The Minister of State, Department for Education and Department for Work and Pensions (Baroness Smith of Malvern) (Lab)

My Lords, I thank the noble Lord, Lord Lexden, for securing this debate and for the long-standing interest he has taken in independent schools and the families they serve. It is very good to have him back on the Benches, and I wish him well. I will respond fully and with evidence to the points raised. Before I do, I will comment that, while I understand there are very strong views about this issue, I cannot help thinking that, more characteristically for this House, it might have been better with a bit less questioning of the character and motives of me and my colleagues—verging in one case on unparliamentary language, in my view. The Motion before us asks this House to take note of the impact of VAT and other tax changes on private schools since 1 January 2025. It is right that we should do so. These were significant reforms, debated extensively inside and outside Parliament before their introduction, and it is entirely proper that we continue to scrutinise their effects. The Government’s position, however, remains clear. Education is central to our mission to break down barriers to opportunity. We want every child, regardless of background, circumstance or where they happen to live, to have access to an excellent education. That means ensuring that public funding is directed where it can have the greatest impact and that difficult decisions about taxation are taken fairly and responsibly. It was for that reason that the Government ended the VAT exemption on private school fees from 1 January 2025 and removed charitable business rates relief from private schools in England from April 2025. As the Government set out at the 2024 Budget, these measures combined would raise more than £1.8 billion a year by 2029-30 to help support investment in public services, including education. The Government remain confident in these costings, which were certified by the independent Office for Budget Responsibility. In November 2025, the OBR revised the expected yield up slightly by an average of £40 million per year, so these measures are raising more than was expected when they were announced. This was, of course, also a manifesto commitment. The Government set out in their manifesto a range of ways in which the revenue earned would be used. While it is not possible to directly link this spending, as it is non-hypothecated, it is appropriate to identify some of the links between those areas identified in the manifesto and increased spending and provision. We are spending more than has been raised to improve our schools and deliver on our commitment to the 94% of children who attend state schools. We are increasing our overall core schools budget by £2.3 billion in 2026-27. We have now achieved 71.6% of our target of recruiting 6,500 additional teachers. There are now 4,654 more teachers: 3,008 more teachers in secondary and special schools in 2025-26, and 1,646 more teachers in further education than in 2024-25. This year, we are investing £18 billion in post-16 education and skills. That includes funding for careers and work experience, with over £86.4 million of funding for careers-related activities. In July 2025, we announced that funded support for the Nuffield Early Language Intervention programme would continue for a further four academic years. We are building and expanding nurseries in schools by providing £82 million of capital funding to over 600 primary and maintained nursery schools across phases 1 and 2 of the school-based nursery programme, which will create over 11,000 new nursery places by September 2027. As of March 2026, 60% of pupils in schools and learners in further education in England are covered by a mental health support team. As part of the national youth strategy, the Government are committed to establishing 50 Young Futures hubs by March 2029. These are all things that we said in our manifesto we would do, and we have done them. I say at the outset that the Government recognise the valuable contribution many private schools make to our national life. Private schools educate hundreds of thousands of children, provide specialist provision, deliver bursaries and scholarships, and work in partnership with state schools and local communities. Nothing in these reforms was intended to undermine those contributions, and nothing in the Government’s approach seeks to remove parental choice. I also understand the international impact of our private school sector. That is why, in Saudi Arabia earlier this week, I raised it and pushed for further opportunities for our private schools. The question before us is not whether private schools make a contribution; they undoubtedly do. The question is whether it is right that private education should continue to benefit from tax breaks that are not available to most other goods and services. This Government concluded that it was not. It is important to place recent changes in their proper context. The Government always expected that applying VAT to private school fees would lead to some movement of pupils into the state sector. That was explicitly factored into our analysis before the policy was introduced. Our estimate remains that around 35,000 pupils may move into state-funded education over the course of this Parliament. That represents fewer than 0.5% of the state school population. At the same time, we must recognise the wider demographic picture. Falling birth rates are affecting pupil numbers across the education system. The latest available data show that overall pupil numbers have fallen across all sectors, not solely within private schools. It would therefore be wrong to attribute every change in enrolment solely to the introduction of VAT. The evidence points to a combination of factors, including demographics, local market conditions and broader economic pressures. As Ministers have consistently stated, the trends seen thus far remain broadly consistent with the assumptions underpinning the original policy. It is, of course, sad when any school closes. I understand the impact on parents, children and communities. School closures, however, can be influenced by a range of factors, not just the VAT policy. Although we accept that VAT may have compounded pressure already on private schools, closures cannot be attributed to it alone. Private schools, like other organisations, can close for a number of reasons. Demographic change, financial sustainability, governance issues, regulatory concerns and mergers have all contributed to school closures long before these reforms were introduced. Given my understanding particularly of the history of Malvern St James, I thought that at least a couple of the examples used by the noble Lord, Lord Lexden, were perhaps not the best examples of the impact of VAT and possibly had more to do with the new ownership of those schools. The Government’s assessment remains that closure rates are within historical patterns and do not demonstrate systemic failure across the sector. On average, 75 private schools closed per year over the 20 years before the tax changes. A total of 60 schools closed in the 2024-25 school year and 67 closed in 2025-26—below the average of previous years. We also note that private schools have continued to open. The picture is therefore considerably more nuanced than some commentary has suggested. The Government have continued to monitor place availability closely. There remains substantial spare capacity across the school system, with hundreds of thousands of unfilled places nationally across primary and secondary schools. In England, overall pupil numbers have declined by 1.2% between 2025 and 2026, so state-funded primary and secondary schools have fewer pupils and sufficient capacity. For the new school year, 98.7% of applications to primary school led to an offer from one of the preferred schools, and the same is true for 96.4% of secondary applications. Both those figures represent an improvement on last year. Local authorities retain statutory responsibility for securing sufficient school places and continue to plan effectively for local demand. To date, no authority has suggested that pupil movements associated with these reforms have created pressures that cannot be managed within existing arrangements. The Government therefore remain confident that the state sector can accommodate any additional pupils arising from the policy. That reflects the position that Ministers have consistently set out to Parliament. Concerns about children with special educational needs deserve careful consideration, and I recognise the points that the noble Lord, Lord Shinkwin, made, not only in his contribution today but in previous debates and, as he says, in his Questions. The Government have always recognised that children with SEND can require highly specialised provision and that stability of placement is particularly important. That is precisely why protections exist for children whose private school placement is named in an education, health and care plan and funded by a local authority. In such circumstances, local authorities are able to reclaim the VAT incurred. Those arrangements remain in place and continue to provide protection for some of the most vulnerable children in our education system. We will continue to monitor outcomes closely and remain committed to improving support for children and young people with SEND wherever they are educated. I note that the tax changes in fact have not led to fewer pupils with SEND at private schools. Indeed, the number has increased slightly. That includes those without EHCPs, the number of whom at mainstream independent schools has grown from fewer than 98,000 in January 2024 to over 101,000 in January 2026. The majority of children with SEND attend state-funded schools, and we want every child to have the best start in life, with help available earlier and locally when families need it. Every Child Achieving and Thriving, the schools White Paper published in February, set out our intentions. We will ensure children get the right support in their early-years setting, school and college. We will invest in new training for all staff and better buildings and equipment and make sure that every setting has access to expert professional support when it is needed. We will create a new offer for children who need additional support, called “targeted” and “targeted plus” layers. Children in early-years settings, mainstream schools and colleges can benefit from education and health professionals without long waits for assessments. For children and young people with complex needs, we are developing new specialist provision packages, designed with experts and tested with parents, to set out exactly what support and resources are required for specific needs. Parents should of course be able to choose where their children are educated, but we must move away from a system that forces the parents of children with special educational needs and disabilities to feel they have to move their children, where they can afford to do so. We will restore parents’ trust in the SEND system. These changes will be introduced gradually, but we are investing £7 billion more on SEND compared to 2025-26. What matters now is that we continue to examine the evidence carefully, as noble Lords have called for today. The Government have done so throughout implementation and will continue to do so. We will keep monitoring pupil movements, school capacity, school closures, SEND provision and the wider health of the sector. Where concerns arise, they will be considered seriously and responsibly. However, after more than a year of implementation, the evidence available to us does not suggest that the fundamental assumptions behind the policy were misplaced. The education system continues to function effectively, state schools continue to have capacity, the independent sector continues to educate hundreds of thousands of pupils and the reforms continue to support the Government’s objective of raising funding to improve opportunities for children and young people across the country. Once again, I thank the noble Lord, Lord Lexden, for bringing this important issue before the House and allowing me to respond with evidence and a commitment to ensuring that we continue monitoring this policy.