Taxes

Sarah Olney Excerpts

Tuesday 15th July 2025 Commons Chamber

[Sarah Olney (Richmond Park) (LD)]

Let me be clear: the legacy left behind by the last Conservative Government is one to be ashamed of. Their incompetence in governing left schools and hospitals crumbling, social care cripplingly underfunded, and record levels of sewage in our lakes and rivers. Their record is a dispiriting picture of low growth, high interest rates and record levels of inequality.

We know that this Government inherited a mess, and we know that the cause of that mess was years of reckless economic mismanagement, but that cannot be allowed to serve as cover for measures that damage business or cause suffering for the vulnerable in our society. The decisions taken by this Government at the autumn Budget have not worked. The national insurance jobs tax will damage small businesses, lower people’s living standards and undermine the Government’s own ambitions for growth. People endured years of Conservative mismanagement, which is why this new Government should be doing far more to grow our economy, create new jobs and improve living standards.

The Liberal Democrats acknowledge that the Government had tough decisions to make. However, instead of raising national insurance, cutting disability benefits and cutting departmental budgets even further, they should be taking bold and ambitious steps to grow our economy, which is the best way to raise tax revenue and boost living standards. That is why we have been calling on the Government to ignore the scaremongering from those on the Conservative Benches, and urgently negotiate a new, bespoke UK-EU customs union.

On taxation, as set out in amendment (b), tabled by my hon. Friend the Member for St Albans (Daisy Cooper), we all know that the Government are desperately looking for ways to raise revenue. I encourage Treasury Ministers to take a look at the measures set out in last year’s Liberal Democrat manifesto, which would ensure that revenue is raised in a fair way, taking into account the huge amount of economic inequality that, sadly, we see across the United Kingdom.

This huge inequality in our country threatens to rip our social fabric apart, which is why the Liberal Democrats have proposed a better way: raising revenue fairly, doing so practically and tackling inequality; increasing taxes on some of the biggest and wealthiest corporations, including the big banks, by reversing the Conservatives’ tax cuts for banks; ensuring that the wealthiest people in the world who are doing business here are taxed effectively, by raising the digital services tax from 2% to 10%; fairly reforming capital gains tax in a way that cuts tax, or keeps it the same for the vast majority, while ensuring that the wealthiest 0.1% cannot avoid paying their fair share; and doubling remote gaming duty to ensure that gambling companies pay their fair share. Those steps could happen immediately, so I hope Ministers, who are keen to fill a fiscal hole, might follow our advice.

The previous Government did so much damage to our high street businesses, but the Labour Government’s national insurance jobs tax has only made things even harder for them and their workers. High street businesses are the beating heart of our economy at the centre of our local communities, and they create the jobs that our communities rely on. The changes to employer national insurance contributions announced in the autumn Budget are an unfair jobs tax which will have highly damaging impacts across many sectors: on social care providers; on GPs; and on the hospitality sector, which has been hit by an extra £3.4 billion in annual costs through the cumulative impact of the changes announced in the autumn Budget. The Liberal Democrats voted against the changes to employers NICs at every opportunity. I once again urge the Government to scrap those measures.

As the motion looks to examine the causes of the economic challenges faced by people and businesses across the country, a perhaps surprising omission is the ongoing disastrous damage caused by the Conservatives’ pitiful Brexit deal. The appalling agreement negotiated by the last Conservative Government has been a complete disaster for our country, particularly for high street businesses, who are held back by reams of red tape and new barriers to trade, costing our economy billions in lost exports. The dismal picture of the financial impact of their terrible Brexit trade deal is becoming increasingly clear. A recent survey of 10,000 UK businesses found that 33% of currently trading enterprises experienced

“extra costs directly related to changes in export regulations due to the end of the EU transition period”.

Small businesses have been particularly badly affected, with 20,000 small firms stopping all exports to the EU. And a recent study has found that goods exports have fallen by 6.4% since the trade deal came into force in 2021.

The Liberal Democrats welcome the steps this Government are taking to rebuild our relationship with the EU, but I urge them to recognise that this should only be a first step towards negotiating a bespoke UK-EU customs union. Independent analysis has shown that a closer trading relationship with the EU could boost GDP by 2.2%. That would bring in roughly £25 billion of extra tax revenue every year, which would be crucial for fixing the public services which the Conservative party left broken.

More broadly, as we look at measures which would ease the pressure felt by so many businesses and boost the economy as a whole, we continue to call on the Government to introduce vital reform to the business rates system. In 2019, the previous Conservative Government promised a fundamental review of the business rates system, but they failed to deliver it. Meanwhile, the current Government pledged to replace the system in their manifesto, but still no action has been taken. The current system penalises manufacturers when they invest to become more productive, leaves pubs and restaurants with disproportionately high tax bills, and puts local businesses at a disadvantage to online retail giants. The Liberal Democrats have called for a complete overhaul of the unfair business rates system and its replacement with a commercial landowner levy that would shift the burden of taxation from tenants to landowners. Our proposals for fair reform would cut tax bills, breathe new life into local economies and spur growth. Equally important, it would provide long-term certainty for businesses, which is what everybody across the UK wants.

On the Liberal Democrat Benches, we know the extent of the challenges the Government faced when they came into office. We acknowledge that they inherited a dire economic landscape—challenges now exacerbated by an unreliable actor in the White House and an aggressive Russia—but that cannot be an excuse for the mistakes the Government are making. They must take bold action to boost our economy. As such, we support the calls in today’s motion to scrap the national insurance jobs tax and reverse the changes to agricultural property relief. People across the country are still struggling with the cost of living crisis, just as small businesses remain burdened with sky high energy prices, now compounded with an unfair jobs tax and an unfair business rate system.

The Liberal Democrats will continue to urge Ministers to go further and act with more urgency, investing in skills by reforming the apprenticeship levy, properly funding social care and boosting growth through negotiating a bespoke UK-EU customs union to give our economy the boost it so desperately needs.

Oral Answers to Questions

Sarah Olney Excerpts

Tuesday 1st July 2025 Commons Chamber

[Rachel Reeves]

It was great to be with my hon. Friend in Warwickshire just a couple of weeks ago to welcome some of the investment, through our industrial strategy and our spending review, which will turbocharge the British economy, creating more good jobs and paying decent wages in all parts of the country, including in Warwickshire.

[Sarah Olney (Richmond Park) (LD)]

Last week, ahead of the launch of its ethnicity code, the Lending Standards Board announced it would be closing, following the withdrawal of support from major high street banks. This was going to be a groundbreaking step towards tackling the barriers that ethnic minority business owners face in accessing finance. What steps will the Government take to ensure that the ethnicity code is implemented, supported and scaled, so that its principles are embedded across the financial sector?

[Emma Reynolds]

I am aware of the situation. I reassure the hon. Lady that the Government are committed to ensuring that firms continue to deliver good customer outcomes, now and in the future, with proportionate regulation and oversight. I am happy to engage with her in more detail on the subject she mentions.

UK Infrastructure: 10-year Strategy

Sarah Olney Excerpts

Thursday 19th June 2025 Commons Chamber

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Liberal Democrat spokesperson.

[Sarah Olney (Richmond Park) (LD)]

Last week, the Liberal Democrats welcomed the announcement of investment in public infrastructure and transport projects, which we have long called for. We are glad that today the Government are setting out a 10-year infrastructure plan to realise those projects, and the Liberal Democrats will be closely scrutinising it to ensure that it delivers for communities across the UK.

Boosting our infrastructure is vital, given the appalling mismanagement under the last Conservative Government that left our school and hospital buildings crumbling while neglecting critical infrastructure, from transport to renewable energy generation. Today’s plan must draw a line under the disastrous mismanagement of projects such as HS2, which promised to connect our country and communities only to end up another hollow Conservative promise, long delayed and billions over budget. While we welcome the Government’s intention to deliver productive investment, we will closely scrutinise its implementation.

I have been concerned that Ministers have been unable to answer questions regarding delegated funding from the structures fund, such as for Hammersmith bridge in my constituency. Will the Minister confirm that specific projects have been selected, and will he ensure that infrastructure funding is distributed fairly for the benefit of all regions? Will he set up a crumbling hospitals taskforce to identify creative funding ideas, speed up construction timelines and put an end to the vicious cycle and false economies of delayed rebuilds, which lead to rising repair costs?

As we look carefully at the implementation of these plans, the Government must ensure that we have a workforce equipped with the necessary skills to meet these commitments. Does the Minister therefore agree that it is time to replace the broken apprenticeship levy with a broader, more flexible skills and training levy? Will the Government fulfil their promise to make Skills England an independent body with employers at its heart?

[Darren Jones]

The hon. Lady is right to point to the fiasco of HS2, which my right hon. Friend the Transport Secretary updated the House on yesterday. The complete and utter negligence in delivering on that project over many years has left us with the legacy of having to pay more for longer, which has implications for all the other things we would like to do in the country. We commissioned the James Stewart review, which was published yesterday. All its recommendations have been adopted, and lessons are already flowing through this infrastructure strategy, so that we never end up in that situation again.

The hon. Lady asked me about the structures fund, which was a particular fund that we prioritised because we know that in many constituencies, bridges in particular often miss out on funding and are in desperate need of it. She will have to speak with the Department for Transport about the allocations of that funding, but I will make sure that she gets an answer from my right hon. Friend the Transport Secretary.

Spending Review 2025

Sarah Olney Excerpts

Wednesday 11th June 2025 Commons Chamber

[Rachel Reeves]

I am very pleased that we were able to make this multi-year commitment on coal tip safety. The Government provided money for this in last year’s spending review, but that was for just one year, and today we have been able to give certainty that money will be available for the vital work that is necessary. I thank my hon. Friend for welcoming it; it is a shame that Plaid Cymru did not.

My hon. Friend has been a staunch supporter of reform of the miners’ pension scheme. We made reforms in the Budget last year, but I will ensure that the relevant Minister meets him to discuss what more we can do to secure a fair pension for miners in retirement.

[Sarah Olney (Richmond Park) (LD)]

London Members were hoping to hear more about infrastructure investment in the capital today. We are looking for spending on the Bakerloo line extension, and spending to deal with the Croydon bottleneck. I even dared to dream that Hammersmith bridge might one day be fixed, but all we have heard from the Chancellor is her reiterated support for the expansion of Heathrow airport. As she will know, Heathrow expansion is opposed by every political party in the capital, and by the Mayor of London. It is not welcome. The negligible economic benefits of expanding Heathrow do not compensate for the massive environmental and noise impact that expansion will have on many people in the capital, particularly my constituents. May I ask the Chancellor to look again at her support for Heathrow, and consider the greater merits of many other infrastructure projects across London?

[Rachel Reeves]

The hon. Lady started that question wanting to be a builder, and ended it by being a blocker. I suppose that is not surprising, given that the Liberal Democrats voted against the Planning and Infrastructure Bill yesterday, while we Labour Members supported it, because we want to get Britain building and to create prosperity and wealth in all our communities. In today’s spending review, we have provided an integrated settlement for the Mayor of London and a multi-year settlement for Transport for London. We have also supported expansion at City airport, and we have an in-principle commitment to expansion, and a second runway, at Gatwick. This Government are backing London, but most importantly, we are a Government for the whole country. That is why we have announced significant investments across the UK today, which are much needed.

Bank Closures and Banking Hubs

Sarah Olney Excerpts

Thursday 5th June 2025 Commons Chamber

[Sarah Olney (Richmond Park) (LD)]

It has been a pleasure to be part of the debate. I thank the hon. Member for Blyth and Ashington (Ian Lavery) and the right hon. Member for Tatton (Esther McVey) for bringing it forward. It would normally be customary, with so many contributors, to say that there has been a wide range of views, but I do not actually think there has been. There has been a wide degree of unanimity on the fact that banking services in this country are in crisis. The lack of access to banking for many of our constituents right across the country is leading to social exclusion, limiting entrepreneurship and having a devastating impact on many of our local economies. I have heard from many hon. and right hon. Members that services cannot just be replaced by online banking, particularly for those who have poor digital connections in their constituencies. The difficulty of accessing banking is a massive problem for those who are reliant on public transport, those who are disabled and those who are elderly or have additional needs.

It is good to hear how banking hubs are making up some of the gap that so many communities are experiencing, but clearly there is a lack of banking hubs, and they do not do everything needed to close the gap in accessing cash or loan facilities. I look forward to hearing the Minister’s comments on that.

The Liberal Democrats are strong champions of their local communities. We want to see the reversal of the damage caused to our local economies by the lack of access to banking. One of the things I call on the Minister to look at is reversing cuts to the interchange fee paid to ATM providers, which would go a long way to increasing ATM provision in many of our communities. The hon. Member for Blyth and Ashington gave a stark example of what happens when cash runs out in certain town centres.

More needs to be done on digital inclusion because, clearly, digital banking will be part of our future banking provision, and for those who struggle to access it, more can be done to assist them. The Liberal Democrats call on the Government to consider a fair banking Act to look at this problem in the round, to think about banking exclusion not just for individuals, families and small communities, but for the wider business sector, and to look at what more can be done to connect our communities and businesses.

I will close by adding my praise to Nationwide for its commitment to maintaining banking services on the high street. I was privileged to join my local Nationwide branch in central Richmond just before recess. The branch celebrates 110 years of being on Richmond high street. While I was there, I chatted to the local staff, who generously gave me some of the birthday cake. Many members of the local community were coming in to do their banking face to face. It was clear not only that it was good for my constituents to be able to use that face-to-face service, but that the staff got great satisfaction from helping customers and being that point of contact in the community. Other banks should be making available that sense of satisfaction to more of their staff, and I would like to see more banks making that commitment to community banking.

Finance Bill

Sarah Olney Excerpts

Report stage
Monday 3rd March 2025 Commons Chamber

[Dave Doogan]

The right hon. Gentleman is absolutely correct: wherever we look, the fiscal ambitions of the Labour Government on North sea oil and gas, or energy more generally, seem to be counterproductive. They are introducing a policy that anybody with a passing understanding of the industry realises will have precisely the opposite result of its stated aim, but the Government will not listen, much to my regret.

Analysis from OEUK shows that the oil and gas sector’s total tax yield will peak in 2026 under Labour’s increase in the EPL before declining, compared with the previous scenario, in which Treasury receipts continued to increase over the period. The analysis shows that while the expected tax take from UK oil and gas producers would increase in the very short term, ultimately it will result in a £12 billion net loss to tax receipts compared with the current regime. If the Labour party does not care about the jobs that the policy will cost, the harm it will do to the just transition or the damage to the economy of Scotland, surely Labour can accept that a tax increase that actually reduces the amount of tax received is, at best, counterproductive. That is why the SNP will support new clause 2 if it is pressed to a Division.

The SNP appreciates the many and varied reasons why parents choose to use private schools, but it is not fair or sustainable to treat private school fees differently from other discretionary spend for the purposes of VAT. The VAT exemption offered to private schools costs the UK taxpayer £1.6 billion annually—money that could be invested in other public services. However, the SNP also understands that for many parents whose children are enrolled in private schools the UK Government’s decision to remove that exemption will be extremely worrying.

The Scottish Government have sought to ensure that the distinctive nature of the Scottish education system is understood by the UK Government in this transition. In particular, the Scottish Government have raised concerns with the UK Government about the decision to include grant-aided special schools in the policy. In Scots law, they are not considered independent schools. In Scotland, there is a clear distinction in educational law between grant-aided special schools and independent schools, and the UK Government’s policy regrettably does not reflect that. I know the Minister studiously avoids almost everything that I say, but I hope that he heard that, and I would be very grateful if he could address it when he sums up.

On Scotch whisky, when the last Tory Government hiked whisky duty, the tax revenue raised from the industry fell by £300 million. That should have been a salutary lesson to any Government who came afterwards. The sensible option for both supporting Scotch whisky and Treasury receipts would have been to cut whisky duty. Instead, the Labour party is raising it again. On top of that, we now have a UK Government plan to grant a different definition of a single malt to English producers than that of Scottish single malts. The definition is entirely inconsistent with the global reputation of the quality of single malts, and seeks to tear up a well-established dictionary definition of a single malt while pulling the rug from underneath Scotch whisky producers. The Government must listen to warnings from the industry, the Scottish Government and those from across the political spectrum, and scrap the plans and duty hikes, which are an act of sabotage to Scotland’s world-class industry.

The industry already faces the risk of Trump tariffs, which cost over £600 million in exports the last time they were applied under his first presidential term. Rather than further damage from the UK Government, the industry needs support, starting with the reversal of the plans to hike duties still further. It is high time that Westminster finally listened to organisations such as the Scotch Whisky Association and stopped discriminating against Scotland’s national drink, which supports more than 40,000 jobs and delivers more than £7.1 billion to the London Treasury every year. The SNP will support new clause 8 if it is pressed.

I have spoken consistently about what is under debate in the Bill, but the wider context cannot be ignored. Labour has no cogent plan for reforming the economy. It seeks to reduce the deficit and not raise taxes, and it wants to stimulate growth with large investments. It is impossible to do all those things at once, and it is astonishing that the Government seem to persist with this wilful ignorance. A Government may increase spending to kick-start the economy and deliver growth and public services, but that requires tax increases and/or deficit spending, both of which the Labour Government are too scared to pursue because of their short-sighted election promises to abide by fiscal rules and not increase the highest-revenue sources. We are therefore stuck in the worst of all possible worlds, with insufficient growth—especially green growth—insufficient investment, a deficit causing a rising debt burden, and no way to increase revenue meaningfully. The UK Government are bizarrely persisting with gaslighting themselves in thinking that they are “fixing the foundations” and delivering growth. They are doing nothing of the sort, and if they stick with this Bill and the Budget on which it is predicated, they never will.

Finally, is it not astonishing that when farmers push back on agricultural property relief, family businesses push back on business property relief, pensioners push back on their winter fuel allowance, the Scotch whisky industry pushes back on duty hikes, the North sea oil and gas industry pushes back on the EPL, and when the Women Against State Pension Inequality Campaign pushes back, they are all told, “No. The situation is too bad. You’ve just got to suck it up,” but when the non-doms push back, they get swept right to the heart of the Treasury and the Chancellor, and they get whatever they want? That is the Labour Government.

[Sarah Olney (Richmond Park) (LD)]

I will speak in favour of new clause 4, tabled in the name of my hon. Friend the Member for St Albans (Daisy Cooper). The amendment would require the Government to carry out an impact assessment on the changes that the legislation would introduce for small and medium-sized businesses. Small businesses are the backbone of our economy and the heart of our local communities, and they create the jobs that we all rely on. I hear time and again from the small businesses across my constituency that they are struggling to keep up with soaring energy prices, business rates and the costs of exporting. The Chancellor is absolutely right to be focused on economic growth; however, my Liberal Democrat colleagues and I are deeply concerned about the impacts of the changes in the Bill on our high streets, and particularly on those in the hospitality industry, who are very concerned about the impact that duty rises on wine, beer and cider will have.

The wellbeing of small businesses acts as an indicator of the health of the economy as a whole. As such, the new clause would be a useful tool to allow us to understand the broader implications of the legislation on our economic prosperity. More broadly, an impact assessment would look at the combined effect on small businesses, both directly and indirectly, of all policies in the Bill to ensure that SMEs remain at the heart of the Government’s economic policy. It is crucial that the necessary tough spending decisions to clear up the mess that the previous Conservative Government left behind do not hit our small local businesses, which are vital to our economy.

To encourage growth for our small businesses, the Chancellor should be looking to reduce the burden on businesses through means such as cutting Brexit red tape, securing better trade deals with Europe and entering a customs union. The combination of the cost of hiring staff, the cost of additional red tape and higher business rates will be simply too much for many SMEs to absorb, which is why I urge the Minister to support our new clause and assess the impact of the legislation on local businesses.

Growing the UK Economy

Sarah Olney Excerpts

Wednesday 29th January 2025 Commons Chamber

[Darren Jones]

I know that my hon. Friend has been working on this issue for many years. As I have said, we want the Heathrow project to be a success for the whole country, and that means in relation to sustainable low-carbon transport and connectivity as well as for local jobs and the local economy. As I said in the statement, as proposals are put forward by Heathrow, the Government will consider them in the normal way, in line with all our legal obligations.

[Sarah Olney (Richmond Park) (LD)]

In November 2020, when giving evidence to the Treasury Committee, the head of the Office for Budget Responsibility, Richard Hughes, stated that further investment in infrastructure such as extending airport capacity would not deliver high economic returns as the UK is already highly connected. Without a proposal on the table for Heathrow, how can the Chancellor be so sure that a third runway will drive high national economic growth?

[Darren Jones]

We hear from businesses, investors, businesspeople, travellers and people who want to be able to come through London or the UK that we are losing trade and investment in comparison with other hub airports on mainland Europe. We have every opportunity to secure that here in the UK, and that will, by its very nature, secure investment, jobs and economic growth.

Oral Answers to Questions

Sarah Olney Excerpts

Tuesday 21st January 2025 Commons Chamber

[Emma Reynolds]

I am always happy to meet my hon. Friend, who is a near constituency neighbour. We absolutely agree that retail investment is crucial. I want more progress on the advice guidance boundary and targeted support. I will be working closely, in my new role, with the Financial Conduct Authority to take that forward.

[Sarah Olney (Richmond Park) (LD)]

Residents in my constituency will have been extremely concerned to read the news this morning that the Chancellor plans to announce next week the expansion of Heathrow. I invite her to tell us, on the Floor of the House this morning, yes or no: will the Government back expansion at Heathrow?

[Rachel Reeves]

I am not going to comment on leaks. I will say that the Government are absolutely committed to growing our economy, and making this a great place for businesses to invest in and trade.

UK-China Economic and Financial Dialogue

Sarah Olney Excerpts

Tuesday 14th January 2025 Commons Chamber

[Rachel Reeves]

We on the Government Benches are not going to apologise for getting a good deal for British businesses and the people working for them. I am determined to leave no stone unturned in ensuring that British businesses have the rights and freedoms to export and trade around the world, helping to create good jobs here in Britain.

[Sarah Olney (Richmond Park) (LD)]

UK exports to China currently represent less than 10% of the UK’s total exports, whereas our exports to the EU represent over 40%, demonstrating the greater opportunities that trading with the EU makes available to our small and medium enterprises. Will the Chancellor commit to talking four times as much to our European partners about our trading opportunities than she has to China?

[Rachel Reeves]

This is not either/or; we cannot write off one country and say that we are going to put all our eggs in a different basket. China is our fourth biggest trading partner and we cannot miss out on opportunities in a country that is growing quickly, with an expanding middle class, where there are huge export opportunities. As the hon. Lady knows, I was in Brussels in December to reset our relations—the first British Chancellor to go to a Eurogroup meeting since we left the European Union. I am leaving no stone unturned in exploiting export opportunities for British businesses.

Finance Bill

Sarah Olney Excerpts

Committee of the whole House
Wednesday 11th December 2024 Commons Chamber

[Dr Ben Spencer]

It is difficult not to take this vindictive policy of taxing education personally. That is not just because, like many parents in Surrey, we as a family have chosen independent education for our children, or because as a Conservative I support all our schools and I want all our children to have the best start in life; it is because lots of different data points show that the Runnymede and Weybridge constituency will be one of the most heavily punished areas as a result of this policy.

It is interesting to hear the Minister talk about the estimated numbers of children who will move out of the independent sector and into the state sector. I speak to the many independent schools in my constituency pretty much all year round. They have met me, and they tell me that they are desperately concerned about this policy. They have estimated that about 5% to 10% of children will need to move out. That is probably 500 to 1,000 children in my constituency, many of whom have already been disrupted by covid. Many of them are studying for their exams, have friendships groups that will be disrupted, and will potentially be moving to schools that will be unable to provide the same courses or exam specifications that they are currently receiving.

I hear from state schools that already face lots of pressure on places. As the Minister will have heard in my earlier intervention about admissions and the empty spaces that we have in years nine to 11, and the intake for the next academic year there is no space—we have lots of pressures. This policy will cause long-lasting damage to many children. I hope it will not, but in reality it will.

It is clear, given the numbers and the full-throated support on the Government Benches, that this policy is going ahead and we will not be able to stop it. But will the Government, at very least, support our new clause 8? If they are so proud of this policy, which they clearly are, and so happy to defend what they see as the limited impact on young people, why are they afraid of a proper analysis? I would ask them please to think again, but I would be at risk of misleading the House, because clearly they never thought in the first place.

[Sarah Olney (Richmond Park) (LD)]

The Liberal Democrats do not support imposing VAT on private school fees. We do not support treating independent schools differently from other independent education providers for VAT purposes, and that is why I wish to speak in favour of new clause 9, tabled by my constituency neighbour and hon. Friend the Member for Twickenham (Munira Wilson). I thank her for tabling the amendment, which would require the Government to produce an impact assessment of the effect of the VAT provisions in the Bill on pupils with special educational needs but who do not have an education, health and care plan. Of the 615,000 children in private schools in this country, almost 100,000 are being educated privately because they have special educational needs but do not have an EHCP.

The Lib Dems are glad that the legislation exempts from VAT on school fees those privately educated pupils who have an EHCP that requires the local authority to fund a private school place. That is a welcome step, but it does not protect those who do not have an EHCP from a steep rise in fees. The parents of many of those children will find that they cannot afford the increase, throwing the future of their children’s education into doubt.

Moreover, there will be an increase in demand for local authorities to issue EHCPs stating that the local authority must fund a private school place. Local authority resources for special educational needs and disabilities are already stretched to breaking point, and additional demand will be impossible to manage.

[Graham Stuart]

The hon. Lady is right. The Government share the analysis that our special educational needs provision in our state schools is under massive pressure already and there is a shortage of capacity, notwithstanding the vast increases in expenditure since 2019. However, the Government’s policy, recognising that, is to tax and therefore deter and reduce expenditure on children with special educational needs out of people’s private pockets. It does not make any sense, does it?

[Sarah Olney]

I trust that that means the Liberal Democrats can look to the right hon. Gentleman to support our new clause today, because the inevitable result of the legislation, if unamended, will be thousands of children with SEND forced into the state sector all at once, which will be enormously disruptive, and not just for them but for pupils already in the state sector. It will be potentially traumatic for those children, as well as being immensely difficult for the state schools to manage. New clause 9 would protect both the children and the schools affected by the impact of these measures—the children who have special educational needs but do not yet have an EHCP, as well as the children of families who have applied for one.

However, it is not just children with SEND who will be affected. The parents of many thousands of other children across the country will find that they can no longer afford to keep them in their current school, and those children will experience enormous disruption to their education as they are forced to change schools. Many will face the upheaval of being separated from their friends and a familiar environment. The Government should reflect carefully on whether the benefits of this policy that they are intent on pursuing are worth the damage caused to these children’s education and wellbeing.

The influx will not be evenly distributed. In my constituency of Richmond Park, more than 45% of children attend a fee-paying private school. In common with other parts of London, demand for state primary places is down, so younger children will be easily accommodated, but secondary schools are experiencing great pressure for places and a rise in requests for in-year admissions will be difficult to meet. There may only be a small proportion of children whose parents are no longer able to meet the fees, but a drop in headcount at private schools could see them closing because they become unviable. That means that the effect of children needing to transfer out of independent schools and into the state sector could be much greater than is currently forecast.

I want to reflect on what the shadow spokesperson, the hon. Member for North West Norfolk (James Wild), and others have said about the music and dance scheme. The Royal Ballet school at White Lodge in the middle of Richmond park in my constituency is a world-leading ballet school, and it has expressed great reservations to me about the effect of this policy, and I would very much like the Government to reflect on that.

If the survey done by The Times of private school parents earlier this year is accurate, and 25% of parents have to withdraw their children from private education due to the Government’s proposals, that could have a huge impact on children in communities such as mine across the country. The Government propose that their new tax treatment should be applied only to the provision of private schooling, but taxing some forms of education and not others will almost inevitably create loopholes.

Creative accountants will find ways of delivering education services that fall outside the VAT legislation while other education providers that the Government did not intend to tax will unwittingly find themselves caught up in it. The risks of these distortions increase if legislation is hastily framed with insufficient time for scrutiny. Between parents who cannot afford to pay their children’s fees and schools that cannot keep their doors open, the state will need to find space and resources for an influx of new students.

The Liberal Democrats are opposed to the Government’s plans to impose VAT on private school fees because we believe it is wrong to tax education. Imposing this increase in fees will have a disproportionate impact on children with SEND, which will create not just hardship for those children and their parents but enormous difficulties for the local authorities and state schools that will be required to provide alternative schooling. That is why I join the calls of my colleagues to urge the Government to back new clause 9.

[The Chairman]

We come to the final Back-Bench contribution, no doubt saving the best till last.

--- Later in debate ---

[James Murray]

I am going to make some progress, because I will come to the right hon. Gentleman’s point in a moment, and I want to mention the points made by other hon. Members in the debate.

We heard from the hon. Members for Twickenham (Munira Wilson) and for Richmond Park (Sarah Olney). Yet again from the Liberal Democrat Front Bench, we see a party that is happy to support our extra investment in education for all children, but that cannot bring itself to support the measures that we put in place to help pay for that investment in education.

[Sarah Olney]

We have heard this point time and again from the Labour Benches. I want to say, one more time, that the Liberal Democrats put forward a fully costed programme in our 2024 general election manifesto, which had a range of tax-raising measures that would have paid for the changes we proposed and did not include VAT on school fees, for all the reasons the Minister has heard today.

[James Murray]

The reason why the Liberal Democrats hear this time and again from the Government Benches is that, time and again, they want all the benefits of investment without having to pay for it. That is a pattern that we see again and again in this Chamber.