Independent Schools: VAT Exemption

Baroness Fraser of Craigmaddie Excerpts

Thursday 5th September 2024 Lords Chamber

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I add my thanks to my noble friend Lord Lexden for his determination to enable us to debate this issue.

The draft Bill which has been published is, to me, a blunt instrument. It treats the sector as a homogenous whole, so causing unintended consequences that implementing the policy in the middle of the school year will not enable us to unravel, let alone resolve. Time is of the essence, not least the limited time that we have to speak today, so I would like to request that the Minister convenes a round table to explore with interested parties the unintended consequences of the current draft legislation in greater depth.

I declare my interest as a former pupil of a specialist vocational performing arts school. I also have a child at a fee-paying independent day school in Scotland and a sister who is a teacher at another.

In the King’s Speech debate, I highlighted my worries about the impact on SEND children. Others have expanded on this, and I support them wholeheartedly. The Local Government Association has called for SEND provision to be reformed; I trust that we can explore this on another day with a little more time.

The first sentence of the Treasury’s technical note published in July states:

“The government is committed to breaking down barriers to opportunity”.


For our performing arts sector, and the schools which provide highly specialist training in music and dance, even the prospect of a VAT levy has created a barrier to opportunities. The schools that deliver training for the Music and Dance Scheme are currently able to offer places on assessment of talent, not ability to pay. This will not be the case if MDS schools have to levy VAT on any part of their fees. I urge the Government to work with the heads of MDS schools to explore the case for their exemption.

Question 5 of the current Treasury consultation asks:

“Does this approach achieve the intended policy aims across all four UK nations?”


I argue that it does not. The education landscape in Scotland is different. We have no academy schools. We have a different curriculum, which in some schools can force children to limit their choices to six subjects at age 14. Thanks to devolution, unlike in England, the Government cannot control how any money raised would be spent in Scotland. That would be a decision for the Scottish Government. There is no guarantee that it would be spent on education. Given the current state of the Scottish Government’s finances, it is likely to be repurposed, like many other programmes, such as the provision of digital devices to pupils. In Scotland, independent schools have been subject to more scrutiny by the Scottish Charity Regulator than any other part of the sector, with regular reviews to ensure that they meet the “charity test”, a process which does not happen south of the border.

The Government’s policy on VAT was announced in the middle of the Scottish school holidays. The allocation of places happens in April each year, but with one in three secondary schools operating at over 90% capacity, there is no space in the Scottish state sector to accommodate even a small proportion of the pupils who may need to move. Schools and families have not had time to prepare. With the changes being introduced midway through the academic year, the disruption for all will be significant. Already, two independent schools in Scotland have closed. I urge the Government to pause the implementation of this policy until the beginning of the 2025 school year and to use that time to explore with us the many complex issues raised today.

King’s Speech

Baroness Fraser of Craigmaddie Excerpts

Friday 19th July 2024 Lords Chamber

[Baroness Fraser of Craigmaddie (Con)]

My Lords, it is an honour and pleasure to follow the wonderful maiden speech of my noble friend Lady Monckton. With her sparkling business experience—bringing Tiffany’s to the UK and her continued involvement in fine jewellery—we are fortunate indeed to have such a gem of a Baroness on our Benches. Much more important and pertinent to our debate today is her experience with Team Domenica and her passion to enable people with learning disabilities to thrive in life and feel included in society, which I know will make such a difference to this House. I know that, like me, noble Lords will look forward to many future contributions from my noble friend.

I add my voice to the congratulations to the new Government, and welcome the new Ministers to their place on the Benches opposite. I sincerely wish them well and will support them if the measures they introduce are

“based upon the principles of security, fairness and opportunity for all”.

I also add my thanks to the noble Baroness, Lady Barran—who has been at the end of a query or a WhatsApp message whenever—for her openness, diligence and service.

However, I must confess my disappointment that there was not much on adult social care in the gracious Speech. I was on the Adult Social Care Committee of your Lordship’s House, so wonderfully chaired by the noble Baroness, Lady Andrews. One of our fellow members was the noble Baroness, Lady Jolly, who I did not realise was retiring—I wish her a very happy and long retirement. I commend the committee’s report to Ministers. Can they give some serious consideration to how they can support some of the recommendations that do not really need more Bills—for example, by reinforcing the provisions of the Care Act 2014?

I too am concerned by the blanket statement in the gracious Speech about measures being brought forward to remove the exemption from VAT for private school fees. Following on from my noble friend’s speech, can the Minister clarify today that this will not apply to fees that are paid to independent schools for pupils with EHC plans? Even if they are exempt, as my noble friend said, those plans can take many years to be put in place, leaving out children with recognised special educational needs whom the state system cannot support and who currently rely on independent schools. Many of these schools are registered charities, and for generations the provision of education has sat firmly in the definition of “public benefit” for charities. Schools are subject to increased staff costs, pensions, utilities and other inflationary pressures. Even when placements are funded largely by local authorities, significant additional fundraising for these organisations is required to subsidise services—there is no fat in the model.

In Scotland—which I always like to mention—independent schools have been subject to more scrutiny than any other part of the charitable sector. In 2022, the Scottish Government removed business rates tax relief for schools with charitable status. Significantly, they excluded specialist schools for children with educational needs.

Like the noble Baroness, Lady Bull, I am really concerned about the devastating impact this policy is having on specialist performing arts schools at this very moment. The Labour Party manifesto committed to

“support children to study a creative or vocational subject”

up to the age of 16. The essential requirement outlined by the noble Baroness, Lady Bull, for early specialist performing arts training has been recognised by successive Governments through the Department for Education Music and Dance Scheme for school pupils and the Dance and Drama Award for students. These are means-tested grants that enable talented students to access the best music and dance training at the best specialist schools—I declare an interest as an alumnus of Tring Park, one of the schools on the dance scheme. The majority of pupils at schools such as Tring Park, or the Royal Ballet School, would not otherwise attend an independent school. Yet the Department for Education cannot guarantee the future of any bursaries in either scheme for the next academic year, this September. This uncertainty, together with the fear of being asked to pay VAT on fees, is causing potential pupils to not even take up places, which is an immediate threat to the sustainability of the training pipeline for our world-class performing arts sector.

The Government’s blanket announcement threatens future Darcey Bussells—or indeed Baroness Bulls—and it could force these schools to accept only the children of the very wealthy. Fundraising and full-fee-paying students subsidise bursaries and make it possible to offer talented young people places. Given the Government’s proudly expressed support for the performing arts, I can surmise only that this is an unintended consequence, and I just hope it is something that can be rectified before these schools are forced to take drastic measures.