Finance Bill

Debate between Nesil Caliskan and Damian Hinds

2nd reading
Wednesday 27th November 2024 Commons Chamber

[Nesil Caliskan]

I thank the right hon. Member for inviting me to intervene. I remind him that the IFS has confirmed that there is enough capacity in the state sector for the transfer of pupils. Also, on the point of special educational needs—

[Damian Hinds]

Thank you.

[Madam Deputy Speaker (Caroline Nokes)]

Order. The right hon. Member will know full well that it is for me to decide if the hon. Lady’s intervention is too long.

[Nesil Caliskan]

The right hon. Member may also recognise that the Government have been clear that when special educational needs are being met in the private sector, VAT will not apply.

[Damian Hinds]

On three counts, I am afraid that is incorrect. First, it does not cover everybody with special needs at a private school. Secondly, the IFS has not said that there is ample space in state schools, nor could it possibly know that. Thirdly, and most importantly, the point on which I was heckled, and on which I invited somebody to intervene, was a completely different one. My point was that unlike in quite a large number of countries, here there is no tax break for those using independent education providers. Everybody contributes towards state education through general taxation; if we take up a private school place, that contribution does not reduce.

In the modelling that goes with the Finance Bill, the Government say that they expect a little over £1.5 billion to be raised from the measure in maturity. We do not know the detail of the modelling and how robust the analysis is. However, I agree, intuitively, with the Treasury that a small part of the effect will be felt immediately in January, but that the effect will really start from September 2025. It will be felt gradually, through some children leaving the independent sector; the bigger effect will probably be from those who do not start in the independent sector in the first place, or who do not start their next phase of education in the sector.

I am not totally clear from what the Treasury has published whether it factors in all the effects of the change. It obviously factors in families who are directly priced out of the independent sector, but what about those who are indirectly displaced, because they were at a school where a number of other families were priced out and the school had to close? Does it factor in the higher number of education, health and care plan applications that will be made, and the much higher than average per-place cost that the state will have to meet for those displaced?

I am also unclear whether the Treasury’s analysis looks at all the effects on independent education cumulatively. Yes, there is the VAT, which is in the Finance Bill, but there are also a number of other measures being taken this year that materially affect the cost base of independent schools, and that is likely to be reflected in fees. They include the increased contribution to the teacher pension scheme; business rates changes, which affect about half of independent schools; and the massive hike in employer national insurance contributions, which will affect so many sectors.

All those are transfers from the independent state sector to the Exchequer, so the real increase in the cost base for that sector will be considerably more than 20% over the course of the year. In the Minister’s summing up, I would love her to tell us what assumption was made about the total average price increase. Whatever it was, the Government calculate that, in the policy’s maturity, 37,000 children will be displaced from the independent sector, and of those, 35,000 will go to the state sector. Ministers say, “Don’t worry; there are loads of places available in the state sector.” In fact, the hon. Member for Barking (Nesil Caliskan) suggested that a third party had said that as well, and the Exchequer Secretary said it again in his remarks. He said that we are talking about 0.5% of the total population in state schools. It is useless to have places available in primary schools in inner London if that is not the age group of people leaving the independent sector. The effect will be uneven across the country, and need is concentrated largely in secondary schools and sixth forms.

There are plenty of places where even a small number of children being displaced from one sector to the other could have a big effect on the state school system. What discussions have Ministers had with colleagues, and with councils in Salford, Stockport, Sale, Bury, Bedford, Bristol and so on? I could name considerably more. What contingency plans are in place?