Independent School Fees: VAT

Part of the debate – in Westminster Hall at 4:30 pm on 21 February 2024.

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Photo of Andrew Lewer Andrew Lewer Conservative, Northampton South 4:30, 21 February 2024

It would. My hon. Friend’s point leads me nicely into my belief that the naivety of Labour’s position is underlined by a hidden agenda to have smaller schools in the midlands and the north closed and absorbed by the state. Underlining that is perhaps the fact that the shadow Education Secretary, since taking up her post in 2021, has not visited an independent school with at least the aim or willingness to discuss the impact of her policy. My hon. Friend has spoken to people in the sector, as have I and many other people here.

The unwillingness to engage speaks volumes. Who would propose massive changes to the chemical industry or the high street retail industry without taking the trouble to speak to people involved in that sector to assess the impact? It is quite unthinkable. I also question why the policy is aimed only at taxing the supply of children’s education, which is arguably the most pivotal, and not at education for adults via universities, for example, or other forms of education such as private tutoring, which is the alternative private education leg-up provision of extra advantage that many on the left as well as not on the left utilise. There are no plans for VAT there; I wonder why.

Perhaps most important of all is the effect that the policy would have on independent schools’ ability to operate. If independent schools cannot absorb the VAT increase or parents cannot afford the fees, many of them would have to close. That would be disastrous for two important reasons. First, we would see the children go into the state sector, increasing the burden on other children and teachers. The Opposition believe that that can be offset by funds raised by the policy, but we are yet to see any consensus on the true impact.

The Institute for Fiscal Studies states that the policy will raise half a billion pounds less than Labour has committed in spending pledges. The education specialist think-tank EDSK puts the likely revenue even lower, leaving Labour more than £1 billion overdrawn on its spending plans. Most worrying is the IFS finding that the evidence of impact on children and families is “quite thin”—alongside 30-year-old data, it relied on the experience of Catholic schools in America—so it is tax first and repent later.

I am sure we will hear that this is a bogus claim and that there might not be a mass exodus, and that might be evidenced by the fact that as inflation has risen and independent school fees have gone up, we have not seen many children leave the sector. However, the ISC has found that 20% of parents who currently send their children to independent schools say they will be priced out and have to educate their children in the state sector. Those are the parents who will be making a difficult choice and might be forced into pulling their children out of the schools they have been educated in, and when they are at a key stage in their education. Perhaps most strikingly, the Baines Cutler report has calculated, using real data from schools and parents, that the predicted income-related drop-off if the policy is enacted would be nearly 100,000 children—one sixth of all the children educated in the sector who need somewhere to be educated.

Even more crucial is the impact on independent schools that provide specialist provision where the state sector does not go—independent specialist schools with small budgets that educate children with particular needs. Department for Education data shows that there are more than 100,000 pupils receiving special educational needs support in independent schools, some with education, health and care plans and some without. Moreover, many independent schools provide specialist faith schooling or provision for military families—something I saw the benefit of in my own education.

When it comes specifically to special educational needs and disabilities provision, what we will see is that parents who can no longer afford to pay the fees will seek out an EHCP if they do not have one, which will lead to more pressure on families, on local authorities at tribunal and on local authority budgets. I am interested to know whether there has been any realistic impact assessment of that.

If schools were to close as a result of the policy, the children would not have the provision they need. It will very much be the case that the schools will have to stop the excellent partnership work they do in order to cover their costs, or reduce their offer of bursaries to disadvantaged pupils, thereby reducing social mobility and making these institutions even more elite. That is the point. Such a regressive tax will seek to harm independent schools on the tightest of margins.

Even if the policy’s impacts are not seen immediately, I fear that the long-term negative consequences will be dire. It is the schools that Labour are not thinking about that will be hardest hit—small faith schools and special needs schools. That capacity sees some special needs support for 96,000 children who are not on an EHCP. Labour has exempted the EHCP pupils from VAT on fees, but not other students with special educational needs. That is 96,000 children facing disrupted education, with state provision further stretched and worse for all those who need it. Families are therefore incentivised to apply for EHCPs. Labour should exempt all pupils with special educational needs from VAT on fees. If it does not, the pressures will be laid at its door.

Similarly, small faith schools up and down the country could not be further from the stereotype that has been presented. They often charge low fees—often lower to the taxpayer than the cost of local state schools, because they are supported by local congregations and voluntary efforts. They are frequently very small, they cannot absorb VAT, and their families and supporters cannot find 20% more at a moment’s notice. They will face deficit and closure, and will be harder hit than the better-known schools that I am sure many have in their heads when proposing this.

There is a slow-burn issue as well, whereby parents perhaps persist for an extra year or two for a child who is in the middle, but then decide not to go ahead for a child who has not entered the system yet. There is also a danger of smaller schools becoming insolvent—having to assess that the increased risks of becoming technically insolvent prevent them from struggling on and pushing through. This needs to be considered in the round and not just as a standalone. Given that we have heard hardly anything else about supporting education from the Labour party, I am not sure voters are being presented with very much.

To conclude, independent schools play a vital role in educating our children. They provide specialist provision and excellent partnership work. The Labour party wants to pull all that up and put it at risk, for the sake of raising a questionable £1.5 billion, which is not enough to offset the damage it will inflict. I hope those listening who are in positions to influence this will take these points away. I look forward to the Treasury Minister’s further thoughts about the VAT details. We need to ensure that this ill-thought-out policy does not put unnecessary strain on hard-working families who want a better future for their children.