Further Education Colleges: Recovery of VAT

Debate between Lord Livermore and Lord Johnson of Marylebone

Tuesday 9th June 2026 Lords Chamber

[Lord Livermore (Lab)]

As I have already said, the Government are aware of this issue and we are looking into the VAT position of these colleges. As I have also said, we have significantly increased the amount of funding that is going to FE colleges to do the exact things that the noble Lord is asking for: £1.7 billion to support colleges to maintain their estates and £375 million to expand capacity for post-16 education, among other investments.

[Lord Johnson of Marylebone (Con)]

My Lords, although the funding gap has halved in the last 10 years, FE continues to play second fiddle to HE in many respects beyond this important VAT issue. Does the Minister agree with the Milburn review that colleges face a further disadvantage because of the way funding is provided on a lagged basis, which disincentivises them from taking on NEETs who are less likely to complete their studies and therefore bring funding to the institution than other types of students?

[Lord Livermore (Lab)]

There is a great deal to be said in favour of what Alan Milburn sets out in his interim review. He has published his interim review, setting out the drivers of youth unemployment. Clearly, some of the issues that the noble Lord raises are important to that and a factor in the rise in economic inactivity among those with health conditions. Alan Milburn will set out his final report later in the year, at which point he will set out his policy recommendations. I look forward to him doing so.