School Fees: VAT
Debate between Lord Lexden and Lord Livermore(1 day, 20 hours ago)
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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
Debate between Lord Lexden and Lord Livermore(7 months ago)
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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.
Independent School Fees: VAT
Debate between Lord Lexden and Lord Livermore(11 months, 3 weeks 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.