VAT: Independent Schools

Caroline Nokes Excerpts

Tuesday 8th October 2024 Commons Chamber

[Richard Tice]

No, we are short of time.

As a former governor of an independent school, I know that that approach would have been welcomed by the independent sector. Instead, the choice that the Government have made will do the opposite of what they intend. It is not going to raise anything like the funding they think it will: almost 100,000 children will leave the independent sector, many of whom have special educational needs, so it will earn almost nothing.

I spoke earlier about the unintended consequences of this policy. A parent in my constituency has written to me. She has two children with special educational needs at private school, and she cannot afford the VAT, so they are going to go into the state system. The nearest place is an hour away, so now the local authority is going to pick up the cost of the taxi service of over £20,000 per child. Those are the unintended real-world consequences of this choice by this Government. Most shamefully of all, because there is such a lack of capacity in so many areas and so many local authorities, that choice is going to result in bigger class sizes. That means more pressure on hard-pressed teachers in the state system, at a time when we are trying to ease that pressure. This choice is going to damage the education of many hundreds of thousands of children—exactly the opposite of what is intended.

I say to the Minister and his Government that they could choose differently. They could pause this policy, work with the independent sector and gain much more universal support. Instead, we have legal challenges going ahead. As I finish, I ask the Minister to answer this simple question: if those legal challenges end up in the European Court of Human Rights and it rules that the policy is unlawful, will his Government comply with that ruling?

[Madam Deputy Speaker (Caroline Nokes)]

I call Baggy Shanker.

[Baggy Shanker (Derby South) (Lab/Co-op)]

Thank you, Madam Deputy Mayor—[Interruption.] I have done it again, haven’t I? I am sorry, Madam Deputy Speaker, but that is my local government background.

Education is the foundation upon which we build the future of our country. It opens doors, breaks down barriers and creates opportunity. Yet today so many of our young people are being left behind by an education system that is struggling to meet their needs. Labour is committed to changing that by driving high and rising standards in all areas in our state schools, ensuring that every child, no matter where they come from, has the same access to excellent education.

When the Tories left office—let us use the word “left”—they also left behind a trail of devastation across our education system. Schools were left crumbling, standards were left falling and they had the audacity to claim that they had “maxed out” on support for our children. We know that that could not be further from the truth. Our state schools are in desperate need of investment, and that is why Labour is making the tough political and fiscal choices necessary to prioritise our children’s future.

One of the toughest yet most significant steps we will take is to levy VAT on private schools and end their business rates exemptions. By doing so, we will generate over £1.3 billion. That money will be reinvested directly into the state education system, benefiting the 93% of children who attend state schools. It is time to put an end to a system that allows a privileged few to enjoy tax breaks while the majority of our children are left with lesser funded schools, and we know that is true.

What will this investment achieve? It will be used to recruit and retain thousands more teachers, ensuring that every child has access to the quality education that they deserve. We will reform Ofsted, improve our schools, and provide early speech and language intervention for our youngest children. Mental health counsellors will be placed in every secondary school, because we understand that a child’s wellbeing is as important as their academic success. We will expand careers advice and work experience, giving students the skills and confidence to shape their own futures.

We know that this works. We need look no further than my own constituency where, as leader of the council, I was proud to introduce the Derby promise. The city of Derby has made—

[Madam Deputy Speaker]

Order. I am going to call the Front-Bench speakers at 3.59 pm. That means that the remaining Members are not all going to be called, unless they choose to make one-minute contributions, which I cannot recommend to anyone. This is just to alert you that there will be some disappointment.

--- Later in debate ---

[Stephen Morgan]

I am going to make some progress. The right hon. Gentleman spoke earlier. I know that many Members are concerned about children with SEND. [Interruption.] Members can shout as much as they like, but I have some really important points to make about SEND. I know I speak for the country—the right hon. Gentleman certainly does not. I assure Members that the Treasury has sought to ensure that these changes do not disadvantage pupils who need provision that is unavailable in the state sector.

Let me be clear: pupils who need a local authority-funded place in a private school, including those with a local authority-funded EHCP, will not be affected by the changes. That is because local authorities are able to reclaim VAT when they are charged. For other pupils, this change should not mean that they will automatically face 20% higher fees. The Government expect private schools to take steps to minimise fee increases, including through reclaiming VAT incurred in supplying education and boarding. I also note that IFS analysis shows that the number of children in private schools has remained steady despite a 20% real-terms increase in average private school fees since 2020 and a 55% rise since 2003.

Members from both sides of the House mentioned transfers to the state-funded sector. There are always some pupils moving between the private and state-funded school sectors. Approximately 50 maintained private schools close every year, for a range of reasons. Where schools do close, pupils may transfer to another private school or move into the state sector. We simply do not accept, in the case of recent closures, that this has had any connection to our policy on VAT. Quite simply, the evidence does not bear that out. The number of pupils who might switch following these changes represents a very small proportion of overall pupil numbers in the state sector. Any displacement is likely to take place over several years, and will mostly come from parents choosing not to place their children in the private sector to begin with, rather than children leaving the private sector. All children of compulsory school age are entitled to a state-funded school place if they need one. I understand that moving schools can be a challenging experience, and local authorities and schools already have processes to support pupils moving between schools.

A number of Members also raised concerns about capacity. There are always a range of pressures on state-funded school places, and the Department for Education works to support local authorities to ensure that every local area has sufficient places for children who need them. That is business as usual and local authorities and schools already have a range of options to increase capacity where it is needed. We are confident that the state sector will be able to accommodate any additional pupils and that there will not be a significant impact on state education as a whole.

I congratulate my hon. Friend the Member for North East Derbyshire (Louise Jones) on her maiden speech. I know she will be a real champion for children and young people in her community. I also welcome my hon. Friend the Member for Bury North (Mr Frith) back to this place and congratulate my hon. Friend the Member for Glasgow East (John Grady) on his maiden speech—he spoke eloquently and with passion about his constituency and the needs of his constituents. It was also a real pleasure to hear the maiden speech from the hon. Member for Isle of Wight East (Joe Robertson), who described so well his beautiful constituency, a place I enjoyed holidaying in as a child. I look forward to working with him on issues affecting the Solent region. My hon. Friend the Member for Tipton and Wednesbury (Antonia Bance) gave an excellent maiden speech. It was evident that she will be a strong voice in this place, nationally and for her community. I congratulate the hon. Member for Horsham (John Milne) on his maiden speech, and I wish him well on his unexpected new role in this place and on delivering opportunity for all.

The hon. Member for South Shropshire (Stuart Anderson) and others mentioned military families; I know that colleagues in the Ministry of Defence and the Foreign, Commonwealth and Development Office will closely monitor the impact on affected military families, considering support via the continuity of education allowance scheme. Small faith schools were raised by a few Members; those schools meet the needs of dedicated faith communities, often at low cost. I know that Treasury colleagues have met representatives from those schools to ensure fairness. A number of right hon. and hon. Members spoke about the impact assessment. As my hon. Friend the Exchequer Secretary to the Treasury set out, we are considering the impact of the policies and will publish a tax information and impact note at the Budget in the usual way.

In conclusion, this Government were elected to deliver change across our country, not least in our schools. Our mission to break down the barriers to opportunity is exactly what our country needs. This party is showing that education is once again at the forefront of national life. I urge Members across the House to demonstrate that by voting against the motion.

Question put.

The House proceeded to a Division.

[Madam Deputy Speaker (Caroline Nokes)]

Will the Serjeant at Arms investigate the delay in the No Lobby?