VAT: Independent Schools

Richard Foord Excerpts

Tuesday 8th October 2024 Commons Chamber

[Alicia Kearns]

I am so pleased that the hon. Gentleman is repeating the lines that the Whips gave him for this morning’s Westminster Hall debate. I was not talking about SEND. It is deeply discourteous to the House to intervene on a Member with a point that is completely separate from the point that they are making; he will come to learn that in time.

As I said, the entire county of Rutland has zero available state school places for years 10 and 11. That means children will now not be able to get their education. I ask the Minister directly: what would he say to 16-year-olds who are to be forced out of their school in January with no alternative place to go and nowhere to do their studies? This is a vindictive policy, and it is absolutely wrong.

I want to touch on the contribution to local rural economies. In Rutland, education is the biggest single employer. As I said, we have 10 schools across 11 sites. In 2022-23, one secondary school in Rutland and Stamford contributed £50 million to UK GDP. It contributed £30 million to local GDP, £14 million was paid in tax to HMRC, and savings of £5.5 million were made to local schools through school places that were not taken. Some 70% of this school’s expenditure is on staffing and, with the imposition of VAT, it is forecast to make a loss for the first time ever. Jobs are being lost. When 70% of the budget is staffing, what does a school do? Cuts have to be made in people’s jobs. More than 2,000 people locally are employed directly by independent schools, and that is not to mention those working in the supply chain, whether driving buses, providing food or flowers, or working in cafés and shops. Rural economies do not have many options at the moment, and independent schools are a bedrock for them. The economic impact of these jobs on rural communities should be considered in an impact assessment, but I very much doubt one has been carried out.

Looking at the national economic picture, the Adam Smith Institute concluded that every child in independent schooling contributes £28,000 to the public finances. The average £2,700 saved on VAT makes a return to the taxpayer of 1,040%. If 5% of independent school pupils leave, the Government will generate £1 billion through this policy. If 10% to 15% of pupils leave, the Government will generate no revenue. If 25% of pupils leave, the Government will lose £1.58 billion, because they are doing something vindictive and wrong.

[Richard Foord (Honiton and Sidmouth) (LD)]

Does the hon. Lady agree that people putting their children through independent school are paying twice? They pay once through their fees and once through income tax. If they are removed from the system, that will mean less money for education.

[Alicia Kearns]

The hon. Gentleman is absolutely right. These parents have already paid into the state school system as if their child were going to state school, and they are net contributors to the local education system and the tax system, because they have chosen to ease the pressures on state schools by taking their child out. This is basic economics, and that is why the Government do not understand it.

Independent schools make a huge and optional contribution to the national teachers’ pension scheme. Some could choose to mitigate their increased costs from the imposition of VAT by opting out of the TPS. What assessment has the Minister made of the impact that this would have on the financial viability of the TPS?

Additionally, a number of independent schools in my constituency provide homes for children in foster care who would otherwise have no stability. These are the kind of schemes they will have to stop. That will again result in increased costs and impact on the state sector, which will have to pick these things up.

It is a long-standing international norm to exempt education from sales taxes. Nurseries, universities, tutors and other education providers are not included in Labour’s proposed VAT increase, although as per my intervention on my right hon. Friend the Member for East Hampshire (Damian Hinds), there is a toddler tax, which any parent with a five-year-old child in nursery school will suddenly find themselves paying. It is ironic that the Labour party says that it believes in free university education for all, yet many who take up apprenticeships or go into work will not go to university. Why does Labour think that all of us who do not go to university should pay for other people to go to university, but somehow, when it comes to this issue, we should pay for others?

There is also a question about the legality. Senior lawyers, including Lord Pannick, have argued that this proposal will breach European convention on human rights rules on educational choice and access. What assessment have the Government made of the legality of this policy?

I am already seeing the damage of this policy in the heartbreaking dilemmas facing families who have contacted me for help. For some pupils halfway through their exam years, there are no places in the state system. The requests are clear: the Government must delay the implementation until at least the end of this school year, so that children are not disrupted in their education. We need to exempt those pupils in years 10 to 13, so they can take their exams without the added pressure of a school move. We need to help local authorities to boost EHCP assessments rapidly, and we need to undertake a regional assessment of available state school places to exempt pupils who live in areas with no availability, such as Rutland.

I understand that the Labour party wants to make an ideological attack on education and choice, but I urge Ministers to sit down and think this through. The richest will continue to attend private schools and absorb the increased costs, while families who sacrifice day after day will suffer. For those who are interested, I did go to my local comprehensive, and my children go to their local comprehensive, but I think it is right that we support choice for all. Tony Blair once said, “Education, education, education.” I urge the Minister to listen to the ghosts of Labour past and to do what is right for all children at both state and private schools, not what is right for reasons of ideological dogma, which is what the Labour party is currently doing day after day.