Contribution
It is a pleasure to serve under your chairship, Sir Alec. I thank all hon. Members for attending, and particularly the hon. Member for Strangford (Jim Shannon) for securing this debate and for his characteristically engaging speech. I am grateful for the suggestions that he made, which have all been noted. I also congratulate his staff member, who is in the Public Gallery, on her super-human efforts with the volume of wonderful speeches she produces. It was great that the hon. Member was able to congratulate her as well. While I perhaps did not agree with the content of the speech given by the hon. Member for Beaconsfield (Joy Morrissey), I admire the speed with which she assembled it here today.
Education matters. It sits at the very heart of this Government’s mission to break down barriers to opportunity, ensuring every child, wherever they live and whatever their background, has the best possible start in life and access to a high-quality education. Our priority is clear: to raise school standards for every child. I believe that this is a priority shared by colleagues across the House, as is clear from the speeches in this debate.
The Government value the contribution that faith schools make to our diverse education system. Faith schools, whether private or state funded, have long played, and continue to play, a really vital role. We continue to work closely with faith school providers, representative organisations and local authorities to find ways to support private faith schools. The Government respect parental choice, and faith schools in the private and state sectors will remain part of that choice.
The truth is, however, that we inherited a dire fiscal situation from the previous Government, and families, including those in faith communities, were dealing with sky-high interest rates, underfunded public services and a broken NHS. That is why we have taken some fair and necessary decisions on tax, which will stabilise public finances and secure the additional funding required to deliver on our commitments to education and young people. The measure that we are discussing will raise essential revenue that will be invested in our public services, such as the £1.7 billion increase to the core schools budget in 2026-27, taking core school funding to £67 billion compared with £65.3 billion in 2025-26.
The Government carefully considered a range of representations made by faith schools, including a proposal for a low-fee carve out. However, the Government concluded that in line with the principles of protecting revenue and fairness, faith schools should remain in scope of the VAT policy. We understand that some parents make the decision to send their child to a private school because of its particular faith ethos, and because they feel that a particular type of school is better able to meet their child’s needs than their place in the state sector. It is the case, however, that all children of compulsory school age are entitled to a state-funded school place should they require one, and of all the faith schools in England, around one third are state funded.
We are also supporting faith groups in their engagement with local authorities to explore options for those private faith schools that are interested in joining the state-funded sector. Where there is a sustainable need, local authorities can bring schools serving particular faith communities into the state sector as voluntary-aided schools, and the school must meet all required standards within the state-funded sector. Since the introduction of the VAT policy, we are aware of one private faith school that has joined the state sector as a voluntary-aided maintained faith school, opening in September 2025.
Furthermore, not all income received by smaller faith schools will be subject to VAT. Some faith schools are likely to be less impacted by changes to private schools tax, where some of their income is derived from other sources, such as voluntary donations or support from religious organisations. That is because VAT is out of scope for donations that are freely given and where there is no reciprocal obligation. That means that some private faith schools may be affected proportionately less than others.
All private schools, including private faith schools, can decide for themselves how to manage the additional cost of VAT. There are a variety of ways in which a school may choose to do that. For example, they may reduce their surpluses or reserves, make savings on non-essential expenditure or, like any VAT-registered organisation, reclaim input VAT on their costs.