Autumn Budget 2024
Lord Lexden Excerpts(1 week, 5 days ago)
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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(1 month ago)
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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.