Independent Schools: Tax Changes

Question

15:06:00

Tabled by

To ask His Majesty’s Government what assessment they have made of the impact of the removal of the VAT exemption and other recent tax changes on independent schools.

My Lords, on behalf of my noble friend Lord Lexden and with his permission, I beg leave to ask the Question standing in his name on the Order Paper. I declare my own interest as chairman of governors of Brentwood School and president of the Boarding Schools’ Association.

My Lords, the Government published impact notes on the anticipated impact of the VAT and business rates changes affecting private schools. We monitor the impact on the sector and published details of pupil numbers in June 2025. A drop in numbers was expected following these changes and due to other factors, such as demographic decline. The full impact is expected to be realised over several years. Overall, private school pupil numbers remain higher than in 2020, then a record high.

My Lords, documents released during legal action against the Government over the imposition of VAT midway through the academic year revealed that Ministers were warned by officials that theirs would be the most disruptive option for the implementation of this vindictive policy. Why did they callously ignore that advice? Ministers were also consistently warned by the sector that their assessment that there would be hardly any impact on independent schools was ludicrously optimistic. Now, the DfE’s own statistics show a drop of 11,000 in independent school numbers, four times that predicted by the Government, with boarding schools hit twice as hard. Is the Minister not ashamed of the Government’s appalling failure to listen to advice? Will she say sorry to the schools that have inevitably closed, to the people who have lost their jobs and, above all, to those students whose lives have been so cruelly disrupted?

No, because I am proud that this Government are prioritising investment in the 93% of our children who attend state schools. On the point about the legal action that the noble Lord started his question with, that was a legal case won by the Government. It was found that the Government had not, as was asserted during the debates on this, acted in contradiction to human rights legislation. On the final point about the numbers, the Government always said that they thought there would be an increase in the numbers of children potentially coming into state schools. That has been around 3,000, which is exactly in keeping with what the Government said at the time of introducing this legislation.

My Lords, the last Tory Government cut school budgets for 93% of pupils, let our schools run down and end up in a bad state of repair and refused to pay our teachers a proper wage to work in our schools, and yet they have the cheek to worry about a few people in private schools. Does the Minister agree?

My Lords, this Government worry about people in all schools. My noble friend is right that as a Government we have a job to put right some of the underinvestment of the last Conservative Government and to deliver our pledge to ensure that there are 6,500 new specialist teachers in secondary and special schools. That is what we are focused on, and that is what we will be investing in.

My Lords, one of the welcome moves from private schools over recent years has been the extension of their facilities, cultural and sporting, to state schools. Have the Government made any assessment of the outcome for the state sector if they feel financially unable to continue with that?

Of course, it is a good thing if private schools ensure that their facilities are on some occasions open to other people, not least because quite often—and certainly in the case of the town I live in—they occupy an enormously large part of the town. For schools with charitable status, it is in line with that that they demonstrate public benefit to retain it, and engaging in partnership activities with state-funded schools is one way in which they can do that. I hope that will continue for private schools.

My Lords, if we look at certain specialist sectors—that is, those which provide support for those with special educational needs—where the private sector has picked up a lot of the slack, and indeed the Government have paid for those places, are we finding out that people are now going and taking up the education, health and care plans, because you have to have money and understanding to get them quickly, as opposed to paying the fees directly themselves?

Where a pupil is eligible to have an education, health and care plan and that has allocated them a place in a private school, of course the impact of VAT on those schools will not be felt by those particular students. I think the noble Lord is also making a wider point about the need to ensure that we reform the special educational needs and disabilities system, which has forced too many parents to try to seek support elsewhere when that high-quality education and support for their children should have been available in our state schools. That is what the Government are determined to deliver.

My Lords, yesterday the oldest independent prep school in my home city of Leeds, Moorlands, announced its closure after 127 years. Twelve days ago, the renowned Queen Margaret’s School in York, which has been educating girls for 125 years, said that it will close on 5 July, three days before another Yorkshire landmark, Fulneck in Pudsey, which opened in 1753. All three cited increased running costs, with both Moorlands and Queen Margaret’s specifically referring to VAT, increased national insurance and the removal of business rates relief as reasons for closure. Like me, the Minister was educated in the state sector, but will she now apologise to governors, staff, parents and, above all, students in many fine schools across the country facing closure for the damage, disruption and distress being caused by this Government’s cruel policies?

No, I will not, because once again I emphasise that this was a decision made by the Government in order to be able to invest in the over 93% of our children who are educated in state schools. On the point about school closures, yes, every closure of a school is sad; I can understand why people will be distressed if their school closes. I note, however, that it has always been the case that approximately 50 mainstream private schools close each year and that in fact 79 private schools opened in the last year, whereas on average that has been 75 per year in the last 10 years.

My Lords, will my noble friend say a little more about what is happening to school rolls? Is it not a fact that, because of the declining birth rate, rolls are falling generally and there are state schools closing because of falling rolls, as well as private schools?

My noble friend is right about that. In fact, as of May 2024, 84% of primary schools and 76% of secondary schools had one unfilled place or more. I know that people have been concerned about whether there would be an impact on state schools and the ability of parents to gain their first choice. I am pleased, therefore, that the latest data shows that there has been no change in the percentage of children getting their first choice of school. The rate of children getting a place at one of their preferred primary schools is the second highest on record, and it is the highest since 2016 for those going into secondary school. At the same time, we have seen primary class sizes falling.

My Lords, the Minister has twice said that the Government are focused on investing in the 93% of children who go to state schools, but on 11 June the Prime Minister wrote on X: “In the budget last year, my government made the tough but fair decision to apply VAT to private schools … Today, because of that choice, we have announced the largest investment in affordable housing in a generation”. So is it housing or is it teachers? Maybe the Minister can clarify.

We have also, of course, announced in the most recent spending review a considerable increase in the funding available to our schools, a real-terms increase over the period of that spending review. On the point about delivering the 6,500 new teachers, we are already making progress on that, because we were willing to agree the 5.5% pay award for last year and the 4% pay award for this year, and because we were willing to drive forward teacher recruitment and retention, backed by an investment of around £700 million across schools and further education, including additional money for the initial teacher training financial incentives package and to streamline routes into teaching, such as the postgraduate apprenticeship route. That is why we have already seen 2,346 more full-time equivalent teachers in secondary and special schools. That is the difference that Labour decisions and Labour investment make.