Exemption

Lord Fairfax of Cameron Excerpts

Thursday 5th September 2024 Lords Chamber

[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.