Independent Schools: VAT and Business Rates Exemptions

Debate between Bradley Thomas and Rachael Maskell

Tuesday 8th October 2024 Westminster Hall

[Bradley Thomas]

Thank you, Dame Caroline. Education is an investment in our future. It is in everyone’s best interests that children are well educated so that they can make an engaged and positive contribution to our society. We do not charge VAT on many types of private healthcare, as that is beneficial when people use their own money to pay for a service that the state would otherwise provide. We do not charge VAT on university or nursery fees, so why should schooling be any different?

There are approximately 2,500 independent schools in the UK educating more than half a million children. They are often small schools: more than 40% of independent schools have fewer than 100 pupils according to Department for Education data. The reality is that the policy will not fulfil its aims and will displace children mid-education. State education must be funded by the state, supported by taxpayers. The VAT exemption encourages greater use of independent education, reducing the number of state school pupils, meaning more money available per pupil in the state sector.

The Times recently stated that 71% of parents felt that rising school fees would influence their future decision about independent schooling. Additionally, 26% of parents said they would have to withdraw their children from independent schools if VAT is introduced.

An Adam Smith Institute report provides a detailed examination of the potential economic impacts. If 10% to 15% of students transfer, the net revenue could be negligible. Alarmingly, in a scenario where 25% of students switch from the independent sector to state schools, the tax could cost the Government £1.6 billion.

Currently, independent schools’ significant economic benefits include supporting 328,000 jobs, saving £4.4 billion from the education budget, and supporting £5.1 billion in additional tax revenue. They do this while saving the state £4.5 billion by removing the requirement to fund the education of 7% of children as the result of parents exercising this choice. Furthermore, independent and state boarding schools are a unique subset of the schools system, with the additional feature of attracting overseas students to the UK. Some 62,700 pupils are international students in independent schools, making up 11% of the population. This is a key export for the country, adding £2.1 billion to our economy annually.

[Rachael Maskell (York Central) (Lab/Co-op)]

Will the hon. Member give way?

[Bradley Thomas]

I will not give way. Independent schools should be seen as a British success story, both culturally and economically, instead of being discouraged and punished with the imposition of an education tax for socialist ideological principles. Most importantly, the human impact of the policy is stark. The failure of this education tax will not just be academic or financial; it will have a serious impact on families.

One parent wrote to me:

“As a widowed single mother who works full-time, I make enormous financial sacrifices to ensure my child can attend the same school from age 3 to 18. This stability is not only essential for my child’s development but also enables me to work and contribute to society. This proposed VAT would be devastating for families like mine.”

Another mother wrote to me and said,

“We also have a daughter who will need to start secondary school in two years. We had hoped for her to attend the same school as her brother but, with no scholarship likely and the addition of VAT, it is simply impossible. This is a painful realisation, and I worry that she will resent the opportunities that we couldn’t give her (but we could give her older sibling).”

We have yet to talk about the impact on special educational needs and disabilities education. This measure will cause particular problems for children who are in receipt of such bespoke education. Nationally, at least 130,000 pupils in independent schools receive SEND support in mainstream and specialist settings. That is 20% of the pupils in UK independent schools, which is slightly higher than the state school average. Independent schools help to provide additional value-adding capacity to SEND education.

--- Later in debate ---

[Bradley Thomas]

My right hon. Friend echoes the point that I made earlier that this is about not just a service that is provided but a key segment of the UK economy that bolsters the value of UK plc and UK GDP.

[Rachael Maskell]

Will the hon. Member give way?

[Bradley Thomas]

I will not; I will make progress. Labour committed in the House of Commons in 2023 that armed forces families need not be concerned about proposals to charge VAT. With the current retention crisis in the armed forces, and the current volatile state of world affairs, the Government need to confirm what impact analysis has been carried out on the effect of taxing education on military personnel.

We then get into issues around the implementation of the policy. Implementation in January will put pressure on local authorities to find rare and academically disruptive in-year placements. Those will be difficult, as state schools will be full and many will be oversubscribed, with areas that have a high number of pupils attending independent schools having some of the busiest state schools.