Finance Bill

Debate between Freddie van Mierlo and Damian Hinds

Committee of the whole House
Wednesday 11th December 2024 Commons Chamber

[Damian Hinds (East Hampshire) (Con)]

I rise to speak to new clause 8, and to refer to clauses 47 to 49.

Clearly, just six or so months in, we will not have seen the full effects of these measures, but we will have started to see them. We will have heard whether there are concerns from faith leaders, and what the early effects are on the number of applications for EHCP plans and so on. It is also right that we have asked that, within 18 months of this Act being passed, we report back on the impact of the music and dance scheme, on which we know there has been a partial concession from the Government, but it remains a very sensitive area none the less.

The Government say that they expect to raise £1.5 billion from this measure in 2025-26, rising to £1.7 billion—I think—in 2029-30. They expect 3,000 children to be displaced in academic year 2024-25; 14,000 in academic year 2025-26; and 35,000 eventually. These are enormous numbers of children who could have their education disrupted. Parents will be denied a choice that would be open to them in most other places in the world. It is also important that we look at the assumptions behind these numbers from HMRC’s policy paper—they are the exact assumptions that may then come into question in that post-legislative review, which our new clause 8 calls for.

The Government first expect fees to rise by 10% on average as a result of these measures. In fact, the actual mathematical cost of putting 20% VAT on fees is, in fact, an increase in cost of about 15%, by the time we net off the ability to reclaim cost on inputs. More significantly, we must put it in the context of everything else that is going on. This year, we are also seeing a business rates increase for about half of private schools, an increase in contributions on the teachers’ pension scheme, and as with so many other sectors, a massive hike in national insurance contributions. Those are on top of any other normal cost pressures that other organisations might have. Those are three things, as well as the VAT increase, that are direct transfers from the independent school sector to the Exchequer. Although, technically speaking, they may not be the measures that we are discussing today, they very much affect the ability of schools to be able to absorb any of those price increases.

To inform their conclusion on how many children will be displaced in the private sector, the Government have, to an extent, relied on one statistic. They say that the number of private pupils has remained steady, despite a large real increase in average school fees since 2000. Considering price elasticity is a mathematically flawed approach. Up until very recently, we used to talk about 7% of children going to private schools. Now we say that it is 6%, because the proportion has come down. But at a time when pupil numbers have been growing, other things being equal, we would expect the number of children at private schools to have been increasing as the proportion stayed roughly constant.

Moreover, it makes no sense at all to look at gradual price increases over a 10, 20 or 20-plus year timeframe and to say we could conclude anything from that on the effect of an overnight price increase of 15%, 20% or more. The Government have come to the conclusion that we will end up with a long-run steady state of 37,000 fewer pupils in private education in the UK.

[Freddie van Mierlo]

The right hon. Gentleman is right to interrogate the Government’s numbers. Does he share my concern around SEND provision with children returning to state schools and the fact that teaching assistants are not fully paid for in state schools? That will be an additional burden on those schools.

[Damian Hinds]

Of course, there has been a huge increase in the number of teaching assistants over the past 14 years, but the hon. Member is right that there are particular issues for children with special educational needs, which I will come on to.

The Government estimate that there will be 37,000 fewer children in private schools and of those, 35,000 will go to state schools. What happens to the others? Some will be international students who will not come to this country, so that is a loss of export earnings, and some will be home-schooled. The hon. Member for Twickenham (Munira Wilson) mentioned that, and we have not talked about it a great deal, but it is significant. The Government will say, “It’s only 35,000.” That is like a pretty substantially sized football stadium if we picture the number of children whose education will be changed by the measure. They say, “Don’t worry because it is only a small proportion of the total number in state schools.” At the end of the day, the number is from a spreadsheet; there is no guarantee that it will be 35,000 or any other particular number. In fact, it is rather odd that they came up with a single number at all. I would think that in any economic analysis like this we would at least have a range in which there is a central planning assumption, but also a reasonable worst-case scenario.

More importantly, as my right hon. Friend the Member for Hertsmere (Sir Oliver Dowden) mentioned earlier, the effect will not be even. I have lost count of the number of parliamentary questions I have put down trying to get out of the Government where they think those 35,000 children will show up, because there is a huge difference in where they show up. It is worthless having empty places in primary schools in inner London if that is not where the children will be displaced to from private schools. In broad terms, there will not be that much of an impact on state primary schools. There will be on state sixth forms in London, but the big effect will be on individual places, particularly in 11-to-16 education. They include not only in counties we might guess, but also Bristol, Bury, Surrey, Salford and a much longer list besides.

On why the proposed review is so important, and we need to examine this in the post-legislative scrutiny, the Government say the revenue costs will be £270 million a year. That is, in other words, the cost of educating those extra 35,000 in the state sector. They go on to say that they have calculated the number based on the average spend per pupil in England in 2024-25. That is wrong. It is a mistake to base it on the average pupil because we know children with special educational needs will disproportionately have to transfer, and that will have a higher cost to their education.

Moreover, we will get more families—we do not know how many—applying for an EHCP. The limiting case is where a child is in a private school right now and their parents are paying considerably more than the average place. They will find that they cannot afford the extra 20%, so they will apply for an EHCP and the child could get placed back in the same school, with the entire cost now being picked up the state.