Finance Bill

Damian Hinds Excerpts

2nd reading
Wednesday 27th November 2024 Commons Chamber

[Damian Hinds (East Hampshire) (Con)]

It is a very long-standing principle, observed all but universally around the world, that we do not tax education, because it is a public good. Some families find that independent education caters to needs that the state simply does not; that is the case with schools in the music and dance scheme or in certain faith communities. In some cases, a family chooses an independent school because of their child’s special needs—or because, for whatever reason, that is the place where their child can be happy. Whatever the circumstances and whatever the reason, we believe in the sanctity of the principle of parental choice. Many places around the world recognise the value of that choice through the tax system. This country is not one of them. There is no tax break for using independent education providers. Everybody contributes—[Interruption.] Does someone want to make an intervention? I would love to hear it.

[Nesil Caliskan]

I thank the right hon. Member for inviting me to intervene. I remind him that the IFS has confirmed that there is enough capacity in the state sector for the transfer of pupils. Also, on the point of special educational needs—

[Damian Hinds]

Thank you.

[Madam Deputy Speaker (Caroline Nokes)]

Order. The right hon. Member will know full well that it is for me to decide if the hon. Lady’s intervention is too long.

[Nesil Caliskan]

The right hon. Member may also recognise that the Government have been clear that when special educational needs are being met in the private sector, VAT will not apply.

[Damian Hinds]

On three counts, I am afraid that is incorrect. First, it does not cover everybody with special needs at a private school. Secondly, the IFS has not said that there is ample space in state schools, nor could it possibly know that. Thirdly, and most importantly, the point on which I was heckled, and on which I invited somebody to intervene, was a completely different one. My point was that unlike in quite a large number of countries, here there is no tax break for those using independent education providers. Everybody contributes towards state education through general taxation; if we take up a private school place, that contribution does not reduce.

In the modelling that goes with the Finance Bill, the Government say that they expect a little over £1.5 billion to be raised from the measure in maturity. We do not know the detail of the modelling and how robust the analysis is. However, I agree, intuitively, with the Treasury that a small part of the effect will be felt immediately in January, but that the effect will really start from September 2025. It will be felt gradually, through some children leaving the independent sector; the bigger effect will probably be from those who do not start in the independent sector in the first place, or who do not start their next phase of education in the sector.

I am not totally clear from what the Treasury has published whether it factors in all the effects of the change. It obviously factors in families who are directly priced out of the independent sector, but what about those who are indirectly displaced, because they were at a school where a number of other families were priced out and the school had to close? Does it factor in the higher number of education, health and care plan applications that will be made, and the much higher than average per-place cost that the state will have to meet for those displaced?

I am also unclear whether the Treasury’s analysis looks at all the effects on independent education cumulatively. Yes, there is the VAT, which is in the Finance Bill, but there are also a number of other measures being taken this year that materially affect the cost base of independent schools, and that is likely to be reflected in fees. They include the increased contribution to the teacher pension scheme; business rates changes, which affect about half of independent schools; and the massive hike in employer national insurance contributions, which will affect so many sectors.

All those are transfers from the independent state sector to the Exchequer, so the real increase in the cost base for that sector will be considerably more than 20% over the course of the year. In the Minister’s summing up, I would love her to tell us what assumption was made about the total average price increase. Whatever it was, the Government calculate that, in the policy’s maturity, 37,000 children will be displaced from the independent sector, and of those, 35,000 will go to the state sector. Ministers say, “Don’t worry; there are loads of places available in the state sector.” In fact, the hon. Member for Barking (Nesil Caliskan) suggested that a third party had said that as well, and the Exchequer Secretary said it again in his remarks. He said that we are talking about 0.5% of the total population in state schools. It is useless to have places available in primary schools in inner London if that is not the age group of people leaving the independent sector. The effect will be uneven across the country, and need is concentrated largely in secondary schools and sixth forms.

There are plenty of places where even a small number of children being displaced from one sector to the other could have a big effect on the state school system. What discussions have Ministers had with colleagues, and with councils in Salford, Stockport, Sale, Bury, Bedford, Bristol and so on? I could name considerably more. What contingency plans are in place?

[Chris Vince]

indicated dissent.

[Damian Hinds]

The hon. Gentleman shakes his head. I take it that means that he has not had those conversations. [Interruption.] I am happy to take an intervention from him. What contingency plans are in place for September if the displacement is greater than anticipated? We know that the money will follow the pupil if more pupils turn up in the state sector, but we have not heard whether that money is coming out of general Exchequer receipts—in other words, that the Department for Education will not be expected to find that money from elsewhere in its budget. Similarly, what are the contingency plans, and what capital has been set aside in case extra capital funding is needed? As well as the displacement of pupils, there is also potential displacement of teachers, as we have heard from the unions.

[Chris Vince]

As the right hon. Gentleman encouraged me to intervene, I will agree that there will be a movement of teachers from the private sector back to the state sector. As a former teacher, I know a number of former colleagues who left the state sector because of the failings of the last Conservative Government, and they are considering going back into state education only because of the hope that the new Labour Government have given them.

[Damian Hinds]

Well, we shall see. As a teacher, he will know that teachers move between the state and independent sectors all the time. They move in both directions, but that is not what the Association of School and College Leaders was talking about. It was talking about the fact that the change is being made mid-year, and said that it carried a risk of redundancies, and of the permanent loss of teachers to the profession.

Labour Members—the hon. Member for Harlow (Chris Vince) is one of them—frequently like to say to Opposition Members that we have to choose. They say: “Are you on the side of the many or the few? Are you with 94% or the 6%?”. Well, we refuse to choose. It is not a question of whether we care about the 94% or the 6%. We care about the 100%—all the children. It is definitely true and right that at the Department for Education—this was true when I was a Minister there—Ministers spend way more than 94% of their time and effort on the state sector. In our time in government, between 2010 and 2024, that paid off with huge results. When we supported our brilliant teachers in their great work, our results went up. We went from 27th in the world to 11th for maths, and from 25th in the world to 13th for reading. We had the best primary school readers in the western world. Free school meal eligible children were 50% more likely to go on to university, and the number of schools rated less than good was down from one in three to fewer than one in 10. That was through supporting teachers, academy trusts, a broad knowledge-rich curriculum and the propagation and spread—from school to school and teacher to teacher—of proven methods, such as maths mastery and synthetic phonics.

Yes, the system does also need money. Per-pupil funding under the last Government was higher than it was under previous Labour Governments. Among the G7 nations, it was middle of the range in cash per child, and the highest as a proportion of national income. Of course, we have to keep increasing the resourcing that we put into key services, none more so than education, but the Conservatives did that as a priority from general taxation, not by taking from another part of the wider education system. I repeat: the Government do not have to choose. These are all children.

[Tim Roca]

Will the right hon. Gentleman clarify his comment that all the education spending that he mentioned came from general taxation? My understanding is that the figures that he just quoted include the student loan system.

[Damian Hinds]

No, they do not. If the hon. Gentleman is talking about the OECD figures, they are for primary, secondary and college-based education in the state sector, but I am grateful to him for his intervention.

When Government Members talk about “the 6%” in the same tone in which they sometimes talk about “the 1%”, I think they believe that they are about to topple the toffs and achieve some sort of great victory in the class war. They are not. Eton college will not miss a heartbeat over this measure. The pupils who will be hit will be those in smaller town schools—the ones that are significant employers locally and a big part of the local community. They do not have big endowments; they do have pretty thin margins. Schools that cater to children with special educational needs will be hit. Denominational schools will be hit.

There have been some concessions from the Government. They are not the most massive concessions in the world, but they are not nothing either. We should acknowledge them, and I thank the Government for them. The first is on the music and dance scheme, with extra help for families with children at the schools in question, albeit that the concession will benefit only a little less than half the total number of families in what is a means-tested scheme anyway. There is also the confirmation that centres for advanced training will be exempt, and of what the Government plan to do on the continuity of education allowance. We need to ensure that those mitigations are more comprehensive than they are now, and that they become permanent.

Of course, the Opposition would prefer the Government to drop this measure altogether and not be the international outlier by taxing education, but if they are determined to bulldoze on, we must have key changes in Committee. We must have an exemption for all children with an EHCP—not only if it specifies the individual school—children who have SEN support, and those who are currently applying for an EHCP. We must have exemptions for schools whose fees are lower than the average charge in the state sector, and for religious denominations where there is no faith school provision in the state sector.

I do not accept the notion that, as Ministers have said at the Dispatch Box, members of religious faith communities are not discriminated against by this measure. It may well be that, as a whole, people of faith are not discriminated against more than others because the vast majority of people of religious faith are in the state sector anyway, where there are plenty of Catholic schools, Anglican schools and other denominational schools, but it is not credible in the slightest to claim that there is no discrimination, and that the effect will not be felt much more strongly by members of certain traditions within Judaism, Christianity and Islam.

We also need key postponements. Children who are already in public exam years, or the year before public exams, cannot have their education disrupted in this way. The school that they move to may not even offer the same GCSEs or A-levels, the same exam board or the same syllabus. Most significantly of all, the Government must for good reasons, including simple practical reasons, at least postpone the introduction of the measure in areas where state schools are already full, or almost full, at that stage of education, because the biggest effect of this divisive, destructive tax attack will be on state schools. It will be felt in class sizes, and ultimately in all parents’ ability to get the preferred choice of school for their child.

--- Later in debate ---

[Connor Naismith]

I thank the hon. Member for making that intervention. He says that it is not a choice between one and the other, but for 14 years under the previous Government we heard his side talk about state schools having to make difficult decisions and tighten their belts. As the husband of a state schoolteacher, I know that our state schools were severely underserved by the previous Government. The money generated by ending the VAT relief on private schools will be vital to recruit the 6,500 more teachers that we need in our state schools and to roll out free breakfast clubs across the country, to ensure that no child in education goes hungry.

[Damian Hinds]

Does the hon. Member know how many additional teachers were recruited in the last Parliament without putting VAT on private education? Does he know how many breakfast clubs are already in state schools in this country? There are thousands of them, thanks to the national school breakfast programme.

[Connor Naismith]

We have heard lots of contributions from the Opposition Benches about the fantastic record of the previous Government, but that does not stand up to the lived reality of our constituents. That is exactly why we saw the result that we had in the general election. The sooner Opposition Members come to terms with that result, the better.