Independent Schools: VAT and Business Rates Relief

Munira Wilson Excerpts

Monday 3rd March 2025 Westminster Hall

[Munira Wilson (Twickenham) (LD)]

It is an absolute pleasure to serve under your chairmanship, Ms Lewell-Buck. I thank the hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont) for introducing this debate and setting out the argument so eloquently. I also thank the almost 115,000 people who signed the petition, of whom 873 live in Twickenham.

I start by apologising to you, Ms Lewell-Buck, hon. Members and people in the Gallery if I have seemed a little distracted over the past 45 minutes. I have just found out that my daughter got her first choice of secondary school—a state school, I should say—for this September, so I have been a little distracted. All her classmates’ parents have been messaging to find out, and I was trying to communicate with my husband to let our daughter know that she will be going where she wants to go. Forgive me, but I thought it was quite appropriate to mention that, given that we are talking about schools and independent schools. I am proud that my borough of Richmond upon Thames has outstanding secondary schools—in fact, all of them are outstanding or good—and some of the best primaries in the country, but that is not necessarily the case everywhere.

It goes without saying that every person in this House, whatever their party affiliation, aspires for every child to receive an excellent education. Every child deserves the opportunity to reach their full potential, yet too many children are not being supported to achieve it. We Liberal Democrats believe in creating state schools that provide a rich curriculum together with rich extracurricular options—schools so high performing that parents do not feel compelled to send their children to the independent sector. That is why we set out an ambitious education offer in our manifesto last year; we see education as an investment, not a cost. However, as we all know too well, that is very far from the current reality of our state system. For too many children, our school system is just not working; too many are simply not getting the support they need and are entitled to, especially if they have additional needs.

Teachers and other school staff as well as school leaders are struggling with ever tighter budgets to hire and keep the staff they need, especially in maths and science, with crumbling school buildings, and with a SEND system that is utterly broken. Is it any wonder that many parents, for some of whom it is far from an easy financial decision, choose an independent education for their children? They want to invest in their children’s future in the same way that I argue the Government should invest in our children, yet it is in that context that this Government have decided to tax independent schools and penalise families for making that choice.

We Liberal Democrats oppose in principle the taxation of education, whatever form it takes—whether it is tutoring, higher education, nursery fees or music lessons. Even more, we believe this measure is counterproductive. Since the policy was announced, pupil movement out of the independent school sector has been three times higher than the Government predicted, with the fall being highest in transition years of year 7 and reception, at 4.6% and 3.9% respectively. The Independent Schools Council’s survey last year found that there were already 10,000 fewer pupils in independent schools. According to the ISC, this fall in numbers alone cost £92 million in state pupil funding, which is more than the Government will raise from business rates on independent schools that are charities.

The majority of independent schools are small: 40% have fewer than 100 pupils. With apologies to the hon. Member for Windsor (Jack Rankin), we are not talking about the Etons and the Harrows here. What I really struggle with in this policy is that, as others have said, it is not the very wealthy who will be impacted by it. The Minister will be very pleased to hear that I have met some rather wealthy people who have told me that they agree with the policy—but they can afford it; they can absorb the extra cost. It is especially the parents who never deliberately set out to secure a private education for their children, but felt forced to for various reasons, who are bearing the brunt and will be priced out. The impact of Labour’s policy is to make our private schools yet more elitist, which is what the Government are waging a campaign against. I think the right hon. Member for East Hampshire (Damian Hinds) made this very point.

I wish to talk about two groups who are particularly harmed by the Government’s policy. The first is families of children with SEND. As we have heard, there are in our independent schools almost 100,000 children with special needs who do not have EHCPs, and who, under this Government’s policy, are not exempt from VAT. Often, their parents opted for private schools as a last resort, after being continually failed by the state system and even rejected. This policy penalises parents for trying to do right by their children.

One family in my constituency came in tears to a surgery last year, after it was announced that this policy was going ahead and would be implemented in January this year. Their son was in a local state primary school, but his challenging behaviour, which had manifested as a result of his additional needs, which the school could not support, had put him at risk of exclusion. His parents made the very difficult decision to move him to a local private school, where he is now thriving. They are paying an extra £18,000 a year on top of the basic school fees for the additional support he needs to learn and thrive. All those costs—not just the basic fees but the additional support fees—are subject to VAT under the Government’s policy. They do not know how they are going to meet the cost, but they know that if their son goes back into the state sector and to the primary he was at, he will be at risk of being excluded. I ask the Minister: why are the Government punishing families such as these? Arguably, they have saved the taxpayer a lot of money in terms of not just the child’s schooling costs, but all the further knock-on costs that we know result from a child being excluded from school.

We all know that SEND provision in this country is utterly broken. Our local authorities and state schools are buckling under the demand, yet this policy threatens to place an ever-greater burden on the state SEND system, as parents are incentivised to battle the system for EHCPs—which many children probably could get if their parents tried hard enough—in order to secure the VAT exemption. Indeed, some parents of SEND children are simply being priced out of the independent sector and back into state schools, where the additional needs will need to be supported. I have repeatedly asked Ministers to monitor and report to the House on that particular impact of the VAT policy, and I ask again: will the Minister monitor and report on the impact on SEND provision for those children who do not have EHCPs and are not exempt?

The second impacted group that I will briefly touch on is military families. Statistics from the Boarding Schools’ Association reveal that the Government’s new policy will have an adverse impact on military families using the continuity of education allowance scheme. Under the scheme, parents must make a minimum 10% contribution to fees, but even with the Ministry of Defence’s recalculation in response to the Government’s policy, parental contributions will have to increase by a further 18% on average, rising from £14,000 to £17,000 for a child in senior school. As my hon. Friend the Member for Surrey Heath (Dr Pinkerton) pointed out, that will be unaffordable for many families, and will impact retention in the forces. Those serving our country should not be financially penalised for doing so, and we should endeavour to provide service families with continuity and stability. I hope that the Minister, alongside his colleagues in the Ministry of Defence, will make a clear statement on how the impact of VAT will be monitored for CEA families, and the criteria by which they will decide to make further changes. I hope they will also commit to reviewing the CEA over the longer term to ensure that families are protected from the impact of VAT, or exempt CEA families from VAT all together.

Aside from the two specific groups that I have talked about, who I think the Government have overlooked, I want to return to the wider principles. We Liberal Democrats would like to see independent schools routinely giving back to their community by way of recognition of the tax exemption they had previously benefited from, and that we believe should continue. Many of these schools already give back a huge amount to their communities through exemplary partnerships with local schools, where not only facilities but learning and experiences are shared between the state and the independent sector.

Independent schools ran over 9,200 partnerships in 2024; each school involved in partnership worked with approximately 11 state schools and with 403 pupils in those schools. Examples of those partnerships include sharing sports facilities, theatre spaces, specialist teachers, mentoring schemes, cooking schools, higher education support and debating clubs, as well as bursaries and scholarships. The Liberal Democrats want to see that become the norm for every independent school, but as my hon. Friend the Member for Esher and Walton (Monica Harding) pointed out, the VAT policy will mean that greater partnership work is the first thing independent schools cut back on.

In these debates, I have often referred to Hampton and Lady Eleanor Holles schools in my constituency, which have a brilliant partnership with a Reach academy in Feltham that is serving a disadvantaged community that has typically not had many children going into further or higher education. That school has seen its results soar and pupils accessing university and medical school as a result of the partnership. The headteacher of Hampton, Kevin Knibbs, said to me this morning:

“While it’s too early to identify the immediate impact of the Government’s policies on our schools…it is deeply regrettable and a missed opportunity that independent schools elsewhere in the country will simply be unable to replicate the Reach-LEH-Hampton partnership model due to the new tax regime. Moreover, the imposition of a tax on education will compromise our and other independent schools’ ability to provide transformative, means-tested free places that are such excellent examples of social mobility in action.”

I thought that was something that the Minister and his colleagues were all in favour of. We should be making the most of the benefits that independent schools can provide, opening them up to more children, not making them more exclusive and adding to the state system’s burden.

I am coming in to land now, I promise. The Government have dismissed the stories of families affected by this tax, choosing to prize numbers over human experience. I fear they are being driven by ideology, but I am perplexed as to why Ministers have been hellbent on this particular policy, which hits parents’ pockets directly, and yet they have resisted my party’s attempts to amend the Children’s Wellbeing and Schools Bill to ensure that private equity companies that are profiteering from private special schools are not being subjected to the profit cap that this Labour Government are imposing on children’s homes and fostering agencies that are often run by the same companies. They are making eye-watering profits, with margins of more than 20%, which local authorities have to pay. The Labour Government do not want to do anything about that, but they are attacking parents who want to send their kids to private schools. It makes no sense to me, and I hope the Minister will address that point.

I understand that the fiscal situation right now is hard. Unlike the Labour party, during the election campaign my party laid out a whole host of areas where taxes could be raised fairly in order to invest in our children’s education and our country’s future. Whether that is properly reforming capital gains tax, reversing the Conservatives’ tax cuts for bankers or increasing the tax on big tech companies, we are ambitious for every child. We want to put a dedicated mental health professional in every primary and secondary school, to expand free school meals for all children in poverty and to ensure that those children who have fallen behind are supported through tutoring. That vision can be realised without penalising parents who are choosing to do what every parent naturally wants to do: to invest in their children’s education and future.