Independent School Fees: VAT

I beg to move,

That this House has considered independent school fees and VAT.

It is a great pleasure to serve under your chairmanship, Mr Henderson—I think for the first time. I put on the record my thanks to the Independent Schools Council and its superb chief executive Julie Robinson, not only for the tireless campaigning that it does for the independent education sector but for its work as the secretariat for the all-party parliamentary group on independent education. I have been the chair of that group since founding it in 2017, after moving from being an MEP to an MP. A number of independent schools serve my constituents, including Quinton House, Bosworth School, Northampton High School for Girls and OneSchool Global.

More than 600,000 children are educated in the independent schools sector in the UK, saving UK taxpayers more than £4 billion each year because those pupils are not educated in the state sector. In addition, the independent sector has a total economic footprint that amounts to £16.5 billion, supporting 328,000 jobs and £5.1 billion in tax revenue. Why is it that the sector often gets bad press, despite its contribution to society both economically and educationally? For many people, when they hear the terms “independent school” or “private school”, they immediately associate them with elitism, isolation and privilege. Nothing could be further from the truth. Independent schools today are modern, diverse and inclusive places that often provide education and specialist provision where the state sector does not go. Furthermore, independent schools are more connected to society now than ever before, working with the state sector in partnerships and widening access through bursaries.

I congratulate my hon. Friend on securing this really important debate. Our independent schools do vital outreach work with access bursaries and access to sports facilities. Many hard-working families up and down the land make huge sacrifices saving to send their children to independent schools. Does my hon. Friend agree that the short-sighted Labour policy on VAT on independent schools will compromise these schools, force some parents to take their children out of them, and ultimately put more pressure on our local state schools?

I thank my hon. Friend for that question, which is indeed the major thrust of what I have to say. As chair of the all-party group, I am delighted every year to sponsor the Independent Schools Council’s annual “Celebrating Partnerships” report, which gives parliamentarians and stakeholders from across the sector the opportunity to come together to celebrate the fantastic work that the independent sector does in partnership. Three quarters of independent schools are now in partnerships with state schools. That is not the old swimming pool every other Tuesday afternoon for an hour or two; they are embedded, mutually beneficial partnerships.

Given how influential and impactful the sector is for wider society, it is in disappointment that I stand in opposition to the Labour party’s policy position on independent education—the introduction of a 20% VAT fee on independent school fees. I urge the current Government and my Conservative party colleagues to be robust in their stance of not imposing VAT on school fees. I look forward to the Minister’s analysis of that, but given that the Opposition are currently well ahead in the polls, and it is at least possible that they could form a Government in the next Parliament, it is important that this debate has been granted. It is important that we take the time to scrutinise what I believe is an ill-thought-out policy. Although I welcome the fact that Labour’s plans for independent education under the right hon. and learned Member for Holborn and St Pancras (Keir Starmer) are not as draconian, undemocratic and questionable in law as they were when he served in the shadow Cabinet of the right hon. Member for Islington North (Jeremy Corbyn)—when it looked like the party was trying to abolish the sector entirely—they are still very worrying indeed.

The principle of parental choice is supported by article 2 of the first protocol of the European convention on human rights, which was incorporated into domestic law by the Human Rights Act 1998. It says that

“the State shall respect the right of parents to ensure such education and teaching in conformity with their own religious and philosophical convictions.”

However, is that right to choose being assisted, if said choice is made increasingly difficult by a huge tax rise? I do not think it is. It is also a fundamental principle that we do not tax the supply of education, and the Value Added Tax Act 1994 exempts education, including nurseries and universities, alongside independent schools. That principle is international in scope and the UK would be an outlier if Labour abandoned that policy. For example, EU nations, Australia and the USA do not apply sales taxes to education.

I congratulate my hon. Friend on securing this important debate. Several headteachers of independent schools in my constituency of Woking have come to me and said that they are worried that many parents will not able to afford to keep their children at their schools with the VAT increase, and one or two are worried about the future of their schools. My hon. Friend has had conversations with the independent sector and the groups representing it; has Labour taken into account that there might be a massive increase in students having to go to the state sector due to schools closing, which would completely kibosh any potential financial gains it is claiming?

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.

Order. I remind hon. Members that they should bob if they wish to speak. I will have to impose a time limit of three minutes, as I will have to call the Opposition spokesman at 5.15 pm.

It is a pleasure to serve under your chairmanship, Mr Henderson. I congratulate my hon. Friend the Member for Northampton South (Andrew Lewer) on securing this important debate.

Labour’s plans to charge VAT and end business rate relief for independent schools is based on the politics of envy, from a party that wants to crush aspiration and ambition. Labour says its primary motivation is to generate revenue to invest in the state education system and that the policy might raise £1.7 billion for that purpose. Well, Labour had better get building more schools, because it intends to implement the policy as soon as the right hon. and learned Member for Holborn and St Pancras (Keir Starmer) enters Downing Street, with no consultation or risk analysis. What a nonsense. The policy will harm both the state and the independent sector, and there will be an exodus of pupils into an increasingly stretched state system, with some independent schools closing altogether.

We must not trust Labour with our schools. About 12 years ago, the OECD “Education at a Glance” report found that expenditure on schools as a percentage of GDP increased from 3.6% in 1995 to 4.5% in 2009. The OECD average was 4%. Billions of pounds of spending went into schools under the last Labour Government, but that huge increase in spending led to no improvement in student learning outcomes. UK teenagers slipped down the league tables in crucial subjects, while our schools became the most segregated in the world, with Britain’s immigrant children clustered in the most disadvantaged schools. Primary school class sizes were bigger only in places such as Turkey and Chile, and there was an alarming rise in children not in education, employment or training. Taxpayers failed to get value for money and Labour’s policies had little impact.

Labour will never understand that it is not just about money; it is about leadership and structure. We have some amazing headteachers in Hastings and Rye. I will not name them, but they know who they are, and they work best with the support of positive and effective Government policy, and with the support of their academy trusts. In Hastings and Rye, 32% of schools were rated as being good or outstanding in 2010, compared with 82% in 2022. There is more work to do, but it can be done, as we have seen from the Conservative Government’s record, without destroying our valuable independent sector.

I apologise to Munira Wilson and Jim Shannon for not calling them earlier.

Thank you very much, Mr Henderson; it is a pleasure to serve under your chairmanship. I congratulate the hon. Member for Northampton South (Andrew Lewer) on securing this debate.

My Liberal Democrat colleagues and I aspire to a scenario in which the offering in all our state schools is so high—so superior—that parents do not feel compelled to send their children to the independent sector. It would be an education system that enables every individual, no matter their background or their needs, to flourish, succeed and fulfil their potential, wherever they are educated. But as liberals, we are also a party that has always championed choice, and it is important that parents are able to choose where their children are educated, and independent schools should always be one of those choices.

Let me be clear: we do not support ending the VAT exemption for independent schools, for the very simple reason that we do not support taxing education. As we have already heard, all education provided by an eligible body, including university education, music lessons and tutoring sessions, are exempt from VAT, and we would not want VAT or any other tax to be charged on any of these things. However, there needs to be a quid pro quo. Independent schools should give back to their local community, in order to retain that right; and, as we have heard, many already do. There are many excellent examples of collaborative work around the country. In my own constituency, Hampton School and Lady Eleanor Holles School have an exemplary partnership with Reach Academy in Feltham, sharing staff time, and mentoring and coaching of pupils for medical school and other university places. The relationship is about partnership and sharing not just swimming pools and theatre spaces but, as I have said, specialist teachers and specialist facilities.

That sort of ingrained partnership work benefits both the state sector and the independent sector, and it needs to become the norm for all. Removing the VAT exemption from independent schools would reduce partnership work and also hit parents who have felt that, for whatever reason, the state sector cannot meet their children’s needs, especially if they have additional needs but do not have an EHCP. I know of many examples of parents who have scrimped and saved, or used a little bit of inheritance that they may have had from their own parents, to send their child, who is not thriving in a state school, to the independent sector, where they are able to thrive. As we have heard, many independent schools are not the Etons, the Winchesters or the Harrows; many are small schools with fewer than 400 pupils.

It is a pleasure to serve under your chairmanship, Mr Henderson. I congratulate my hon. Friend the Member for Northampton South (Andrew Lewer) on securing this debate.

I draw the attention of the House to my entry in the Register of Members’ Financial Interests. I will declare an interest of three types: my partner is the headteacher at a prep school; she also owns a house that backs on to one of the best-performing state schools in Surrey, so inevitably her house price will go up when selection for that school becomes selection by house price rather than by academic achievement or fees; and I myself went to an independent school—my father paid a fortune for this accent.

I would say two things about this. Economically it is not sensible, and educationally it is not sensible either. Prep schools in particular are already a fragile ecosystem, and most have around 150 to 250 pupils. My hon. Friend the Member for Northampton South talked about an impact assessment of what happens if a few pupils drift away. I will tell hon. Members what happens if 10 or 15 pupils leave a fragile prep school. That school is perhaps not paying market price for its teachers’ salaries, and it has already opted out of the teachers’ pension scheme, which accounts for around 28% of salaries.

Independent schools are the only ones paying in—it is a Ponzi scheme—and some actuaries predict that that figure will go to 40% because there will be more failures. If 10 or 15 pupils leave that sort of school, it collapses. There will then be 150 pupils who have to get educated under the state system in that area, which may be a rural area with a small state school. There may be 1.1 million vacancies in state schools around the country, but they are not equally distributed: something like 20% of secondary schools are over capacity. Those are the best ones—the ones that people want to get into.

Congratulations, Mr Henderson; it is a pleasure to serve under your chairship. I also congratulate the hon. Member for Northampton South (Andrew Lewer) on raising the issue.

In Northern Ireland, schooling is slightly different, in that we still have a transfer test that allows entrants into grammar schools. For that reason, there is not as great a preference for private schools as there would be were grammar schools to be removed. However, I am thankful that the DUP, with a now-working Assembly, has a Minister in place to protect the education system and retain grammar education for people of all classes and backgrounds.

To declare an interest, back in the ’60s—I probably go back further than nearly anybody in the Chamber—my mum and dad sent me to a boarding school in Coleraine, which gave me five years of good education. I am incredibly indebted to my mum and dad. In the ’60s especially, we had no holidays, and our car was an old banger that was kept forever—just so that their sons could have an education. I thank them for that. It gave me a great chance in this world, and I appreciate it.

Taxing private schools out of existence is not the route to take. The education of children is charitable in the extreme, and the only profits that are made are found in well-rounded children and well-paid teaching staff, which should be the goal of every school. That is what we should be looking at—nothing else. We should not achieve that goal by raising fees to such an extent that only the most elite can afford schooling, as in schools in Switzerland, for example.

The boarding school on the periphery of my constituency of Strangford is Rockport School, in North Down constituency. It draws a number of international students to its doors. That can only be good for the local area. It also generates money, cultural exchange and social engagement. I would hate to see that great school—its headteacher, Mr George Vance, cut his teeth at our local grammar school, Regent House, in my constituency —left in a position in which fees rise at an exorbitant rate and the benefits of the school are lost. That would be a tragedy.

It is pleasure to serve under your chairship, Mr Henderson. I thank my hon. Friend the Member for Northampton South (Andrew Lewer) for bringing forward this debate.

I will focus on the consequences of removing the current VAT exemption for independent schools. It is clear that this change would lead to a rise in school fees, as schools are forced to pass on the cost to parents in order to keep running. That would immediately mean that many parents, who may only just be able to afford the fees as they stand, would no longer be able to continue sending their children to private school. In fact, I calculated that one of my local Nottinghamshire high schools would lose around 20% of its children. Smaller schools would struggle to survive at that rate and may close. That would mean job losses and loss of choice for local parents regarding their child’s education.

I was recently contacted by my constituent, Dr Sharmini, a local school governor who is incredibly concerned about the potential change. She emphasised that it is not the most wealthy and their children who will be affected, but parents who work incredibly hard and make sacrifices to send their children to independent schools.

It is important to emphasise that this change would also have a knock-on effect on non-fee-paying schools, which would see an increase in pupils. That could mean larger class sizes and greater resources being required in non-fee-paying schools. It may also result in children having to move schools in very short time spans.

I am a veteran, and this is the sort of thing that would affect military families. They may have to move mid-school year, and they make good use of independent schools and boarding schools because of that. This change will have a large effect on the lives of children who will have to move. We are removing children from their teachers and friends, and for many that will be very distressing.