MPs slam Labour VAT on school fees proposal
At a Westminster Hall debate held on Wednesday 21 February, the issue of VAT on independent school fees was discussed. MPs from a number of different parties expressed their concerns about the Labour proposal, arguing that such a move could put more pressure on state schools and further increase the ‘elitism’ of independent schools.
Andrew Lewer (Con), Chair of the all-party parliamentary group on independent education, began the debate by highlighting that independent schools generate £5.1 billion in tax revenue and save taxpayers more than £4 billion each year.
Lewer considered the policy “ill-thought-out”, and said: “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.” He argued that independent schools pay their ‘fair share of taxes’ and parents who pay school fees have also already been taxed on their incomes.
Lewer argued that if Labour went ahead with this policy, private schools would become ‘more elite’ as only rich people would be able to ‘absorb the 20%’ fee increase. He also questioned the aim of the policy, in particular why Labour were proposing taxing the supply of children’s education but not of education for adults. He cited Institute of Fiscal Studies (IFS) data which, he said, shows that the policy would raise “half a billion pounds less than Labour committed in spending pledges”.
The Conservative MP also discussed the impact of the policy on children with special education needs and small faith schools. He argued that these small schools cannot absorb VAT and may face closure.
Dr Neil Hudson (Con) criticised Labour's proposal as “short-sighted”, arguing that it would put more pressure on local state schools as parents might be forced to withdraw their children from independent schools.
Jonathan Lord (Con) raised concerns about his constituents' inability to afford private school tuition and also predicted an increase in students attending state schools.
Sally-Ann Hart (Con) echoed her colleagues’ concerns and said she believes that the policy is based on the ‘politics of envy’ which would be harmful for both state and independent schools.
Munira Wilson (Lib Dem) explained that the Liberal Democrats would not support ending the VAT exemption for independent schools because they do not “support taxing education”. She argued that this policy could reduce the partnership work between private and state schools and would be a burden for parents who felt that state schools could not meet their children’s needs.
Paul Scully (Con), a former minister, criticised the policy too and argued that it is not economically and educationally ‘sensible’. He argued that many independent schools are already in a ‘fragile’ situation and if, for instance, 10 to 15 pupils leave a school due to increased fees the school would not be able to pay the ‘market price’ for their teachers’ salaries and pension scheme.
Jim Shannon (DUP) said “taxing private schools out of existence is not the route to take” and raised concern that the VAT proposal would have a “detrimental” effect on education and the economy.
Darren Henry (Con) said that removing the current VAT exemption could lead to the closure of small independent schools and that would mean ‘job losses’. Moreover, some schools may not be able to continue lending their space and facilities for free to local clubs.
David Simmonds (Con) discussed the impact that VAT change would have on small independent schools which provide therapy for mute autistic children. He voiced concern that this policy would directly ‘hit the taxpayers’ and the availability of the specific specialist provision on which they depend.
The former Home Secretary, Suella Braverman, said if this policy is adopted: “Labour will become the party that kills off social mobility through this tax on aspiration, personal choice and responsibility, and social mobility”.
Robin Walker (Con), Chairman of the Education Committee, requested an update from the Labour Party regarding the ‘specialist settings’ VAT exemption. He asked if it would apply to all settings.
The Shadow Education Minister, Helen Hayes, replied to the debate for Labour. She urged members to ‘look in more detail’ at the IFS’s report which suggests that Labour proposals would have “little effect” on the number of children being educated in private schools, but would lead to a net gain to the public purse of at least £1.3 billion per year.
Regarding exempting all children at special schools from the tax, she argued that could lead to a “loophole whereby any school can claim that it is a special school.” Instead it appears Labour would exempt children with an education, health and care plan (EHCP).
The Financial Secretary, Nigel Huddleston, called the policy "left-wing populist virtue signalling”. He argued that the introduction of 20% VAT on school fees would either ‘push up prices or lead to cutting costs’.
Huddleston explained that if large numbers of pupils from the private schools move into the state school, it would put “pressure on the state sector” and as a result cost taxpayers even more. He added that VAT is a complex area and “it is not simple to make blanket policy without considering the full impact”.
You can read the full debate here.