Independent Schools: VAT and Business Rates Relief

Gagan Mohindra Excerpts

Monday 3rd March 2025 Westminster Hall

[Dr Huq]

I do not know how parliamentary that language is. I am not going to join in the praise of Eton, particularly because I think the hon. Lady may have been an atypical parent. I imagine that some parents there would be able to bear a 20% increase, and for a school that is clever with its accounts, these things may just be a rounding error. I am talking about smaller schools for which that does not apply.

It is interesting to see the hon. Member for Boston and Skegness (Richard Tice) here. I have a massively remain constituency, with 72% of my electorate voting remain, but, perversely for Reform, it is leaving the EU that has made this policy possible—it is a Brexit benefit. If only we had never left the EU, this would not be happening.

Usually education is not a taxable luxury good, and there is a fear that if this increase happens, what could be next—nurseries or universities? I used to work in that sector. There is a slight worry that there is a loophole, because the policy contradicts the EU’s VAT directive that specifies there should be no VAT on any form of education. In Greece in 2015, the left-wing Syriza Government wanted to introduce VAT at 23%. They had to abandon that for a slew of different reasons, including because it was contrary to the EU’s VAT directive.

University tuition is zero rated, and there is a worry among my friends in the sector there, who say, “You’re lucky to have got out when you did, because they’re closing so many university departments in the UK.” What could be next? I hope that my hon. Friend the Minister can assure me that nurseries and universities are off limits.

We have heard all these things—that schools are going to close—and we have heard a lot of catastrophising, but it remains to be seen whether those things will come to pass. One of my schools went in 2023. My worry is that this policy will make an elitist system more elitist. The Government say in their response:

“Ending tax breaks for private schools was a tough but necessary decision”,

but when growth comes, is there a way of undoing it? It was a very clear policy in many manifestos, so I understand that it will not all be undone, but let us think a bit creatively.

[Mr Gagan Mohindra (South West Hertfordshire) (Con)]

What does the hon. Lady expect her Government to do if they will not give way on this point?

[Dr Huq]

I would suggest implementing it in a slightly different way, based on turnover—so doing it for the enormous schools that can afford it, but not for smaller ones that have been caught in the trap.

There is also an argument for looking at grammar schools, which are a legacy from many years ago. We do not have them in my area, but when I was the Labour candidate in Chesham and Amersham in 2005, they came up as a hustings issue. The argument that the Labour party always gave me in those days was that we respect parental choice. At times, the Conservative party has flirted with bringing back more grammar schools, but they are even more elitist in a way because they take state funds for private school-type facilities. Dr Challoner’s grammar school in Amersham was way bigger than the school I went to; I felt very small when I went there. Perhaps something could be done about the grammar school system, because that is an inegalitarian one.

I wanted to vocalise some of the concerns from my electorate and remind hon. Members that one size does not always fits all. In this case, that is far from the truth.

--- Later in debate ---

[Mr Gagan Mohindra (South West Hertfordshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Vickers. I thank my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (John Lamont) for presenting the petition. Out of the nearly 115,000 petitioners, 500 were from my constituency.

Education has always been an important part of my purpose in coming to this place and in all my 21 years of elected office, because I know that education can change people’s potential. I am lucky enough to have been brought up in this country, and educated well at school and university. As others in the House will be aware, I am dyslexic. My dyslexia was not diagnosed until my mid to late 20s, and I take that as a reflection of the excellent education that I was able to benefit from.

My concern is that the new Labour Government have come in with a strong mandate from the electorate, but I think that they are rewriting the terms of how they got that mandate. Comments have been made about previous manifestos talking about reform of the independent school sector, but I would argue that given the turnout figures, the Labour party having 411 MPs is probably the fault of my own party, rather than to the credit of the Labour party. I look forward to the next general election for those roles to be reversed.

My concern specifically with the proposal on independent schools is one that others have mentioned: the policy of taxing education. For me, that is a dangerous policy; others have described it as a policy of envy. We have spoken about VAT, but there is also the reform of the charity status of independent schools and the knock-on consequences for business rates. It is a pleasure to see the Treasury Minister in his place, because this is more a financial question than an education policy one. The issue is about the potential revenue generation of the policy, but for me, it is also about the wider conversation on supporting wealth creators and driving economic growth.

As with any business plan, assumptions are made, and the proposed £1.8 billion in revenue is probably a bit ambitious. I say that based on two things. First, the policy was introduced mid-term, at the beginning of this calendar year, and that did not allow families to adjust—there was no element of transition. I have spoken to parents who benefit from being able to send their children to independent schools, and they feel aggrieved because, in their view, they are paying twice. They are subsidising the state sector because their child is not using their place, and the parents are instead paying for a place at an independent school.

My biggest concern is about SEND provision in the state sector. Hertfordshire has had failings over many years that I know the county council is working hard to resolve. Part of that work has been subsidised and supported by the excellent private schools in my constituency, Merchant Taylors’ and the Royal Masonic School for Girls being two of them. Where parents are able, they can send their children to independent schools to make sure that their children get the support they need in, typically, a smaller class. If those parents were reliant on the state and not able to afford an independent school, they would not necessarily get that provision; the timeframe to get an EHCP can be years. The Government are fundamentally destroying the life chances of children in the position I was in 35 years ago, and that worries me.

The Government’s impact assessment admits that the education tax will impact girls more than boys because there are more single-sex private schools for girls than for boys, and those schools have less of a financial background and have not been around for as long. Given the pressure that this tax would place on single-sex schools like the Masonic School for Girls in my constituency, I am concerned about its impact on the excellent work that has been done by the private sector to lead the way in ensuring a high quality of education for girls, particularly in science, technology, engineering and maths and other fields where they are under-represented.

Not only will the tax impact children who are educated in the private sector and children who will feel the impact of increased pressure on the state sector, but it will greatly impact the industry and those employed in it. With over 100 independent schools allegedly expected to close over the next three years as a direct result of the tax, many who work in the sector face unemployment, and there is a risk of highly skilled teachers leaving the profession or the country. We live in a global world. One of the main drivers for communities and successful families to stay in this country is family links, but another is educational standards. Middle-class parents—who are typically those generating economic growth and employing people—are now considering leaving the country and home-schooling or privately educating their children in schools in other parts of the world. In the modern world, especially with the Government’s drive for increased airport capacity, moving back and forth between here and the middle east or other parts of Europe will be less burdensome than the increase in the cost of private schools associated with the tax that this Government have suggested.

If children are forced to move to a new school within the school year, or at a key stage of their education, it will greatly disrupt their education and could cause long-term damage to their prospects. These are the same children who, not many years ago, were directly impacted by the pandemic. I do not think we have seen a lot of the harms associated with that come through yet. My concern is about not just finances, but the educational outcomes and life chances of those children if we force disruption on them during an academic year based on financials that may not stack up to the ambition of the Treasury.

The Government’s own impact assessment admits that disruption will be caused to the education of SEND pupils, hurting progress in their education and the opportunities and resources available to pupils in the state sector. That will put more pressure on local authorities, which are already stretched to their capacity—I referred to Hertfordshire county council earlier.

My right hon. Friend the Member for East Hampshire (Damian Hinds) mentioned faith schools and art schools. In my old constituency of South West Hertfordshire, we had world-leading schools of both types. I am not their representative any more—others in the House have that honour—but I am sure they will be having meetings with their MPs to say that their ability to attract world-class pupils, who will go on to become world-class artists and be successful in the years ahead, will be greatly diminished by the Government’s decision.

I am glad that a Treasury Minister will respond to this debate rather than a Department for Education one, because we have all been in education debates before. If he were being brave, at what point would the Minister look to reverse this decision? There was talk of a review in two years. I ask him to go further and put a sunset clause on the policy, because one of the greatest attractions of our great country has been its educational standards. I applaud my right hon. Friend the Member for East Hampshire for the great work he did over many years. For us to remain a global leader, both in the economy and in education, we need to give pupils the best opportunities possible, but we also need to attract the best educators in the world. Historically, we have done that with pay scales. My party has suggested that, given some of this Government’s policies, teachers may end up taking a pay cut. I will be interested to hear what the Minister says on those points.