Baroness Barran:

Moved by Baroness Barran

At end insert “, and do propose the following amendments to the words so restored to the Bill—

15B: Clause 5, page 5, line 14, after “But” insert “the Secretary of State may by regulations made by statutory instrument provide that”

15C: Clause 5, page 6, line 11, at end insert—“(8) A statutory instrument containing regulations under sub-paragraph (3) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”

15D: Clause 5, page 6, line 14, after “But” insert “the Secretary of State may by regulations made by statutory instrument provide that”

15E: Clause 5, page 6, line 18, at end insert—“(2C) A statutory instrument containing regulations under sub-paragraph (2A) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.””

My Lords, my Amendments 15B to 15E would allow the Secretary of State to reverse this policy in future.

The Bill introduces two things with which we fundamentally disagree: a tax on education and a two-tier charity system. Both are political choices made by this Government and both are, we believe, mistakes. I cannot see why the power for the Secretary of State to reverse this decision would be rejected. It does not require the Secretary of State to do anything but offers the flexibility and ability to change, if this policy—coupled with the introduction of VAT on independent school fees and the increase in employer national insurance—has wide-reaching and damaging impacts, not just on independent schools but on their neighbouring state-funded schools. That is particularly the case in areas of tight capacity, where there are not spare places for children to go if their independent school closes as a result.

The Government talk about wanting to remove barriers to opportunity. I hope that every single Government always want to remove barriers to opportunity, but there is a risk that this policy does the reverse and that there will be a lag before we see its impact, as parents strain every sinew to try to continue to send their child to the school of their choice.

The data in one or two years’ time will be much more telling. If that paints a negative picture and shows that pressure is being put on local state-funded schools—schools that have not had time to prepare and create additional capacity— as a result of the closure of independent schools, my amendments would give the Secretary of State a way to reverse this policy in the interests of children.

I thank all noble Lords who have contributed to this debate throughout the progression of the Bill. I hope that the Minister will, on reflection, accept my amendments.

My Lords, I will speak briefly in support of the amendment in the name of my noble friend Lady Barran. I have not taken part in any of the debates around independent schools in your Lordships’ House, and, for the record, I am entirely the product of the state education system in the east of Leeds. However, I have been prompted to get to my feet today on the back of the very sad news that was announced yesterday of the closure of Fulneck School, in Pudsey, Leeds. It was established in 1753, during the reign of King George II, and will now close its doors for the final time in July.

Fulneck, for those who do not know, is famous for educating, among others, the great Liberal Prime Minister Herbert Asquith and the late great Dame Diana Rigg—otherwise known to some as Mrs Peel—along with a very close friend of mine, who was absolutely devastated to hear the news this morning. Fulneck is part of a Moravian settlement in Pudsey, which includes a grade 1 listed church and many other listed buildings. It is a unique part of the heritage of Leeds and the broader West Riding of Yorkshire, a large part of which will now be lost for ever.

I will not argue that the imposition of VAT is the only reason for the closure of the school; in fact, the school’s own statement refers to problems of falling numbers in recent years. However, the statement points to significantly rising administrative costs. Surely the broader point here is that, for a large number of small, independent schools across the country that have been struggling to keep their heads above water in recent years, the imposition of VAT and increases in employer national insurance are policies that will sink them.

As a result of the closure, 300 or so students will now have to be educated elsewhere within the locality; most, presumably, will have to find places within the state sector. I note that the school lies within the parliamentary constituency of Leeds West and Pudsey, which is represented by the Chancellor of the Exchequer. I support my noble friend.

My Lords, I declare my interests in sport as set out in the register.

I have spoken in Committee and on Report about the damage that retaining Clause 5 will do to the sporting success of many talented young people in the UK who gained admission to independent schools from the state sector through sports bursaries and scholarships. The reason for this was that, in response to parental demand, many independent schools have invested in state-of-the-art sports facilities, top-level coaches, and the sports psychologists, nutritionists, physios and support staff whose presence in many of our independent schools have delivered success at international and national level, while offering those facilities, out of hours and during the holidays, to local communities through their dual-use policies.

The costs imposed by VAT on school fees, increased by higher national insurance contributions and now by business rates, means that to balance the books those schools which survive will have to reduce the many sports scholarships and bursaries currently available to talented young people. Talented young people from a wide range of backgrounds in the maintained sector would otherwise never have access to facilities and coaching expertise of this type.

To demonstrate the scale of the support, I previously drew the Minister’s attention to 14 athletes on Team GB at the Paris Olympic Games who came from Millfield School, 13 of whom came through its means-tested financial support mechanism. Those athletes brought home seven Olympic medals and one Paralympic medal—four gold, three silver and one bronze. The career path for our talented athletes has provided opportunities for thousands of young sports men and women who could not afford to go to independent schools and benefit from their sporting facilities without the bursaries and scholarships on offer. At the Paris Olympics in 2024, 33% of Team GB’s medallists had been given the chance to attend independent schools, many of whom had their fees paid in part or in whole through means-tested bursaries and scholarships.

The statistics prove the point. I would not be worried if facilities in the state sector were a substitute; that they are not is not a party-political point. Sports facilities at local authority level and state school level have been in decline for years. We had a magnificent Olympic and Paralympic Games in London in 2012. The regeneration of the East End of London was a resounding success, but we did not leave a sports legacy to London or to the country. Playing fields continue to be sold; public swimming pools are closed. Even Sport England has this month lost its statutory ability—which has had a great effect in keeping playing fields open—to appeal against the loss of sports facilities removed as part of the proposed planning reforms.

I see no evidence that these arguments were addressed in another place yesterday. By raising them today, I urge colleagues from across the House to vote for this amendment and protect the opportunities afforded to many of our aspiring young Olympians and Paralympians. I ask noble Lords not to deny those young people the same number of bursaries and scholarships that independent schools have been able to make over many years. I hope that every Member of your Lordships’ House will bear these arguments in mind when they consider whether to vote to retain Clause 5 in its current form.

My Lords, I have not to date spoken on this Bill, but there are couple of matters which need to be aired regarding the history of charity. I am a director of a charity, and my daughter attends a private school—let us get those on the record.

The history of charity in this country goes back a very long way, with a particular flourishing during Elizabethan times. The charities of that era were often health related, certainly education related and often to do with hospice and almshouse care—of course, this Government have decided to raise a jobs tax on hospices, which we have been discussing this week. The concept of charity was founded very much on education.

Through the latter end of my illness, my wife would drive me home at weekends for home visits. We found all manner of routes through south-east London to avoid the worst of some of Mayor Khan’s blockages that have been created through London—it did not stop us from paying the ULEZ, of course. On one of the small roads, I came across a charity called the Portuguese speakers community centre. I thought, “Well, well, well, there is such a thing”. I am sure that it does the most amazing work. On most high streets, we see a variety of charities. Lots are to do with animal support—the PDSA, Cats Protection and all manner of other charities. They all do very good work. However, they were not envisaged as the charities of the day when the big flowering of charities came to pass in Elizabethan times, but education most certainly was.

So, for the first time in the history of this nation, we are deciding to have a two-tier charitable system. Whereas that charity route of old—education—is no longer deemed of charitable-worthy status, the Portuguese community centre, for instance, which I am sure does good work, is. It is a strange day that we pass through with this legislation—it is a very sad day. The amendments in Motion Q1 will at least give the Secretary of State pause for thought and an easy way out in the future. I almost guarantee that those thoughts on raising lots of revenue will never be realised. Schools will close and, because of the VAT increase, children will move to the state sector and be a cost to the state in their education. Let us note this day and heed what is being told to the Government: “You will rue this decision”.

My Lords, I rise to support the noble Lord, Lord Moynihan, and ask that noble Lords note my register of interests. I have not spoken on the Bill before, but we need to consider the impact on sport.

Over many cycles of Olympic Games, many of our medal-winning athletes have gone through the independent school sector and a significant number will have been supported with scholarships. The access it gives to high-quality coaching and facilities, and balancing education with that pathway, is important.

The Sutton Trust has noted that private schools are overrepresented among the medal-winning athletes that we have. Its data probably does not support the argument that I am about to give. The noble Lord, Lord Moynihan, was right that 33% of Team GB’s medallists at the Paris 2024 Games went through private schools—down from 40% for the Tokyo Games. Yes, that compares with just 7% of the general population. Is it right that it is disproportionate? No, it is not, but the independent sector offers amazing opportunities for athletes to succeed.

The reality is that there is so much work that we need to do in our state schools. They should provide access to good-quality sports facilities and coaching and care about our children’s education, but the reality is that we are still quite a long way from that. We already know that the state sector is struggling to deliver sports such as cricket; the ECB has noted that. We need to think about the consequences in the short term for our medal-winning athletes and our place on the medal table.

I did not think I that I would be in a debate defending independent schools, but it is important that we are able to offer the right support to young people. A lot of young people on scholarships in independent schools will lose out on the chance to represent the UK. That is not right for the foreseeable future of our elite sporting environment.

I want simply to add to these very moving and persuasive comments. It seems to me the most terrible act of self-harm to tax the schools again and again. It is not just VAT and the non-domestic rates but national insurance increases on staff and employees, and, in recent years, a compulsory increase to pension provision outside any private arrangements the schools may make. Those are four separate recent taxes. When is this bleeding going to stop?

My Lords, we on these Benches believe that there is a principle at stake of not regarding independent schools as charities. Education is not a profit-making business, although independent schools have to cover their costs—which, as I have sadly heard, Fulneck School has failed to do. We will support the noble Baroness, Lady Barran, if she wishes to test the opinion of the House.

My Lords, I thank all noble Lords for their important contributions in this debate. The noble Baroness, Lady Barran, has stated her firm belief that no education should be taxed. She has also reminded this House of her view, shared by the noble Lord, Lord Mackinlay, that the Government are creating a two-tier charity system. The measure delivered through this Bill is a tough but necessary choice to ensure that the Government can deliver on their commitments and break down barriers to opportunity for all. Tough choices are difficult—the Government know this—but they are also necessary. This Government will take these tough decisions because of the financial climate out there.

Let me come back to some really important points raised by the noble Lord, Lord Moynihan, and followed up by the noble Baroness, Lady Grey-Thompson, in relation to children and their access to sporting provision. The Government are committed to improving access to sports and physical activity for everybody, wherever they live. No matter where people are in this country, or who they are, they should have access to the best sports facilities and opportunities to get active. I hear the noble Lord strongly and share a lot of his passion and annoyance. As a former Olympian, he speaks from experience and depth of knowledge.

I would just reassure the noble Lord and the noble Baroness that the Government provide the majority of funding for grass-roots sport and continue to do this through our arm’s-length body, Sport England, which invests more than £250 million of Exchequer and lottery funding each year. In addition, Sport England is investing £120 million across 2025 to 2029 to increase participation in sport and boost diversity at grass-roots level to give more opportunities for young people to develop their potential. This funding will increase and enhance opportunities for talented young athletes in England. We want to see more young children go on to compete at the Olympics and win more medals—gold medals in particular.

The noble Baroness, Lady Barran, talked about the impact on the state sector of pupil moves. All children of compulsory age are of course entitled to a state school place if they need one. Funding is also provided for post-16 education in all parts of the UK. Local authorities are responsible for ensuring sufficient state school places. The Department for Education already works with local authorities to identify pressures and take action where necessary.

The noble Lord, Lord Caine, is a former state school pupil from Yorkshire; speaking as a former state school pupil from Lancashire, I share his passion for education. I reassure him that we expect the number of private school closures to remain relatively low and be influenced by various factors, not just the removal of VAT and business rates tax breaks. Parents can seek places in other private schools or find a state school place through their local authority. Around 50 private schools, excluding independent special schools, close each year. The Government are aware that there may be some temporary increase in the school closure rate over the normal rate during the few years after implementation. The Government estimate that this may be broadly equivalent to 100 schools in total closing over the next three years, in addition to the normal levels of turnover, after which closures will return to historic norms.

As I have set out previously during the passage of the Bill, the rules in relation to the application of charitable relief are set out in primary legislation and can be amended only through primary legislation. It is for Parliament to agree to pass primary legislation, as per normal parliamentary processes. I hope I can reassure noble Lords that this Bill is not and cannot be the first step in removing charitable relief from other charities. Should the Government, or any Government, wish to make further changes to charitable relief in future, they will require parliamentary consent.

This is a matter which we consider Parliament should decide on the face of the Bill. That is what the Bill does and moving these measures to a power in the way suggested by the amendments under Motion Q1 is, we consider, not appropriate. For these reasons and the other reasons that I have already set out, I respectfully ask noble Lords not to press their Motions containing Amendments 15B to 15E.

Will the Minister confirm clearly that, through this measure, the country will obtain, for the first time ever, a two-tier charitable system? That is what he appeared to accept. This must be thoroughly undesirable. To remove a set of arrangements that independent schools, the vast majority of them very small schools, have enjoyed over centuries and to create two tiers must be a thoroughly retrograde step. To describe the exemptions that independent schools, like all other charities, have hitherto enjoyed as “tax breaks” is deeply unfair. Independent schools have been properly treated, along with other charities, for centuries—a position that ought to endure—and it is really shameful, given that independent schools are overwhelmingly small and cannot bear these burdens, for this state of affairs now to come into existence as a consequence of this legislation.

Noble Lords will not be surprised to hear that I disagree with the noble Lord. We are putting the Bill through because we, as the Government, want to deliver on our commitments and break down barriers to opportunity for all. Ninety-three per cent of students are in the state sector. The measures are necessary, tough decisions. We know they are tough choices, but they are necessary to make sure that we can support the state sector, where 93% of students attend.

My Lords, I listened carefully to the Minister and I think he did not satisfactorily address the points made by my noble friends Lord Caine and Lord Moynihan, and the noble Baroness, Lady Grey-Thompson, which addressed, in different ways, how independent schools form part of the fabric of our society. Nor did he really address the points of principle raised by my noble friends Lord Mackinlay and Lord Lexden, the noble Baroness, Lady Pinnock, and the noble Lord, Lord Thurlow. He understandably repeats the point about tough decisions and tough choices, but these amendments do not force the Government to do anything: all they do is allow the Government to change their mind gracefully if they find that their policy actions do not raise the funding that they had hoped. With that, I would like to test the opinion of the House.

Ayes 267, Noes 151.

Motion Q1 agreed.