Independent Schools: VAT and Business Rates Relief

Gregory Stafford Excerpts

Monday 3rd March 2025 Westminster Hall

[Alison Taylor]

I simply do not agree. I refer to my earlier point that this policy was in Labour’s manifesto in 2017, 2019 and 2024. It is a long-standing policy of the Labour party.

[Gregory Stafford (Farnham and Bordon) (Con)]

If I understand the hon. Lady’s point, it is that because the Labour Government now have a stonking majority, this policy is therefore approved by the British people. Is she therefore saying that in 2017 they rejected this policy, in 2019 they rejected this policy, and then suddenly in 2024 the majority of the population converted to supporting this policy? Or is she really saying what we all know, namely that the British people did not vote for Labour based on this policy and they did not understand the effect that it will have, not just on the independent sector but on the state sector?

[Alison Taylor]

I think my point refers to the timing point that the hon. Gentleman has been making. I will carry on.

In Scotland, it is up to the national Scottish Government to decide how to use the significant additional funds that they receive through the block grant. As expenditure on education in England increases, so do the resources available to the Scottish Government, but despite Scottish families being taxed more than families in any other part of the UK and despite Scotland receiving the largest increase in the block grant since the Scottish Parliament was formed, there is little to show for those things in state schools in Scotland. In spite of the incredible hard work of teachers and support staff in schools in Scotland, the attainment gap continues to increase, and standards and results continue to fall.

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[Gregory Stafford (Farnham and Bordon) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Lewell-Buck. I congratulate my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (John Lamont) on leading today’s debate. I declare an interest as the father of children who currently attend an independent school.

I am afraid it is not a pleasure to speak today about the vicious, vindictive and, ultimately, financially valueless policy that the Labour Government have brought in. As has been said, no other country—no serious country—in the world taxes education. The sorts of schools being taxed are faith schools; arts, drama and music schools; single-sex schools; and independent schools to which armed forces parents send their children. As a side note, a member of our armed forces said to me last week that, in their view, this policy was a breach of the military covenant.

This is not about a tax break, as Labour Members have said. Tax has never been levied on education in this country, so this policy is an additional tax on education. It is not a tax break. As other hon. Members have said, parents who make the sacrifice to send their children to the independent sector are saving money for the state sector.

Across my constituency of Farnham and Bordon, including Haslemere, Liphook and the surrounding villages, we are lucky to have 11 excellent independent schools that cater both to junior and to senior pupils. But unfortunately, only last Friday we discovered that one of those schools will close at the end of this academic year. The Royal school in Hindhead has been a cornerstone of education since 1840. It was formerly the Royal Naval school, and was specifically set up to educate girls—the founder had the ambition for girls to become independent members of society, and it was a pioneering school in that effort.

As other hon. Members have said, single-sex education has worked wonders for girls in terms of not only their education but their social mobility. The school became co-educational more recently but, as my hon. Friend the Member for South West Hertfordshire (Mr Mohindra) said, this is a real problem. I recognise that the school had ongoing financial difficulties, but it is deeply unfortunate that the Labour party’s policies on low-fees schools—those that charge around £3,000 per term—seem to have been the final blow to the school’s long-standing viability.

The Royal school has been not only a significant education institution for generations of pupils but a key part of the fabric of our community, employing people and helping the state sector with areas where it cannot produce. I take this opportunity to express my sincere gratitude to its dedicated teachers and staff who have worked tirelessly over the years, and to acknowledge the sense of loss felt by all of us in the Haslemere community. However, it is equally important to highlight the profound impact that the closure will have on the parents and families who are now faced with the difficult task of finding alternative provision.

Mr Chancellor, a single father of an adopted child, spoke to my office only this morning. He took on the financial strain of a fee-paying place at the Royal school to allow him to drop his child at school and know that, between the hours of 7.45 am and 5.30 pm, his child would be cared for, fed and looked after. That allowed my constituent the flexibility of extra time to work on his small business. That is the sort of impact there is on the hard-working local people the Labour Government profess to want to support. Families such as Mr Chancellor’s will either have to seek places in other independent schools or, regrettably, be forced to turn to an already overstretched and underfunded mainstream education system.

Although Mr Chancellor has commended the work of Surrey county council admissions team—who were also left in the dark about the school’s closure—there is clear anxiety for parents whose children’s fate is currently unclear. State schools across Farnham, Bordon, Haslemere and Liphook are already bursting at the seams. The fees charged by independent schools are often only a quarter, or even perhaps half, of the cost of state school provision per pupil. That has meant that for decades independent schools have taken huge strains from the state system in educating a percentage of pupils from nursery age until they are young people.

Last October, following a meeting I organised in my constituency with the then shadow Chancellor—my right hon. Friend the Member for Godalming and Ash (Jeremy Hunt)—and my right hon. Friend the Member for East Hampshire (Damian Hinds), I wrote to the Department for Education and the Treasury. The Exchequer Secretary’s reply emphasised that the policy was supposedly forecast to raise around £1.8 billion, but realistically, even if that were true—the Opposition dispute that heavily—that is a mere drop in the ocean for Government spending, particularly when TaxPayers’ Alliance research reported that the policy comes at a net loss for the Treasury, as state spending has been forced to stretch per capita to facilitate 35,000 pupils now expected to be educated in the mainstream schooling system. Last week, Surrey county council admitted to me that it does not have enough state school places to accommodate children transferring to state schools. When will the Government understand that these policies are crippling local authorities that are trying immensely hard to cope with the volume of displaced children?

It is not just about the fact that there are not enough places in the state sector. My right hon. Friend the Member for East Hampshire will know all too well that Alton Convent school in his constituency closed last year. During the general election campaign, I knocked on the door of a gentleman whose children had just got a place at that school, only to find that they now would not have it. But they could not get a place in the local state school because he had not sent his children to the local junior feeder schools. He would not have been able to get a place at the local school even if there had been one.

In my constituency, no group has been more profoundly affected by the Government’s damaging policies towards independent schools than the parents and families of children with special educational needs and disabilities. The closure of the Royal School and the narrowing of available educational options serve only to exacerbate the already significant challenges faced by these families.

Across my constituency, we are fortunate to have three special schools: Undershaw, Pathways and More House. Since my election, I have met multiple headteachers, including Jonathan Hetherington, the headteacher at More House, a renowned SEND school for boys in Frensham.

Only this morning, I attended a meeting with 25 parents from the Last Wednesday SEN support group in Farnham. Because Wednesdays are not great for Members of Parliament, they were charitable enough to change their name to “First Monday” this week, just for me. I joke, but one lady was in tears this morning about the impact that this spiteful policy will have on her child. Many will be forced to navigate a new school and new academic curricula, all while receiving little to no support and without a formal education, health and care plan.

Some of my constituents, across both counties—Surrey and Hampshire—are having to wait 24 months to receive their EHCPs. Between 2019 and 2024, the uptake of EHCPs increased by 63% in Surrey and 93% in Hampshire —both well above the national average. When he responds, can the Minister tell us what is being done, and what conversations he is having with the Department of Health and Social Care and the Department for Education to expedite that process?

In my local area, I am genuinely concerned about the fact that 17% of independent school pupils receive SEND support, but only 6% of them have a formal EHCP. I want to quote the Prime Minister, who shared the Government’s supposed plan for SEND pupils who do not have an EHCP, or who are in the process of acquiring one. In June, the Prime Minister told LBC listeners:

“Where there isn’t a plan, then that exemption doesn’t apply.”

So there is no assurance for those children and those parents. I did not receive any assurance in last week’s debate on SEND education support, so I ask the Minister to confirm that the 93,000 children in the independent sector who receive SEND support but do not have a formal EHCP will not be included at all in the SEND education support plans, as the Prime Minister seemed to outline in June.

Increasing VAT on independent school fees to 20% is not just a fiscal policy; it is a direct assault on the educational choice and social mobility of our constituents. This policy threatens to attack thousands of students in an already strained system, undermining the very fabric of our diverse educational landscape. The influx from the independent sector will exacerbate existing pressures, leading to larger class sizes and diminished resources for all.

Is this really the legacy that this Labour Government want to leave: a society in which educational diversity, which leads to educational excellence, is sacrificed at the altar of a misguided and malign fiscal policy fuelled by class envy? I urge the Minister to reverse this punitive tax and champion a system that upholds choice, fosters excellence and truly invests in the future of every child.

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[The Parliamentary Secretary to the Treasury (Torsten Bell)]

It is a pleasure to serve under your chairship, Mrs Lewell-Buck, for this debate secured not by an hon. Member, as is often the case, but by public petitioners, including some who are present in the Public Gallery. The public paying attention to an issue is good grounds for it being debated. I also thank the hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont) for introducing the debate—also, for closing it shortly—and all hon. Members who have spoken during it.

There are lots of things that are not common ground on this issue, as I will come on to, but I will start by noting that we are all motivated by the same determination to support the aspirations of every parent in the UK to get the best education for their children. In that context, we should all congratulate the hon. Member for Twickenham (Munira Wilson) on her good news and agree with my hon. Friend the Member for Ealing Central and Acton (Dr Huq) that we all know people who have made a wide range of decisions about the educational choices for their children and that no one here is judging other parents’ choices.

The best education for children is also what motivates the Government to break down barriers to opportunity to ensure that every child has access to high-quality education—and every child includes the 94% of children who attend state schools. The reforms to VAT and business rates that we are debating will raise about £1.8 billion a year; I will come on to the questions about the costing shortly. That will help to improve state education.

In the autumn Budget, the Government announced a £2.3 billion increase to the core schools budget, and it is to deliver such commitments—not for any other purpose—that we have made the tough but necessary decisions that we are debating today. The hon. Member for Harborough, Oadby and Wigston (Neil O’Brien) called for even larger increases in spending on schools, but it was noteworthy that he did not set out the means by which such increases would be paid for.

I will briefly outline the policy changes that the Government are making, before turning to the important issues that hon. Members have raised during the debate. Since 1 January, education services provided by private schools have been subject to VAT. While private schools are now required to charge VAT, they are also able, as has been discussed, to recover the VAT that they incur when purchasing goods and services. The Government are also legislating to remove the eligibility for charitable rate relief from private schools that are charities in England. This is intended to take effect in England from April; it is already the case in Scotland and is being taken forward in Wales.

As I have said, the goal of those changes is to provide additional funding for the state education sector. However, I fully recognise that they will increase the cost for some parents and carers who have chosen a private education for their children. This change is necessary, but I am not hiding from the reality that any rise in costs is unwelcome for those affected by them.

[Gregory Stafford]

We disagree on whether this change is going to raise any money. However, I want to understand the policy point being made here, namely that to raise the money to fund the state education sector, the Government have decided to raise tax on the independent education sector. Why did they decide to raise money from the education sector rather than from any other sector, or from any other rich individuals?

[Torsten Bell]

I thank the hon. Member for his intervention. I might be a bit more sympathetic to Conservative Members focusing on this change if I saw them supporting any of the revenue measures that we have had to take to start turning around public services and improving the public finances. They oppose this measure, they oppose changes on national insurance, and they oppose cuts to the winter fuel payment and the rest. Now, I will make some progress.

On the timing of implementation, as my hon. Friend the Member for Paisley and Renfrewshire North (Alison Taylor) pointed out, this change was clearly signposted in Labour’s manifesto. Also, His Majesty’s Revenue and Customs is working hard to support schools through this change by providing bespoke support to schools alongside comprehensive guidance on how they can register for VAT. A dedicated mailbox for queries has also been made available to schools and their tax representatives.

Several hon. Members have discussed the impact that the changes will have on pupils and their families, and on state schools and private schools more widely. Many Members have understandably returned to questions that were addressed in the tax information and impact note, or to the Government’s response to the consultation that was conducted between July and September last year.

The issue of costings was raised by the hon. Member for Boston and Skegness (Richard Tice). The underlying methodologies used were certified by the independent Office for Budget Responsibility, and the costings take into account exactly the issues that he raised about behavioural responses.

On the issue of pupils moving schools or sectors, we recognise that there will be some movement of that kind. However, we believe that the number of students who will switch to the state sector represents less than 0.5% of all UK state pupils, so we are confident that the state sector will be able to accommodate any change.

The hon. Member for Farnham and Bordon (Gregory Stafford) raised the issue of school closures. The evidence suggests that around 50 private schools close each year during normal business. Although we would expect some additional closures, we have not seen any evidence to revise our view that the overall number of extra closures will be modest—perhaps something in the order of 100 schools over three years.

We also recognise the concerns that have been raised about the impact on pupils with special educational needs, including by the hon. Member for South West Hertfordshire (Mr Mohindra). That is why we will ensure that those pupils with the most acute additional needs, whose needs can be met only in private schools, will be unaffected. For example, in England, where attendance at a private school is required by a child’s EHCP, that child’s parents or carers will not pay VAT and councils supporting them will be able to reclaim the VAT. In Wales, post-16 provision of this kind is funded by the Welsh Government rather than by councils. They cannot reclaim VAT in the same way, so ringfenced funding will be provided until 2028-29, when responsibility will pass to local authorities.

More broadly, we are committed to transforming the system of supporting children and young people with SEN, because it is badly needed, as the hon. Members for Esher and Walton (Monica Harding) and for Tiverton and Minehead (Rachel Gilmour) clearly set out. The Budget announced a £1 billion uplift to high needs funding in 2025-26, providing additional support for more than 1 million children in the state sector with special educational needs and disabilities.

The hon. Members for Surrey Heath (Dr Pinkerton) and for Windsor (Jack Rankin) raised the issue of service families, but I fear they downplayed the increase of more than 12% in the continuity of education allowance from the Ministry of Defence. The issue of faith schools was also raised. They are an important part of our educational landscape, but the argument that private faith schools should be exempt from these changes is not compelling. An exemption would reduce the revenue available for pupils in state schools, including those of faith, and would be inconsistent with this Government’s strong view that a state education is suitable for children of all faiths and for children of no faith.