School Fees: VAT

Lord Lexden Excerpts

Monday 13th October 2025 Lords Chamber

Asked by

[Lord Lexden]

To ask His Majesty’s Government how much money has been raised from the imposition of value added tax on school fees.

[Lord Lexden (Con)]

My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I declare my interest as a former general secretary of the Independent Schools Council and the current president of one of its constituent bodies.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, at the Budget last year, the Government set out that ending the VAT exemption for private schools would raise £460 million in 2024-25 and £1.7 billion per year by 2029-30. The Government remain confident in these costings, which are certified by the independent Office for Budget Responsibility. The OBR will recertify these costings at the forthcoming Budget in November. The money raised by this measure is helping to raise standards for the 94% of pupils who attend state schools.

[Lord Lexden (Con)]

My Lords, have the Government noted a recent detailed survey by the Independent Schools Council which shows that their appalling education tax is producing an exodus from independent schools eight times larger than Ministers predicted? Does it not follow that the Government will have to fund many extra places in the state sector for pupils driven from independent schools, while simultaneously the proceeds from their tax raid on those schools plummet? Is it not the case that the Government stand no chance of extracting the £1.8 billion that they hoped to receive from independent schools to fund an enormous range of improvements, including, most surprisingly, the largest investment in affordable housing in a generation, according to the Prime Minister in June?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question—I think the short answer is no. We estimated that the introduction of VAT was likely to lead to around 35,000 more pupils in the state sector over the course of this Parliament. This is fewer than 0.5% of all pupils currently in the state sector and will take place gradually over this Parliament. This assessment was certified by the OBR at the time, and we remain extremely confident in it. Pupil movements so far are absolutely in line with this estimate and are in line with trends over the past 20 years. They represent, as I say, a very small proportion of the private school population. It should be noted that not all pupil movements are the result of this policy; they can happen for a large variety of reasons and will reflect wider demographic trends.

Independent School Fees: VAT

Lord Lexden Excerpts

Thursday 13th March 2025 Lords Chamber

Asked by

[Lord Lexden]

To ask His Majesty’s Government what assessment they have made of the results of imposing value added tax on independent school fees on 1 January.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, before I call the noble Lord, Lord Lexden, for the third Oral Question, I should remind noble Lords that there are active legal proceedings relating to the policy of applying VAT to private schools. Part of my role is to decide whether, in specific circumstances, it is appropriate to waive the application of the sub judice rule, under which we do not debate matters before the courts. In view of the national importance of this issue, I have decided to grant a waiver of the rule to allow reference to this matter on an ongoing basis. It is relevant to my decision that a similar waiver has been issued in the House of Commons.

[Lord Lexden (Con)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and declare my interest as president of the Independent Schools Association, whose 700 members—mainly small schools—are now at serious risk of damage or closure.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, the result of imposing VAT on school fees has been to help raise revenue to fund the Government’s objective that every child has access to high-quality education, including the 94% of children who are educated in the state sector. The Government have published a tax impact and information note setting out an analysis of the impacts of this policy. The Government’s costings, set out in a detailed costings note, have been certified by the independent Office for Budget Responsibility. We remain confident in those assessments but will of course continue to monitor the impact of the reforms.

[Lord Lexden (Con)]

My Lords, what are the Government to say to the mother of a child with special needs whose independent school is closing because of their education tax? She writes to me: “Shell-shocked does not cover it. My child is autistic. State secondary was an utter disaster. She felt safe and happy. Her heart is now broken”. What are they to say to the head of a small independent school in Derbyshire with 120 pupils, who writes to me: “I am battling to save my life’s work”? How would members of the Government feel if they were forced to move their child to a new school in the middle of an academic year, particularly if exams were in the offing? How should the sudden imposition of an unprecedented education tax on 1 January, after a rushed consultation last summer when schools were on holiday, be described? One word does it: cruel.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question, and I pay tribute to his involvement in this sector. As he will know, probably better than me, there has historically been a significant turnover within the private school sector, with around 3% of private schools—roughly 75 in the UK—opening and closing each year, with the overall number of private schools remaining stable. Since this policy was announced in July, private schools have continued to open in England in line with historic trends.

Autumn Budget 2024

Lord Lexden Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Lexden (Con)]

My Lords, this Budget makes history for the wrong reason. It is the first ever Budget to place a tax on education in our country.

Over the years, all Governments have regarded education as being so invaluable to individuals and society alike that nothing should ever be done to obstruct its success and growth in all the varied forms that it takes. Other countries agree. Greece briefly thought otherwise but quickly recognised its mistake. The Government are now breaking a universal golden rule by slapping VAT on independent school fees, not at a fairly modest rate to ease the process of adjustment but at a whopping 20% from 1 January, just a few weeks from now, during the course of a school year, which is the worst possible time.

Far from taking money from independent schools, Tony Blair’s Government provided a little—just a little—in order to get more state and independent schools working together in the interests of all their children. Modest government funding in 1998 for a joint state/independent partnership group helped stimulate all manner of hugely successful projects. There are now thousands of them up and down our country. Last week, inspiring teachers and other representatives from both sectors came to Parliament to celebrate their latest achievements. They are helping many independent schools to thrive, which is what the Prime Minister said in September last year that he wanted to see, telling the publication Jewish News:

“We have got fantastic independent schools”.


How can these words be squared with his VAT levy, which reverses the policy of the last Labour Government and jeopardises the partnership work that is one of their legacies?

I was able to give that work a small helping hand as general secretary of the Independent Schools Council—that gives me an interest in this subject, which I declare along with my current position as president of one of the council’s constituent bodies, the Independent Schools Association, which works on behalf of some 670 schools, most of them small in size and widely cherished, often because they provide with great care and warmth for special needs, different religious faiths, the performing arts and other specialisms.

That leads me to a crucially important point. The kind of independent schools I have mentioned are far more numerous than the large schools with their well-known names that attract so much media attention. It cannot be said too often that 40% of independent schools have under 100 pupils. Enormous value is placed on them by their local communities. Who will be most seriously and widely affected by the VAT levy? Not the rich, who are the Government’s target in this Budget. Their children go to a small minority of independent schools, which can certainly be expected to go on thriving. The education tax will fall mainly on working families of limited means—just the kind of families the Government say they want to protect. They cannot rely on the Government’s assurances that they will escape most of the tax because schools will be able to absorb it. Small schools have no handy financial reserves into which they can dip. Absorbing a proportion or all of the VAT levy—which the Minister says he expects—would mean cuts, above all to staff, who account for some 70% of school costs.

What have the teacher unions got to say about this? They have called for the tax to be delayed until the start of the new school year so that its impact can be properly assessed first. Amazingly, the Government think that there is no need for a proper and full impact assessment before inflicting this unprecedented tax on our country.

So the Treasury and the Government sail complacently on, insisting that the many worries that are driving thousands of parents to distraction will evaporate when education VAT comes in a few weeks’ time. They say there will be no large, involuntary movement of children to state schools, some of which will be unable to provide the courses that such children have been studying. They say that irreplaceable little faith schools for Jewish and Muslim children will not fold. They say that service families will not be driven from boarding schools, and that some 100,000 special needs children without EHC plans will not suffer. These are mere hopes.

A policy that breaks all precedent ought not to proceed on the basis of mere hope and a single report from the Institute for Fiscal Studies that other experts dispute. Above all, it ought not to come into effect on 1 January, just five months after independent schools, then on their summer holidays, were told that their plans and budgets for the next school year would have to be redone. Was that not utterly unforgivable? Can there be a single teacher who believes it is right to upset and distress children during the course of a school year?

Independent School Fees: VAT

Lord Lexden Excerpts

Monday 21st October 2024 Lords Chamber

[Lord Livermore (Lab)]

At the Budget, we will set out an assessment of the expected impacts of this policy in the normal way by publishing a tax information and impact note. In this assessment, we will consider, first, the likely pass-through of VAT to school fees. Here, after a cover of VAT on input costs, we expect schools to be liable for VAT of an average of around 15% of their fee income. The Government expect that private schools will take steps to absorb a significant proportion of this VAT liability. Secondly, we will consider the likely elasticity of demand, which will be consistent with the elasticity used by the OBR in the costing of this policy. It is worth noting that, despite a 75% real-terms increase in fees since 2000, the number of children in independent schools has remained steady, which suggests an inelastic demand for private school places.

[Lord Lexden (Con)]

Should we not all be grateful to the noble Lord, Lord Hacking, who has sent a very thorough report to the Prime Minister, showing the dire consequences that the Government’s education tax will have? Is it not time that the Government realised that their education tax—the first in our history—is likely to force a large number of parents, particularly those using small special needs schools in the independent sector, to move their children next term to state schools which are wholly unprepared for them?

[Lord Livermore (Lab)]

The answer to the noble Lord’s question is no, because the assumptions underlying that report are incorrect. We expect that a large number of private schools will take steps to absorb a significant proportion of this VAT liability, so the majority of that fee will not be passed through.

Destitution: Low Median Wage

Lord Lexden Excerpts

Thursday 23rd November 2023 Lords Chamber

[Baroness Vere of Norbiton (Con)]

This Government are absolutely committed to ending a low-wage economy, and that is why we have just introduced the largest ever rise in the national living wage. Also, it is not just about the national living wage; I absolutely accept that there will be people who are living on benefits—that may be for a temporary period—and that is why we uprated benefits by 6.7%, which was the September CPI, versus a forecast inflation rate next year of 3.1%, so people will see more pounds in their pocket.

[Lord Lexden (Con)]

My Lords, should we not express the hope that yesterday’s measures will represent a real turning point in the economic life of our country, opening the way for sustained growth and greater prosperity for all our people?

[Baroness Vere of Norbiton (Con)]

I absolutely agree with my noble friend. It is an absolute turning point. It is about the long-term decisions that have to be made, and that is about investing not only in businesses but also in our people. From a business perspective, the full expensing has been widely welcomed across the economy. It will add an extra £3 billion of new investment. We already have the lowest corporation tax in the G7 and now, with full expensing, that will bring in the investments that my noble friend Lord Johnson really needs to see.

Local Authorities: Budgets

Lord Lexden Excerpts

Tuesday 19th September 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I just set out the position on broader reform to the funding system for local government. The Government recognise the pressures that local authorities are facing. At the spending review 2021, the Government confirmed that councils in England would receive £4.8 billion of new grant funding between 2022-23 and 2024-25 to meet pressures in social care and other services. We also recognised in the Autumn Statement last year that the position on inflation had changed the position for councils, and set out additional funding to respond to that.

[Lord Lexden (Con)]

My Lords, is it not tragic that Birmingham—once the jewel of local government, thanks to Joseph Chamberlain and his son Neville, the reforming lord mayor in the early 20th century—should have been reduced to its present pass? What is to be done about this great council? Should it be split up? Its present position is truly tragic.

[Baroness Penn (Con)]

My Lords, as we speak, my right honourable friend the Secretary of State for Levelling Up is giving a Statement to the House of Commons on action to be taken on Birmingham City Council. It is the Government’s intention to appoint commissioners in that instance, but there will be a period of consultation, I believe, before that is brought forth.

Inheritance Tax: Cohabiting Siblings

Lord Lexden Excerpts

Tuesday 20th June 2023 Lords Chamber

Asked by

[Lord Lexden]

To ask His Majesty’s Government what plans they have, if any, to make transfers of property between long-term cohabiting siblings exempt from inheritance tax.

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, the long-standing inheritance tax assumption for wealth transfers between spouses and civil partners reflects the formal legal obligations that marriages and civil partnerships necessarily entail. While the Government understand the issue, there are no plans to exempt transfers of property between long-term cohabiting siblings.

[Lord Lexden (Con)]

My Lords, the Government say that two people who have shared a jointly owned home for years must be in a legal relationship if inheritance tax is to be deferred when they are parted by death. I remind the Government that they blocked my Private Member’s Bill to open up civil partnerships to siblings after its Second Reading, where it gained wide support across the House. This would have enabled siblings to establish legal relationships and solve the problem. Why on earth should the postponement of tax on the death of the first of two people united in a loving association for years require sexual activity between them? Why should the survivor of a chaste relationship have to face the agony of selling the family home on the death of a loved partner to pay an inheritance tax bill? Have this Government no compassion?

[Baroness Penn (Con)]

My Lords, it is important to set this Question in context. Each individual has a nil rate band of £325,000. Two cohabiting siblings who jointly own a house may have an inheritance tax liability only when the value of the house exceeds £650,000—well in excess of both the average UK house price and the average London house price. There are also circumstances in which inheritance tax can be paid over a period of time, giving the beneficiaries time to adjust to changed circumstances. That facility would enable people in those circumstances to remain in their home, which I believe is the concern at the heart of my noble friend’s Question.

Devolved Budget for Wales: Inflation

Lord Lexden Excerpts

Wednesday 15th March 2023 Lords Chamber

[Lord Lexden (Con)]

My Lords, is it not extremely difficult to secure throughout our country the high level of prosperity that we would all like to see? My noble colleagues from Northern Ireland will testify to that.

[Baroness Penn (Con)]

It is a difficult thing, but one that this Government are committed to. That is why I am so pleased to see that as a result of the measures announced in this Budget today, we have seen the OBR adjust its growth forecasts upwards by the largest amount based on supply-side reforms since its establishment in 2010.

Taxation: Income Tax Threshold

Lord Lexden Excerpts

Wednesday 16th March 2016 Lords Chamber

[Lord O’Neill of Gatley]

My Lords, I plan to make some longer comments specifically about this sensitive issue next week when I open the debate on the Budget. There are some very important complexities behind the policies which, frankly, were misunderstood in the way they were reported at the weekend.

[Lord Lexden (Con)]

My Lords, the second part of my noble friend’s original Question asked,

“how many people have been affected”,

by raising these tax thresholds. Can my noble friend give us the figures to show the extent to which people have benefited from the changes?

[Lord O’Neill of Gatley]

My Lords, as a result of the changes announced in the Budget today and in the summer Budget 2015, 31 million individuals will see their income tax bill reduced in 2017-18. This is close to an additional 1 million whose income tax has been reduced as a result of the previously announced measures. A typical base-rate taxpayer is going to pay notably less—just over £1,000 less tax in 2017-18 than back in 2010-11—while a typical high-rate taxpayer will pay more than £1,100 less than would otherwise have been the case. Let me add that this is the first time that there has not been an even stronger benefit for the lowest-income earners over the whole of that period.

Corporation Tax (Northern Ireland) Bill

Lord Lexden Excerpts

Tuesday 17th March 2015 Lords Chamber

[Lord Lexden (Con)]

My Lords, the noble Lord, Lord Bew, is an old friend from academic life and it is good to follow him. It is good, too, to have an opportunity to congratulate the noble Lord, Lord Hay of Ballyore, on his maiden speech. It is clear that he was a faithful and dedicated servant of the Northern Ireland Assembly, just like his predecessor, my noble friend Lord Alderdice.

I share the hope that has been widely expressed in this debate that the Bill before us will assist the progress of Northern Ireland and help secure its longer-term prosperity. The important measure of devolution for which the Bill makes provision has not, like some other measures of devolution, been conceived in undue haste or brought forward with insufficient preliminary work. The case for devolving the rate of corporation tax in Northern Ireland was advocated powerfully in Ulster Unionist circles in the 1980s, as my noble friend Lord Empey has told us. It was taken up enthusiastically by my right honourable friend Owen Paterson when he was Conservative shadow Secretary of State for Northern Ireland before the last election. A commitment to action was included in the Conservative Party’s 2010 manifesto and in the manifesto of the Ulster Unionist Party then led by my noble friend Lord Empey. Indeed, it was the subject of discussion between the two parties as part of the work that was done with the aim of creating an enduring partnership between them. I regret that that aim was not in the end successfully accomplished. Ulster’s position in the United Kingdom would have been strengthened by such a partnership.

After the election, the coalition made clear in its Programme for Government that it would,

“work to bring Northern Ireland back into the mainstream of UK politics”—

a commitment to lift all true unionist hearts. In the course of doing so, it would examine,

“potential mechanisms for changing the corporation tax rate in Northern Ireland”.

That examination began exactly four years ago with the publication of a government consultation document stressing the overwhelming need to rebalance the Northern Ireland economy by increasing the size of its private sector, which over several generations had shrunk so alarmingly.

From 2011 onwards, I inquired about the progress of the Government’s work through a number of Oral and Written Questions. There is little doubt, I think, that the announcement of the Government’s decision was delayed to avoid discussion of it during the Scottish referendum campaign of last year. The decision was finally made known in the Chancellor’s Autumn Statement last December, and I welcomed it in the debate on the Statement which took place in this House. It is important to remember that the Bill implements clear commitments that have been given to the people of Northern Ireland. It would have been extremely regrettable if a measure so long in gestation and enjoying such widespread support in Northern Ireland had not been carried into law before the election.

We are all extremely conscious of the acute difficulties that have arisen within the Northern Ireland Executive. It is obvious that they must be resolved if the scene is to be set successfully for the transfer of power over the main corporation tax rate to the Executive in 2017, the target date. I express my admiration for the tenacity and determination with which my right honourable friend the Secretary of State for Northern Ireland continues to work with the political parties in the Province to try and overcome the severe problems. Her predecessor, my right honourable friend Owen Paterson, pressed the case for the devolution of corporation tax with immense fervour. The arguments which he and many others made have been accepted widely, if not universally, in Northern Ireland. In these circumstances, it would be tragic if political instability in Northern Ireland should, at the final hour, deprive the Province of the prospect of benefits which so many economic experts predict and which so many business men and women hope to deliver.

When the Chancellor announced the Government’s decision in favour of devolution, in his last Autumn Statement, the Northern Ireland Chamber of Commerce and Industry declared that,

“our politicians must grasp this opportunity”.

There is no doubt that that is exactly what Northern Ireland politicians, as a whole, wish to do. I hope that, with the assistance of my right honourable friend the Secretary of State for Northern Ireland, they will be able to make that wish a reality and then go on to deal successfully with the challenges that will at once arise, most notably through the reduction of Northern Ireland’s block grant, which has rightly featured prominently in this debate.

This is a money Bill but, as a number of noble Lords have stressed, it has significant constitutional implications. It adds a new element to the unbalanced and asymmetrical arrangements that characterise the United Kingdom’s three devolved settlements and create resentment in undevolved England. The justification, as we all know and has been stressed often in this debate, is the existence of a low rate of corporation tax in Northern Ireland’s neighbour, the Republic of Ireland, with which it competes for international investment. Will the greater imbalance that this measure will introduce within the devolved settlements be accepted on all sides in Wales and Scotland? As we have heard, it is clear that it will not. Nationalist politicians in Scotland and Wales have said that what Northern Ireland has, they must have too. How will the main British parties react? That is the question to which we now need to know the answer.

This Bill has been conceived in the best interests of Northern Ireland and could serve those very well indeed. However, at the same time, it could add to the United Kingdom’s constitutional instability which, sadly, is so marked a feature of life in our country today.