VAT on independent school fees may make “an elitist system more elitist”, says Labour MP
MPs have debated an e-petition opposing the imposition of VAT on independent school fees and the removal of business rates relief for these schools. The government said the policy was necessary’ to raise revenue, but a Labour MP suggested smaller, less wealthy schools should be exempt from the policy.
John Lamont (Con) started the debate by citing the Independent Schools Council that said the policy is “a blanket tax that assumes independent schools are a stereotype”. He suggested that the policy lacked thorough consideration and could harm students, adding that not all parents of independent school students are ‘wealthy’. He said “it is wrong that the government are potentially taking that choice away or making it much more difficult for families to send children to the very good schools”.
Lamont believed that if fewer pupils go into the independent sector due to these changes, the government will have fewer opportunities to charge VAT, so the policy will not raise the “anticipated revenue”.
Damian Hinds (Con) said: “The government were genuinely in the market for tax rises, especially tax rises that did not break the rules they had set for themselves on income tax, on VAT and… national insurance contributions”. He criticised the policy and suggested that the government had made five significant errors in proposing it. These errors included the belief that schools would be able to absorb the tax increases, a failure to consider the cumulative effect of various cost pressures on schools, neglecting the impact of geography, not segmenting the market effectively, and overlooking the needs of specific groups of children and families that the government should aim to support.
Dr Rupa Huq (Lab) voiced the concerns of some of her constituents about the changes, suggesting that this policy will make “an elitist system more elitist”. She suggested that schools such as Eton would be able to “cash in on windfalls from the new VAT rules… they can claim it back on capital projects, such as buildings and land acquisition, over the last 10 years. All the VAT on costs, which is now 20%, is recoverable when factoring in non-business use, so the policy will basically hand money back to schools such as Eton from Treasury coffers.”
Huq suggested implementing VAT on fees “in a slightly different way, based on turnover—so doing it for the enormous schools that can afford it, but not for smaller ones that have been caught in the trap.”
Rachel Gilmour (Lib Dem) suggested that due to these changes independent schools may no longer be able to offer their facilities or provide bursary places to disadvantaged children from low-income households.
Other MPs including Richard Tice (Reform), Gagan Mohindra (Con) and Christine Jardine (Lib Dem) also criticised the government’s decision, with Tice claiming the policy will raise “the square root of net zero” and “put extra costs on to the state sector”.
Likewise, Gregory Stafford (Con) believed that there are not enough places in the state sector, saying that the policy is “a direct assault on the educational choice and social mobility”. He urged the government to reverse the “punitive tax” and champion a system that invests in the future of every child.
Another Conservative MP, Jack Rankin, expressed concern about the impact of the policy on military families and the 30,000 SEND pupils who are currently in independent schools. He argued that “it is clear that getting an EHCP [education, health and care plan] is already an uphill struggle, and taxing independent schools will create the most regressive possible outcome”.
“My advice would be that, if they [government] want to tax people who have more money, they should tax people who have more money, rather than taxing education. The problem with taxing education is that… it catches people who are sacrificing so much to invest in education”, said Neil O’Brien (Con). He claimed that since the Labour Party has come to power, 43 schools have closed or announced closure and the impact of the policy has now seen 10,000 pupils leaving this academic year in the first term.
The Parliamentary Secretary to the Treasury, Torsten Bell, defended the government’s position, highlighting that reforms to VAT and business rates are expected to raise about £1.8 billion a year. He said the change was ‘necessary’ while recognising that it increases costs for some parents.
On the issue of pupils moving schools, the minister believed that the number of students who will switch to the state sector would be less than 0.5% of all UK state pupils and the state sector will be able to accommodate it. Bell concluded that the government would ensure that those pupils with the most acute additional needs, whose needs can be met only in private schools, will be ‘unaffected’.
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