Lord Mohammed of Tinsley (LD)

My Lords, I join other noble Lords in welcoming the noble Lord, Lord Lexden, back to his rightful place and thank him for securing this debate. I declare the interest, as other noble Lords have done, that I did not go to an independent school. I went to Park House comprehensive school, which sadly is no more; it was demolished many years ago. I was not here two years ago when the debate around independent schools and VAT took place, but I suspect that those who were here have probably heard some of the old speeches being brought back in. I thought today’s debate was about the impact of VAT, so I am going to stick to that. The more important questions are about its impact and how properly to evaluate whether the assumptions on which it was based were correct. My understanding is that, since January 2025, private school fees have been subject to VAT at 20% while, from April 2025, most charitable independent schools in England have lost their 80% business rate relief. The Government estimated that VAT would raise £1.5 billion in 2025-26, rising to £1.7 billion by 2029-30, while the business rate measure was expected to raise a further £70 million to £90 million a year. As Liberal Democrats, we believe profoundly in equality of opportunity. A child’s educational opportunities should not be determined by the wealth of their parents or the postcode in which they happen to be born. The long-term answer must be a state education system in which every child can access an excellent school with properly funded SEND provision, excellent teachers and genuine opportunities to progress. But we should not confuse that long-term ambition with the immediate question of whether this particular policy is delivering what was promised. There are approximately 560,000 pupils in independent schools in England. The latest figures show that that number fell by about 3.8% in the year to January 2026. Total pupil numbers across all schools also fell by 1.2%, reflecting wider demographic changes. This distinction matters. Before implementation, HMRC estimated that VAT would eventually lead to 37,000 fewer pupils in independent schools, of whom approximately 35,000 would move into the state sector. It estimated that the additional cost to the state sector would eventually reach around £270 million a year. The OBR similarly estimated around 35,000 fewer private school pupils and around £300 million in additional state school spending. There are important unanswered questions. How did the modelling move from 37,000 fewer pupils in independent education to approximately 35,000 additional pupils in the state sector? What assumptions were made about where those children would go? At what ages would they transfer? Would they enter primary schools, secondary schools or sixth forms? How would the impact vary geographically? How many would be home educated or leave the UK education system altogether? These are not technical details. They determine the actual cost and consequences of the policy. I am particularly interested in the figures used for the cost of an additional state school pupil. If we are going to assess whether the policy represents good value for money for the taxpayer, we need to know whether the estimated cost captures the real marginal cost of additional pupils, including buildings, capacity, teachers, SEND and high-needs provision, and post-16 education, or whether it is essentially an average funding figure. There is another issue that deserves much greater attention: the children and families behind the statistics. I have spoken to parents in my home city of Sheffield, and to a few friends here in London, who have made enormous sacrifices to pay independent school fees. They do not necessarily regard themselves as wealthy. Some have given up holidays, delayed moving house or made other financial sacrifices because they believed that their child’s education was worth that commitment. Some families who have historically just managed to afford fees may now be unable to do so. The impact may be particularly significant for children receiving bursaries or scholarships. We should not assume that the consequences of higher fees fall equally across the independent sector. A very wealthy family may be able to absorb the substantial increases, but a family already stretching its finances to keep a child at a particular school may not. I also want to raise the question of teachers. One of the arguments for the policy is that revenues raised will support state education. This is entirely legitimate, but if we want to improve educational outcomes, we need to ask what happened to the teaching workforce? I hope that, when the Minister rises, she will address this issue. The independent sector employs teachers who could work in state schools. If independent schools respond to higher costs by reducing staffing, while state schools simultaneously struggle to recruit and retain teachers, the consequences deserve careful examination. The Government’s original modelling assumed that schools would absorb some of the costs, pass on some through higher fees and make efficiencies. The OBR estimated an effective VAT rate of 15.4%, with roughly two-thirds of the cost passed on through fees. HMRC estimates average fee increases of around 10%, although it recognises substantial variation between schools, so what has actually happened? The Independent Schools Council reports that among schools responding to its survey average fees increased by 4.4% between January 2025 and January 2026, before VAT and nursery fees. We now have the beginnings of evidence but not yet the complete picture. That is why I believe the Government should commit to a proper post-implementation evaluation. I am grateful to the Association for Families of Independent Schooling for drawing attention to this issue for me. I do not suggest that this analysis should simply be accepted; indeed, the same principle applies to every source of evidence in this debate. The answer is not to commission a review designed to reach a predetermined conclusion; it is to commission an independent and credible assessment of the evidence, assumptions, modelling and forecasts and test them against what has happened since January 2025. We need to examine pupil numbers, destinations, school closures, fee increases, bursaries, staffing, geographical effects, SEND provision and additional costs to the state sector. We should also assess the combined effects of VAT and the removal of business rate relief rather than examining each measure in isolation. The Government made a significant policy intervention in education and taxation. It is entirely reasonable for Parliament now to ask whether the evidence is matching the forecasts, so I have two questions for the Minister before I sit down. First, what monitoring and evaluation of the original assumptions and forecasts have taken place, who is responsible for that work and when will the results be published? Secondly, will the Government consider commissioning an independent review of the evidence, assumptions, modelling and forecasts underpinning these reforms, tested against the evidence emerging since implementation? If these measures are to be justified by the benefits they are intended to deliver for state education, we owe it to taxpayers, parents, teachers and, above all, children to ensure that those benefits are measured properly. We should follow the evidence, wherever it takes us.