Independent Schools: VAT Exemption

Lord Fuller Excerpts

Thursday 5th September 2024 Lords Chamber

[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.