Independent Schools: VAT and Business Rates Exemptions

Caroline Dinenage Excerpts

Tuesday 8th October 2024 Westminster Hall

[Bradley Thomas (Bromsgrove) (Con)]

I beg to move,

That this House has considered the removal of VAT and business rates exemptions for independent schools.

It is a pleasure to serve under your chairmanship, Dame Caroline. This debate matters for various reasons. I have always been and will remain committed to supporting education across the board, including our excellent state schools. I want all schools to be adequately funded to present opportunities for children from all backgrounds. I say that as someone who was proudly educated in state schools and who cares about the life chances of everyone.

I have secured this specific debate to highlight how Labour’s ideologically driven plan to remove VAT and business rate exemptions for independent schools is an inherently flawed policy. If Labour will not abandon the education tax I will also suggest some improvements that the Government could make to lessen the impact of the policy on pupils, parents and school staff in Bromsgrove and across the country.

[Dame Caroline Dinenage (in the Chair)]

Order. We seem to have a problem with the sound—it seems to be everybody’s microphones. I encourage the hon. Gentleman to plough on while we see whether we can change a few plugs and get it rolling again. In case he was put off by the tinny quality of the sound, we are trying to get it rectified. Please plough on.

[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.

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[Several hon. Members rose—]

[Dame Caroline Dinenage (in the Chair)]

Order. A lot of people want to take part in this debate, so I remind everybody that they need to bob if they wish to be called. Given the nature of the debate, I recommend that Members declare any interests if they have them. I am going to kick us off with a three-minute limit on contributions because 19 people are down to speak.

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[Several hon. Members rose—]

[Dame Caroline Dinenage (in the Chair)]

I am desperately trying to squeeze everybody in, but, as we can see, a lot of people want to speak, so I will now take the time limit down to two minutes.

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[Several hon. Members rose—]

[Dame Caroline Dinenage (in the Chair)]

This is a reminder that there is a two-minute time limit and, in order to get through the remaining speakers, I am now not going to add an additional minute for each intervention.

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[Robin Swann (South Antrim) (UUP)]

I thank the hon. Member for Bromsgrove (Bradley Thomas) for securing this debate. I want to bring up a specific Northern Ireland and constituency-based concern. When the addition of VAT to special schools was first proposed, I was contacted by the administrator of Newtownabbey Independent Christian school. I want to quote what he informed me:

“We receive no revenue or capital funding from the Department of Education to run our school therefore our parents have no choice but to pay fees when, out of religious conviction, they chose to send their children to our school. We are not an elite school, nor do we practise academic selection in any form. We believe this policy lacks fairness. Some of our school parents are on low incomes, demonstrated by pupils being entitled to free school meals. An added cost of 20% will deprive them of their religious based choice to send them to a Christian School.”

That is important not only in a Northern Ireland context, but in the context of this Government’s intention to add VAT to independent school fees, because under section 75 of the Northern Ireland Act 1998, public authorities must

“have due regard to the need to promote equality of opportunity”.

Adding this VAT fee to a religious-based school deprives the protected characteristic of religious belief. The administrator also believes that the addition of VAT may well be an infringement of parents’ religious freedom and liberty. Article 2, protocol 1 of the European convention on human rights states:

“No person shall be denied the right to education. In the exercise of any functions which it assumes in relation to education and to teaching, the State shall respect the right of parents to ensure such education and teaching is in conformity with their own religious and philosophical convictions.”

[Dame Caroline Dinenage (in the Chair)]

Order. We have to move on to the next speaker.

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[Mr Paul Kohler (Wimbledon) (LD)]

It is a pleasure to speak under your chairmanship, Dame Caroline.

As the MP for Wimbledon, I am proud to represent a constituency with such a rich and diverse education offering, including fantastic primary and secondary schools in both the independent and state sectors. I am deeply concerned about the impact that the removal of the VAT exemption will have on many of these schools. Private school enrolments have already dropped in expectation of the tax hike, and there is growing concern that the numbers leaving the private sector and entering the state system will be much higher than the Government estimate.

As the right hon. Member for Islington South and Finsbury (Emily Thornberry) made clear when she said it did not matter if imposing VAT resulted in state school class sizes increasing, this decision is ideological, not practical—levelling down, not up, with red meat to show that the red flag is still flying, or at least fluttering. It will be rushed through in just three months’ time, in the middle of the academic year, giving institutions with no tax expertise little time to register for VAT, let alone assess and adapt.

Labour can only do this because the UK left the EU. Who said there were no Brexit dividends? Not for the first time, my party is in harmony with Brussels, and believes that education should not be taxed. We are a party that believes in giving individuals agency and supporting them in making choices about their and their families’ lives.

For many, such decisions are made because they know their child would not receive the support they need within the state sector. Independent schools in my constituency, such as the Hall school, Willington and the Study, to name but three, do a huge amount to support children with special educational needs. I have spoken to many parents who have made tough financial sacrifices in order to send their children to these schools. They speak of the barriers to their children receiving the support they need, including long waiting lists to receive an EHCP. According to the Independent Schools Council, 90,000 children are receiving SEND support without an EHCP.

In short, this Government should be aiming to improve all schools, regardless of their status, and they should be pursuing policies based on evidence, not dogma.

[Dame Caroline Dinenage (in the Chair)]

I thank all Members for their forbearance and efficiency this morning. We have managed to get through everybody. I also thank the Front-Bench spokespeople for forgoing a little bit of their summing up time. I call Sarah Olney for the Liberal Democrats.

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[Ben Coleman]

Will he apologise?

[Dame Caroline Dinenage (in the Chair)]

Order.

[Nigel Huddleston]

As for provision, as my right hon. Friend will articulate this afternoon, more than 200,000 EHCPs were issued with SEND provision. We provided more support than the Labour Government ever did.

If, as many predict, there is displacement of children with SEND and EHCPs into the state sector, is there capacity? Is there adequate additional financial support for local authorities to deal with the predicted surge in demand? If the answer is no, or I do not know, to any of those questions, the Government must delay this policy.

Before I conclude, I ask the Minister to have the decency to recognise the apparent hypocrisy of so many Members on the Government Benches, including himself, who attended independent schools or send their children to one, yet are now determined to increase the costs on others, depriving many families of the choice that they benefited from.

I also ask him to apologise on behalf of the Secretary of State for Education for her appalling divisive tweet over the weekend, which betrays her lack of awareness of the realities of independent schools across the country. Headteachers, teachers and parents in both the state and independent sectors, unions, tax experts and think tanks are all appealing to the Government to think twice about this policy. I appeal to the Minister to listen and act accordingly.

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[James Murray]

I have only a few moments left to address a number of points, so I will make some progress. Several hon. Members in their contributions today also raised their concern about the impact of the policy on pupils in private schools with special educational needs. We have carefully considered that element of the policy. Our proposed approach makes sure that pupils will not be impacted where they have acute additional needs and an education, health and care plan—in England, or its equivalent in other nations—specifies that those can be met only in a private school. In such cases, where a pupil’s needs can be met only in a private school, local authorities will fund their places and will be able to reclaim VAT. Similarly, on business rates, the Government are developing an approach to address the potential impact of the changes in cases where private school provision has been specified for pupils through an EHCP. More widely, as a Government, we are committed to transforming the system for supporting children and young people with SEND in all schools. We need to deliver better outcomes in a financially sustainable way.

I close by again thanking all hon. Members for taking part in this debate. In our consultation about the technical detail of this policy, we have been engaging widely and in depth, and of course the views of MPs are an important part of that. As I said earlier, it has been a tough but necessary decision to end tax breaks for private schools. We believe it is the right decision and one we need to implement as soon as possible to help raise the funding we need to deliver our priorities for state education in our country. We are determined to improve the education that is available to all, because that is how we will ensure that the aspiration of every parent to get the best possible education for their children can be fulfilled.

[Dame Caroline Dinenage (in the Chair)]

Bradley Thomas has one minute to wind up.