Non-Domestic Rating (Multipliers and Private Schools) Bill

Iqbal Mohamed Excerpts

2nd reading
Monday 25th November 2024 Commons Chamber

[Vikki Slade (Mid Dorset and North Poole) (LD)]

Since becoming a Member of Parliament earlier this year, I have been heartened every time I have heard Ministers confirm that business rates reform is planned. I know what impact business rates can have on town centres through my work as a council leader and my time owning and operating a high street business for nearly 14 years in my constituency of Mid Dorset and North Poole—I do not any more, so I do not need to declare that as an interest. But that was why I was so disappointed to read the Bill, which simply tinkers around the edges and does nothing to fix the foundations of our town centres or about the inequity of business rates between physical and online businesses.

I welcome the higher rate aimed at large warehouses, but it does not go far enough. Those online businesses have sucked the life out of our high streets, and if what the Bill proposes is the extent of the change, it will not support anyone.

[Iqbal Mohamed (Dewsbury and Batley) (Ind)]

It is not just favourable business rates that benefit online businesses; they can use tax loopholes to avoid paying the taxes that small businesses pay as a proportion of their profits. Does the hon. Member agree that the Government have other mechanisms for raising such funding?

[Vikki Slade]

I agree with the hon. Member and thank him for his intervention. I was just about to say that we need a proper tech tax on online businesses, which should be ringfenced to stay in local communities, where councils could use it to support town centres in a way that works for them.

Many councils are not able to keep the business rates accrued in their areas; they are set externally and sent elsewhere to support other communities. That is not understood or even appreciated by local communities. I cannot remember the number of times that, as a local government leader, I was shouted at by people saying, “You’re making all that money as a council.” People think that the councils own the businesses and the properties and that they set the rates. The fact is, they are set elsewhere, and councils do not have the power to provide discounts without having to plug the gap not just for their own areas, but for what they send to Government. That is what real reform would look like.

--- Later in debate ---

[Iqbal Mohamed (Dewsbury and Batley) (Ind)]

I rise in support of the majority of the amendment tabled by the Liberal Democrats. Reducing the high street business rates relief from 75% to 40% will devastate the small businesses on my high streets in Batley and Dewsbury, and many of them will not be able to absorb the costs, resulting in job losses and closures. My primary topic, however, will be the implications of the Bill for private schools that do not draw their students from the richest families in our society.

When I spoke out against the introduction of VAT in previous debates, I was accused of not wanting the best for 94% of students in our country. I absolutely love state schools, and I visited Boothroyd primary academy during UK Parliamentary Week last week. The children were so excited to meet me, but I think I was more excited to meet them and their teachers. I also visited a private faith school that charges, I believe, less than £3,000 per pupil and spoke to the pupils there. There are private schools that serve poor working-class families, and there is a reason why these families have chosen to send their children to such schools. Parents would be penalised if we removed that choice. The other challenge that I have in my constituency is that schools are bursting at the seams, with very few, if any, places available to parents. Many children are going to their second or third-choice schools, away from their catchment area.

Let me come back to the removal of private schools’ charitable status, which is an extra burden on top of charging VAT at 20%. Students at such schools overwhelmingly come from low-income families, and this reality often gets lost in the debate about private schools. We are all very aware of their elitist nature. With average fees of over £15,000, rising to £50,000, they service only the children of the wealthiest. It is not the children of the wealthy, however, who attend independent schools in constituencies such as Dewsbury and Batley, where faith schools are often the only option for families who cannot get their children into local state schools due to demand, or where state schools cannot meet their religious and spiritual needs. Those families are overwhelmingly from low-income backgrounds, and the removal of business rates charitable rate relief from private schools will result in a further increase in their fees, in addition to the proposed VAT. For wealthy families, that might not be a problem. For the families in my constituency, it is a major problem.

In addition, the measures will pose a risk to the future viability of many private schools, which often charge just enough to exist. I ask the Government to consider that class is a reality in the discussion about private schools, but not in the way it is commonly presented. In many communities, faith-based schools are not the preserve of the wealthy; they overwhelmingly educate the children of ordinary working-class families. The Government’s impact assessment of the proposals shows that the average cost, per school, of the removal of charitable status ranges from £27,000 to £179,000 a year for faith schools.

This issue is more complicated than measures to raise tax, and it feels to me that some important subtleties have been lost in the debate. For many of my constituents, faith schools not only provide high-quality education; they also provide children of faith with the relative freedom to express their faith and identity without fear of stigma or recrimination. I feel that none of this reality was properly considered when we discussed VAT on private schools, and now, through abolishing business rates charitable rate relief for private schools, that imbalance continues. The Government have an opportunity now to redress that imbalance, and I request that consideration be given to extending the exclusions for special needs schools to include faith-based schools that draw their students from low-income backgrounds. One easy solution would be to exempt from VAT schools that charge below per-pupil state school allowance, and allow them to retain their charitable status.

--- Later in debate ---

[Jim McMahon]

That really was not worth giving way for. I have literally just said that 1 million properties will be supported against inflationary increases next year. The 40% will continue, with a cap of £110,000. That is exactly what this Bill is intended to do. If the hon. Gentleman supports it, he can join the Government in the Aye Lobby and vote for it.

We know from businesses that the current scheme of discretionary relief does not provide the certainty needed. That is why the Bill will enable a permanent tax cut for retail, hospitality and leisure businesses from 2026-27 through new lower multipliers, ending the year-by-year uncertainty that the previous Government hardwired into the system. That is doing what businesses have been calling for. That rebalancing—from out of town to in town, from online to on street—is exactly what people have called for in communities and in business, and Opposition Members know it. Their frustration is that they did not do it in the 14 years that they had in office. It is down to us to take the steps that are needed in government now, and we are happy to do so.

The reasoned amendment raises concerns about the impact on schools in the state sector. I can assure the House that protecting and improving state education is at the forefront of the Government’s mind. In fact, we estimate that only 2,900 more pupils will enter the state sector as a result of the removal of the business rates relief for private schools. Let us be clear about what that means in reality: that goes down to about 300 a year. In any given year across England, 60,000 pupils will move between schools; this is 300. We need to keep that in context, because we have heard a lot of scaremongering about the transfer, but that is what the evidence says. That evidence is placed in the House of Commons Library, in case Members want to take time after this debate to go and look. There might even be enough time to find the documents before the vote if they want to bring themselves up to speed.

Importantly, this is about providing much-needed investment in the state school sector. Just how many parents say, “We need specialist support for SEND, because the mainstream provision is not adequate”? How many parents—by their own admission, among Opposition Members—choose to pay for private education because they do not have faith in mainstream provision? Despite what Opposition Members have said about the glory years of the past 14 years, the truth that parents and pupils on the ground feel is very different, and they know it. We have to repair mainstream provision so that parents and pupils can go with confidence to their local school, knowing that they will get the support that they need—support for all pupils, not just some.

Several hon. Members have mentioned the impact on faith schools. I want to offer some comfort. Of course we value and understand parental choice, but based on the evidence submitted through the HMT consultation, as well as the analysis undertaken by the Department for Education on removing the charitable rate relief, it is not apparent that private faith schools will be affected by this measure any more than non-faith schools. There is no evidence of disadvantage.

[Iqbal Mohamed]

Will the Minister give way?

[Jim McMahon]

I want to make progress in the time that I have, and to wind up within the 10 minutes.

The key point is that all children of compulsory school age are entitled to a state-funded school place if they need one, and all schools—and they know this—are required to follow the requirements of the Equality Act 2010 relating to British values and to promote an environment that encourages respect and tolerance towards families of all faiths and none.

A number of Members have rightly mentioned SEND provision—it has been a significant part of the debate, for understandable reasons. We have ensured on the face of the Bill that private schools that are charities and “wholly or mainly” provide education for pupils with education, health and care plans remain eligible for business rates charitable rate relief. Furthermore, private schools that benefit from existing rate exemptions for properties that are wholly used for the training or welfare of disabled people will continue to do so. Taken together, we believe those policies mean that most private special educational needs schools will not be affected by these measures at all.

We recognise that some pupils with special educational needs and disabilities will be in private schools, but without local authority funding in place, as it is judged that their child’s needs can be provided for within the state sector. Of course, parents will still be free to choose whether to be in the state sector or to remain in the private sector—that is a very important point to make. Local authorities aim to process all education, health and care plan applications in time for the start of the next school year, but in special cases, the local authority is able to prepay one term’s fees if the process is not complete. Likewise, some private schools will forgo the first term’s fees for pupils who are expected to receive their education, health and care plan in the future.

Turning to high streets, the Government are wholly committed to rejuvenating our high streets. We want to support the businesses and communities that make our town centres successful. That is why through this Bill, the Government intend to introduce permanently lower rates for retail, hospitality and leisure from 2026-27, in order to protect the high street. That tax cut will be fully funded and sustained through a higher tax on the most expensive properties—the 1% of properties that have a rateable value of £500,000 or more. The new tax rates will be set out in next year’s Budget to factor in the business rate revaluation outcomes and the broader economic and fiscal context at that time.

We were clear in our manifesto that we would look at the business rates system and support our high streets, and we meant it. We know that our high streets and town centres are the beating heart of our communities, but over the past 14 years, they have struggled to keep their heads above water. Think about all those household names that have gone to the wall—that are a thing of the past, not the future. Think about all the banks and pubs that have closed, and about the shutters that have come down on shop premises that were once the lifeblood of where people live. The previous Government had 14 years to get this right, but they oversaw the decline and decimation of our high streets. People feel that in their hearts, because town centres are more than just a place to do business; they are a place for a community to come together. That is something the Tories never understood when they were in government, but it is something that this Government absolutely understand.

With the leave of the House, I thank all hon. Members who have contributed to this important debate. This Bill is the first step on the road to transforming the business rates system. The measures within it will provide certainty and support to our vibrant high streets, enabling the delivery of a permanent tax cut that is sustainable and that finally levels the playing field between the high street and online. The Bill will also help break down barriers to opportunity, supporting all parents to achieve their aspirations for their children. We need to bear in mind, of course, that the vast majority of children in this country—over 90%—are in state schools. This investment will see them given the support that they need and deserve, and that, frankly, they have waited a long time for. I commend the Bill to the House.

Question put, That the amendment be made.

The House proceeded to a Division.