Independent Schools: Tax Changes
Thursday, 17 September 2026
Contributions
Motion to Take Note
Moved by
Lord Lexden
That this House takes note of the impact of VAT and other tax changes on independent schools since 1 January 2025.
Lord Lexden (Con)
My Lords, in the autumn of 2024, when I was in better health, I introduced two debates on the imposition of VAT on independent school fees, due to come into effect on 1 January 2025. Most speakers in those debates referred to the grave difficulties independent schools and the families of their pupils would face as a result of Labour’s education tax—the first to be introduced in Britain and, apart from a disastrous experiment in Greece, the first in Europe. The Government added further to the costs of independent schools last year and, in the process, helped jack up their fees—after five years during which fee rises had been lower than wage inflation—by scrapping the exemption from business rates that most of them enjoyed by virtue of being charities. Just like the VAT exemption, both were scurrilously misrepresented by Labour as tax breaks. Independent schools were hit again by the increase in employers’ national insurance contributions. State schools received additional public funding to off-set the higher NIC bill; independent schools did not. The object of today’s debate is to consider how independent schools, of which there are some 2,500 in total, are faring in the face of Labour’s unprecedented financial assault upon them. I declare my interest as a former general secretary of the Independent Schools Council and the current president of the Independent Schools Association, one of the ISC’s constituent bodies. The ISC represents some 1,400 schools, in which around 80% of the pupils in the independent sector are educated. The Independent Schools Association has some 700 schools, a large slice of the total, in its membership. As I have stressed on previous occasions, it is among these 700 schools that many of the small schools, so prevalent in the independent sector today and so valued by their local communities, are to be found. Large, well-known schools that fascinate the public and the media are the exception, not the rule. Article after article and survey after survey have provided evidence of the strain that the Government’s education tax is placing on hard-working families. The latest survey by Parentkind found that 40% of parents with children in independent schools have been forced to cut back on household spending to meet the cost of their children’s education. These are the people who work extra hours, forgo holidays and put off replacing the family car because they believe an independent school is right for their child. The education tax increases the sacrifices that they have to make. The independent sector’s contribution extends far beyond this country. Independent schools are a major export success story and an important source of British soft power, helping attract talented young people to the United Kingdom and enhance Britain’s reputation overseas. This is something the Government should be championing, not chipping away at. Together, independent schools generate more than £3 billion annually through education, exports and transnational education, despite intense international competition. At home, independent schools stand ready to use their expertise to help raise standards and deliver national education priorities. One clear opportunity is for them to work with state schools in meeting the Government’s new enrichment benchmarks. These expect pupils to have access to civic engagement, arts and culture, outdoor adventure, life and future skills, and sport and physical activity, but the Government have confirmed that no dedicated funding will be provided to schools to deliver this ambition. Independent/state school partnerships already make a major contribution in these areas. In the past year, more than 1,000 ISC schools have worked with state school colleagues in nearly 10,000 partnership projects across sport, music, the arts and academic collaboration. These range from sharing facilities and running joint lessons and events to seconding staff and helping state school sixth-formers with university applications. All represent invaluable opportunities for children at no cost to the state. Sadly, the Government have shown remarkably little interest in supporting and strengthening this work, even as they place greater expectations on schools to broaden pupils’ opportunities. The Government claim that falling pupil numbers in England’s independent schools reflect the wider decline in the school-age population. The figures do not bear this out. Pupil losses in independent schools have been more than triple the decline in the school population as a whole. The Government also trot out the line that more independent schools have opened than closed since the introduction of the education tax. This disguises the importance of the loss of mainstream independent schools, many of them centuries-old centres of academic excellence. Mainstream schools account for 82% of the 106 school closures so far under the impact of the education tax. The schools that have opened, though numerically larger, are for the most part very different. The independent sector now has many more special schools, catering for children with acute and complex special needs, which account for some 90% of the newcomers. The growth of specialist provision is both welcome and necessary at a time of rising demand for SEND support, but the Government failed to acknowledge the change in the character of the independent sector that this trend represents. Many places in special schools are commissioned and funded by local authorities. Where an independent school is named in the child’s education, health and care plan, the local authority can also reclaim the VAT. The Government may argue that closures are in line with long-established trends, but the average capacity of the schools that have closed since the introduction of the education tax has been almost double that of schools which closed in the preceding 10 years. The casualties of the Government’s education tax include Malvern St James in Worcestershire, which closed after 133 years. Durham High School closed after 142 years, Ruthin School in Denbighshire closed after 742 years and Thetford Grammar School in Norfolk closed after nearly 1,400 years. Labour have been in government for little more than two years, yet the damage they have done is considerable. Every school closure means lost jobs, disrupted local supply chains and children losing a community that may have impacted their lives for years. The effects are often particularly severe in rural areas. Reports on closures refer to distraught teachers, anxiety among parents forced to find a new school at short notice and children having to move midway through their A-levels. Mr Campbell Harrison, head of St Gerard’s School in Bangor, which closed in July after more than 100 years, told me: “VAT, the loss of business-rate relief and higher national insurance pushed us over the edge. More than 30 members of staff lost their jobs, with some unable to make mortgage payments and few comparable posts available locally. We gave families as much notice as we could so that the children had a chance to find places before September. Some families have struggled to find suitable places, while some children now need to travel an hour and a half each way to get to school—an exhausting three-hour daily commute for a child. In an area where employment is already scarce, the closure has taken more than £1 million a year out of the local economy”. That is what Labour’s education tax means in practice. Ministers have called the VAT exemption a subsidy, but of course the truth is the reverse. Independent school parents subsidise the state by educating their children at no cost to the taxpayer. Every child who moves into the state sector will cost the taxpayer more than £8,500 a year. The more children are forced by the education tax to leave independent schools, the higher the cost will be, and the proceeds of the tax will drop dramatically. The evidence from Scotland is stark. The introduction of VAT there is already estimated to be costing more than it is raising. Analysis by BiGGAR Economics, commissioned by the Scottish Council of Independent Schools, estimates that VAT on independent school fees will cost the Scottish taxpayer some £16 million this year. Over time, the annual cost is projected to rise to a staggering £181 million. Labour claimed that this policy would help fund the recruitment of 6,500 new teachers. Ministers may well try to shift the manifesto goalposts to suit their current communication strategy, but the stark reality is that the number of full-time equivalent teachers in state schools has fallen by 2,322 since 2023-24. With teacher numbers down, where is the money going? The former Prime Minister, Sir Keir Starmer, even suggested that the education tax had enabled the Government to make “the largest investment in … affordable housing in a generation”. Labour may dislike independent schools, but the public take a different view. Opinion polls show that more than half of respondents believe that independent schools have a positive impact nationally and in their local communities, with fewer than one in 10 believing that the impact is negative. Independent schools are part of our cultural heritage, a source of educational excellence, a great British success story and a powerful instrument of soft power around the world. The Government should recognise that they are a national asset worth protecting. The sad truth is that the Government will not admit that this policy was never driven by economics. It was driven by ideology—by the old prejudice that independent schools are an enemy to be overcome rather than a national asset to be supported. They are taxing families to the hilt, placing an impossible burden on some of our finest institutions and adding pressure to a state system which is already at capacity at secondary level. The stark consequences are now before us. In assessing the effects of their education tax, the Government continue to rely on HMRC’s tax information and impact note, which was drawn up almost two years ago—before the policy took effect. It must be reviewed. The Government may point to the Office for Budget Responsibility’s slightly higher revenue forecast in 2025, but that revision largely reflected schools having to pass on more of the tax than the Government originally expected. It does not take account of the subsequent fall in pupil numbers, further school closures or the additional costs falling on the state sector. A review is essential. There is also a need for a clear and robust methodology for estimating the revenue raised by VAT on independent school fees in each tax year. Last weekend, the Secretary of State said: “My interest is in the 93 per cent of kids who are educated in the state sector”. Does she have no interest in the more than half a million children educated outside of it, and in their families? Does she have no interest in the hundreds of teachers who have lost their jobs, or the countless supply chains that have been affected? Does she have no interest in the wider economic consequences of this policy, or the damage to our international education exports? She should begin to show some interest, because surely every child and every school matters. I beg to move.
Lord Alton of Liverpool (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Lexden, not least because we have missed his well-informed and always wise and measured voice. It is good to see him back in his customary place. I supported him when he spoke in September 2024, and I do so again today. I especially endorse what he said at the end of his remarks about the need for an independent review of the assumptions that were made in introducing this policy. It does not concern only this issue, but we do not do enough post-legislative scrutiny. We push through legislation and new policies, and too often we do not go back to see whether they did what was on the tin and what was expected of them. I ask the Minister to comment on the specific figure, which the noble Lord cited, of the cost of placing a child in the state sector. I think the figure we have been given in the past was £7,690 for each additional state school pupil. How was that figure derived and applied? Do the Government still stand by that figure? For the record, I did not attend an independent school. At the end of the Second World War, my father was a demobbed Desert Rat who married my mother—an immigrant whose first language was Irish. I am a typical grammar school boy, whose family was rehoused to a council flat on an overspill estate. My parents and wonderful teachers were the reason Iusb became a beneficiary of the Education Act 1944. I was the first from either side of my family to enter higher education. I believe it is the duty of the state to facilitate quality educational opportunities for all, not for 93% or for 7%. As a teacher, I taught in the voluntary-aided and state sectors, and I have been a governor of schools in the voluntary-aided and state sectors. My children and grandchildren have had a mixture of voluntary-aided and independent education. In another place, I fought general elections with a commitment to increase income tax based on the ability to pay by a penny in the pound to improve state education. I have never seen this as a binary or ideological issue, and I have always supported the independent sector and challenged the ideological caricature of independent schools as mini-Etons, replete with straw boaters, top hats and tails. The noble Lord, Lord Lexden, referred to exceptions not being the rule, and I agree. That caricature is simply not true and does not lead to considered debate. It is simply wrong to suggest that all parents with children in independent schools are wealthy. That is why I opposed the targeted VAT tax, which takes little account of the ability to pay or of individual circumstances. Some middle-income families stretch their finances significantly and make great sacrifices, and they feel the 20% increase acutely. Some children in independent schools come from straitened circumstances. That money should be an impediment is one of the reasons why, when I was in the House of Commons, I broke ranks and voted for the assisted places scheme. I would like to see more assisted places instead of none. In our 2024 debate, I pointed out that 168,000 children were receiving financial support from independent schools, often through bursary schemes, while 10,000 were paying no fees. In 2026, the Independent Schools Council’s census established that ISC schools provided £538.5 million in means-tested fees assistance to pupils, with more than half of pupils receiving means-tested bursaries having over half of their fees remitted. That is remarkable and something to celebrate, not denigrate. Pushing schools to the brink of financial ruin jeopardises the good that these schools can do, and it is often the beneficiaries who suffer, not those with ocean-deep pockets. I will illustrate what I mean. Last Friday, I had a conversation with a bright young woman who told me that her grandfather had won a challenging custody battle to bring her up. He used his resources to provide a stable and fulfilling education in an independent school for his granddaughter. In parentheses, where such schools have boarding facilities, a really committed pastoral team can literally be a lifeline. In reply to a Written Question I tabled to the noble Lord, Lord Livermore, which was answered on 19 September 2024, the Government confirmed that a 20% VAT education tax would “also apply to boarding services”. It is hard to see how pricing families out of such services meets the Government’s worthy objective that every child should get the best start in life. A Cabinet Minister recently discussed her decision to send three of her own children to independent schools. In putting her children’s needs first, she is doing the right thing and should be defended for doing so. Being able to exercise choice, and not defending ideology, should be axiomatic. Let us also be clear that, in interrogating the economic justifications advanced in favour of this policy, we muddied the waters too much. The statistics are worthy of intense scrutiny. For example, the excellent Library note that we have been provided with for today’s debate says that “published figures do not fully capture the impact of the tax changes because they include independent special schools, which are largely unaffected by the new measures”. Simon Hyde, CEO of the Heads’ Conference, said this is creating “a confusing picture”. Yes, there have been some new schools, but 90% of new openings have been special schools, while 106 mainstream schools—some of which the noble Lord, Lord Lexden, referred to, and which have long and historic roots—have been closed. According to the department’s own figures, since 2024 the cohort of children in independent schools has fallen by 33,231—double the estimate of 14,000 that your Lordships were given back in 2024. There are now 560,300 pupils in independent schools—nearly 4% down on the previous year. The largest reductions were seen in the key intake years: 5.2% in reception year, 5.6% in year 7 and 6.6% in year 12. It is dissembling to suggest that the loss of 30,000 places is attributable to demographics. Unprecedented pupil losses in independent schools are triple the decline in the school population as a whole. To inform the debate, can the Minister please tell us the average annual cost to the state sector of educating children who have had to leave independent schools? What assessment has been made of the educational consequences of disrupting a child’s education and moving them from one school to another? Can she tell us how many more independent schools she expects to close? How many children will be displaced? What are the current estimates of the revenues being raised this year by extending VAT on school fees and removing business rates charitable relief? In summary, taxing education is simply wrong in principle. It is a breach of human rights and, in the EU, it would be a breach of Article 132 of the EU’s VAT directive, which exempts education from tax. Our starting point should be that encouraging diversity and parental choice is a good. Suggesting that all schools would be able to absorb punitive taxes was clearly wrong. Where schools have done so, it has been at the cost of services to parents, including bursaries for the less well off. Let us also note that this has disproportionately hit low-fee faith schools. Where schools have closed, there has been heartache, disruption, a loss of jobs and of revenue into the local economy, and sometimes heritage buildings and community assets. The noble Lord, Lord Lexden, was therefore right to ask the House to consider all this again, and to reiterate the need to value all schools, state or independent. I hope we will have a review of this policy that he rightly called for.
Lord Redwood (Con)
My Lords, I declare that my son teaches in the private sector, but I will not be drawing on his experiences or the views of his school in my remarks; I wish to be broader than that. Jealousy is not a great emotion. It produces bitterness and unpleasantness. If it gets woven into politics, it usually ends up damaging the people and parties pursuing it, rather than helping them. I remember that a previous Government did not like grammar schools very much, and they decided that the parents of children in the surrounding area of a grammar school, where a big majority would not have children attending the grammar school, could be given a vote on the future of the grammar school. I think they thought that that would result in the abolition of grammar schools. However, when they held a vote, they discovered that the parents of pupils who had not got into the grammar school had no problem with the fact that very bright pupils had got into the grammar school; they saw that as a good for the wider society and the local community, not as a bad. There is a warning there. We are fortunate in this country that we have some outstanding private sector schools, some of them very famous and well known. Some of them deliver a high quality of education. Labour will point out that they are able to do that partly because they have more income per pupil going into the school because they can charge much higher fees, and there is some truth in that. But there is also truth in the energy and the standards that they set, and what they expect, which also contribute to their great success. So, when we have a great success such as that, clever Governments want to build bridges, not create barriers. They wish to see how we can allow those well-endowed schools still to flourish, but also how more of us can benefit from that process. My parents were not rich enough to send me to a private school, but I benefited from the fact that my local state primary put me in for a competitive examination to get a place in a direct grant school. I was fortunate enough to pass that exam, so I was able to attend as a day pupil what was primarily a boarding school paid for by richer parents who sent their children there. It worked harmoniously; we benefited from the exchanges between us, our different backgrounds, our different aptitudes and the different contributions we could make to that school. A previous Government thought that that kind of thing was wrong, so the direct grant school idea disappeared and those schools had to become fully fee-paying schools or perish. But then there was the assisted places scheme, which was a similar kind of operation, and that too is an excellent idea, because it gives people from low-income backgrounds, who would respond well to the ethos of the school offering the place, that opportunity. Again, it blends the excellence of the private school with opportunity for those who can compete for the places. Quite a lot of our great public schools, as endowment charities, are aware of their need to pursue wider charitable purposes in the educational area. So some of those great schools help the surrounding state schools by offering lectures and specialist tuition, organising joint events and being good members of the local community. Again, that is something we should value. Of course they should do that as charities, but it is there and it enriches the wider experience. We have some extremely good state schools, and I am very proud that they should be there. But we also have some state schools that could do considerably better. That is where having both great state schools and some great private schools, which can act as mentors, guides or lighthouses to illuminate a better future, can be so valuable. So the Government should look again at the opportunity for social and educational enrichment that can come from more sharing of facilities, more joint venturing and more cross-feeding of good ideas from state sector to private sector and from private sector to state sector. This unfortunate policy experiment that the Government have unleashed on private sector schools is very revealing about the wider debate on the impact of certain policy interventions. One of my persistent themes, as noble Lords have probably picked up, is that tax is usually very damaging and that it is usually something you impose to stop people doing things rather than to encourage them to do things—because it very rarely does that. The Government decided to unleash three very big tax rises on these private schools: the VAT that we are describing, which directly has to be paid by the families of the pupils going there, as well as the very big hit on business rates and the very big hit on employee costs. Of course, the main item in a private school’s budget is employment, not just of the teachers but of all the support staff, some of whom are not that well paid. These jobs are at risk the higher you put up national insurance, along with the other two taxes. We have seen, and have heard already in this debate, that the result of this treble tax attack has been a substantial number of school closures, as predicted. It is not good enough to say, “Well, there have been openings on the other side”, because we know that those openings are of different kinds of schools, often with different revenue streams. You cannot get away from the fact that you have lost quite a lot of good schools, which just found the treble taxes too much. We also know that some 33,000 places have had to be found in state schools as a result of the displacement. That is 33,000 families and individual pupils whose lives have been profoundly changed. It is not easy for a child to change school at an unusual time—other than when everybody is changing school, going from primary to secondary—because you lose all your friends. You go into a new school and maybe nobody wants to be friends with you, because groups of children can be cliquey and difficult. The Government seem totally insensitive to those kinds of issues. They think it is worth while to change the lives of 33,000 young people and their families for some greater good, which just seems to be the idea that they do not really like people being able to buy a decent education for their children. I would imagine that the cost of those children transferring is around £300 million a year, applying a very rough multiple to the number of children. A Government who are very short of cash are not well advised to invent a policy that immediately imposes an additional £300 million a year of public spending. We wait to see how much extra revenue growth there has really been because, as we heard in the Scottish example, you can end up worse off when you take the balance of disappointing revenue into account with the extra costs. One of the social consequences of imposing a tax on the schools, which means higher fees for parents to pay, is that many of the schools will not close but will change the people they educate. So we will see a pattern where these schools will be for very rich foreigners—that is, an export—and for very rich people at home, but all the other strivers who would like that are priced out of the market. Surely that is the opposite kind of social change to the one that Labour should want. It should not want the schools to be only for the children of billionaires or multimillionaires. Would it not be better if they reflected more widely and offered education to a wider number in the community? So please, Government, think again. Understand that these schools can be a great bonus for our society.
Baroness Laing of Elderslie (Con)
My Lords, what a pleasure it is to see my noble friend Lord Lexden back in his place this afternoon and to hear from him in his usual erudite fashion on a subject on which he has the experience and expertise of many decades. We have all benefited from hearing him this afternoon. I agree with everything that he said and all the points made by the noble Lord, Lord Alton, and my noble friend Lord Redwood, so I will not repeat those points. I ask just one question: who is the most damaged by this policy brought forward by this Government? There is no point in asking who benefits most, because nobody benefits. The Minister will undoubtedly say that the Exchequer benefits to a very small amount in tax take and that some of that tax take can be invested in education generally, but that is not a strong argument. The fact is that our children’s education is the responsibility of everyone in our society, because we all want the coming generation to have the very best start and opportunity in life. The better educated our population is, the better the economic hope for future generations. We all want to see a better education system, but dividing it into 93% and 7% and pretending in some way that these are separate is simply nonsense. The education system is one system as a whole. It affects every young person and every child in our society, in every part of our country. If you damage any part of the education system, logically, you damage it all. So, my question is: who suffers the most? The answer is not the families who are genuinely wealthy and who are despised by this Government but who will go on paying for their children in independent education. The people who suffer are, as ever, those who are at the margins. First, there are the 33,000 children who have had to be removed from independent schools and sent to other schools. Clearly, they suffer. However, that means that 33,000 other children have been displaced from other schools. In any given geographical catchment area, one usually finds that there might be an independent school, possibly two independent schools, and three or four really good state schools—many of our state schools are excellent and provide an excellent education. Then there will be seven or eight state schools that do not provide an excellent education, because they have some disadvantages and some difficulties; they possibly do not have the parental support or they are possibly in an area that suffers from some other disadvantages. The children who most benefit from attending an excellent state school are those who are at the margin, lifted out of an area of disadvantage, taken away from a school where they would not have flourished and have the opportunity of going to an excellent state school that will give them a truly good start in life. Those are the children who will suffer most from this Government’s policy. The children who have left the independent schools are likely to live in the catchment area of an excellent state school and are likely to have parents who know what you have to do to get your child into such a school. A child who has parents who understand the education system and who contribute to the education system is likely to succeed and to have a good opportunity, regardless of whether they go to an independent school or an excellent state school. Those who will suffer are those who would have had the chance of a place at an excellent state school but have lost that place because it has now been taken by a child who had previously been at an independent school but who has vociferous middle-class parents who know what to do to get the best education for their children. The children who will suffer are those whose parents are not involved in the education system, are not well educated themselves and do not know how to get their children into the excellent state schools. I am not making this up. This is fact. When I was a constituency Member of Parliament—I know that your Lordships do not like one mentioning being a Member of Parliament and representing a constituency, but when you have done so for 27 years, as the Minister knows very well, it is in your heart and in your being—I personally dealt with hundreds of families who were trying to get their children into the best schools. I know what is now happening. Places at the excellent state schools are being taken by children who were previously at independent schools but whose parents can no longer afford it. The people who will be most damaged by this policy and the direction in which the Government are taking the education system are those children who are now being denied places at excellent state schools. They are the people who we should be lifting up in life, not putting down. They are the people who deserve every bit of help that we as a community as a whole can give them. It might be that whoever devised this government policy—they did not do it to raise more money for the Exchequer because that, as we know from the simple arithmetic, is incidental—thought that they were going to damage the despised middle classes. That is not who is being damaged. The people who are being damaged are the children who would have had an opportunity that has now been taken away from them. The Government say that they care about the 93%; I care about 100% of children in this country, and I hope that the Government will recognise that they are failing those at the margin and should change this policy.
Lord Caine (Con)
My Lords, I support every word spoken by my noble friend Lord Lexden in his fine and typically erudite opening speech, and indeed the words of all other speakers so far in this debate. It is telling that the Government Whips have not been able to muster a single Back-Bencher to support the political choice to impose VAT on independent schools. I also note the lack of any speakers in this debate from the Liberal Democrat Back Benches. For the Minister today, it really is a case of herself alone. I also say what a pleasure it is to see my noble friend Lord Lexden back in his place today. There are many noble Lords on these Benches who have had reason to be indebted to him over many years, not least due to the fact that he gave a number of us our first job. It is very good to see him back. For the avoidance of doubt, and like a number of others in this debate, my entire schooling was spent in the state sector, in my case in the predominantly working-class constituency of East Leeds, where the local MP, a chap called Healey, was for five years in charge of the nation’s finances, when he presided over a severe debt crisis and bankrupted Britain. I am talking about 50 years ago, but it does seem like today. My final school, Temple Moor, was a fine grammar school that turned comprehensive some six years before I attended, although it retained some of the grammar school ethos during my time there. In supporting my noble friend, therefore, I am clearly not defending anything from which I have ever personally benefited. Like my noble friend, however, along with others on these Benches, I utterly deplore and condemn the nasty, spiteful and vindictive war being waged against the independent sector by this Labour Government. As has been pointed out, since it became clear that VAT was going to be introduced following the 2024 general election, 106 mainstream independent schools have closed and there has been a net loss of 79. According to the Department for Education’s own 2026 census, the number of pupils educated in the independent sector has fallen by over 33,000 in the past two years, as we have heard. That is well over double the 14,000 estimated by the Government in the short term and is rapidly approaching the 35,000 they said would be lost in the long term, although some studies predict the final total could be as high as 90,000. If anything epitomised the heartless approach of this Labour Government, it was the decision to impose VAT in the middle of an academic year, with the inevitable consequences and traumas for schools, teachers, parents and, above all, students. Will the Government now commission a credible independent review of the evidence, assumptions, modelling and forecasts that underpin these policies, tested against experience since their implementation? In my own area of Yorkshire, some particularly fine independent schools have been forced to close their doors. Fulneck, part of an historic Moravian settlement in Pudsey, which opened in 1753 during the reign of King George II and educated, among others, Herbert Asquith and Diana Rigg—Mrs Peel to some— as well as one of my closest friends, shut in July last year due to rising operational costs and falling numbers. I well remember my friend texting me on hearing the news to say how “devastated” he was, a reaction shared by many others. An institution that was at the heart of the local community and a unique part of the heritage of the West Riding of Yorkshire is now gone for ever. As the heart-wrenching statement issued by Fulneck put it: “This isn’t just the end of a school—it’s the end of a community, a history and a home for so many”. At the same time, Queen Margaret’s in York, educating girls since 1901, was forced to shut, citing mounting financial pressures from the introduction of VAT, increased national insurance and pension contributions, and the ending of charitable status business rates relief as major contributory factors. The site has recently been sold to a developer for a reported £5 million. It was followed last December by the oldest independent prep school in Leeds, Moorlands, after 127 years. It too pointed to VAT, national insurance and business rates relief. It is a similar story with Wakefield Independent School. If I can briefly stray outside Yorkshire, like my noble friend Lord Lexden, I was very sad this July to see the closure of Durham High School for Girls after 142 years, not least because that is where my partner Emma’s three hugely gifted daughters, Imogen, Olivia and Libby, each received an outstanding education. They are full of sorrow that the institution which has hopefully set them up for life is no more. I am the first to accept that there are a number of factors at play which can lead to school closures, such as falling numbers. What is, however, now undeniable is the devastating financial impact of the policies pursued by this Labour Government. As my noble friend Lord Redwood pointed out, they have hammered the independent sector with a triple whammy of increased national insurance, the removal of business rates relief and the imposition of 20% VAT, the first ever tax on education. For many independent schools struggling with tight margins, this has been enough to finish them. As we have heard, the Government seek to justify all this by arguing that that their focus is on the 93% educated in the state sector. Given my own history, I will take no lessons on the importance of providing good state schools for everyone. Yet the argument that state schools will be improved by waging war on the independent sector is little short of madness. As my noble friend Lord Lexden pointed out, the education tax was supposed to help pay for 6,500 more teachers, but teacher numbers have fallen, at a time when more students from independent schools that have closed have to be accommodated within the state sector, leading inevitably to higher class sizes for many. Then in June last year we were told by Keir Starmer on X, as my noble friend stated, that the money was being used invest in affordable social housing—so which is it? Of course, Labour’s attack on the academies that they once championed risks the huge progress in the state sector which under my party saw English students soar to the top of international league tables in reading and maths, and the number of schools rated as “good” rise from 68% to 90%. Labour Governments, rooted in socialist dogma, undermined academic excellence in the 1960s and 1970s, and now this “back to the 1970s” Government are doing the same today. They should be utterly ashamed of themselves for the damage, disruption and distress that their policies have caused and continue to cause. I look forward to a future Conservative Government reversing their nasty, cruel and vindictive policies.
Lord Blackwell (Con)
My Lords, I should declare my interest as a governor of an independent school, the Yehudi Menuhin School in Cobham. Like others, I thank my noble friend Lord Lexden for initiating this debate and I share his views, and those of the other speakers so far, on the damage that this policy has done to the independent sector in general. The Government should recognise that parents who send their children to independent schools are, in effect, paying twice. They pay once through their taxation to support the state sector and then they pay again. They would not do that unless they believed that they could achieve a better education, or meet some special needs, through paying double to send their children to an independent school. If the Government are in pursuit of fairness, rather than trying to bring down these high-quality schools through additional levies it would be much fairer to focus on bringing up the standard of education in state schools so that we had a better education system overall for the 100%. I will focus my brief remarks on the specialist music and dance schools. These schools offer a unique and focused education for a relatively small number of highly talented children. These children are supported and inspired by being in peer group of other talented children who share their passion for music. That environment and support is simply not available in normal schools. This handful of specialist music schools is shaping the next generation of musical leaders, who are a vital national resource for a sector that is important not only culturally but economically. Like other music schools, the Yehudi Menuhin School attempts to operate a needs-blind admissions policy. It seeks the most talented children who are capable of achieving the highest standards, regardless of their social background, their economic status and the ability of their parents to pay fees. With only 93 pupils in that school, providing a full academic education alongside specialist music training means that costs are very high. The full fees for a boarder amount to some £50,000 a year. As a result, alongside a needs-blind admission policy, only around one in 10 parents pays the full fees. The rest need financial support to reduce the fees to a level they can afford. VAT at 20% adds up to £10,000 on a £50,000 fee, and is proportionate, depending on how much the parents contribute. Since parents who are being supported by bursaries and scholarships are already paying as much as they can afford, they cannot simply pay another 20%. This will inevitably increase the demand for financial support to maintain their children at the school. We are fortunate in this country, as the Minister knows, to have the Government-funded music and dance scheme, which offers means-tested support to support UK residents at these schools. But that has not kept pace with inflation over the years and has not been raised to pay for the VAT levy. These schools attract talented children from all around the world, many of whom are not eligible for the MDS grant. For those coming from overseas, all the burden of funding bursaries and paying the additional VAT the parents cannot pay falls on the school and the limited funds that schools are able to raise from charitable donations. As others have said, there have been other financial pressures on these schools, from inflation, the national insurance increase and the loss of business rates relief. There will be further costs from implementing the loss of zero-hours contracts for staff, many of whom are part-time music teachers. The VAT levy now poses a real danger to the financial viability of these specialist schools, which play such an important role in maintaining the UK’s cultural leadership. I would prefer the Government to think again about the wider application of VAT to private schools across the board, as many other speakers have urged. If they are not prepared to do that, I ask the Minister whether the Government would at least reconsider whether the unique specialist music and dance schools should be exempted from this policy.
Lord Black of Brentwood (Con)
My Lords, I congratulate my noble friend Lord Lexden on securing this debate and on his powerful speech. It is very good to see him in his place after a challenging few months. This is an important debate. As the Government, frankly, bury their head in the sand, wilfully refusing properly to monitor the impact of this dreadful policy, it falls to this House to do so. I declare my interests as chairman of governors at Brentwood School and honorary president of the Boarding Schools’ Association. I have three points, the first a general one about the implementation of this spiteful policy. When the Government were elected, Keir Starmer made a great deal about restoring trust in politics. Before the King’s Speech in 2024, he said: “The fight for trust is the battle that defines our political era”. Well, trust is founded on honesty but, with this policy, Labour has always been far from honest. It said there would be limited impacts on the numbers attending independent schools. It was not honest. The number of pupils has fallen by over 33,000—as we have heard, double the 14,000 it glibly estimated. It said there would not be significant school closures. It was not honest: some 106 mainstream schools have shut their doors, destroying jobs, displacing pupils and wrecking communities. It said it would use the money raised to fund new teaching places. It was not honest: the number of teachers has fallen. The Government said they were closing a loophole, knowing full well this was no loophole. It was not honest. Education has never been taxed and, by introducing one, the Government have created a glaring anomaly. No wonder they did not want to undertake a proper consultation before introducing this policy. They knew they would be found out, and so they have been. This is not an education policy but a class warfare policy, which has hit children and hard-working parents hard, and it is fraudulent. How can the Government claim to want to restore trust in politics when they so brazenly introduce a policy, knowing they are perpetrating a con trick on the public? It is breathtaking hypocrisy. It is little wonder trust in politics is still so low. Nowhere has the impact on this policy been more harshly felt than among our boarding schools, which is my second point. The UK’s boarding schools are the best in the world, a powerful tool of soft power contributing significantly to our economy. They are a jewel in the crown of the sector, with schools like Brentwood School attracting pupils from across the globe: 33 nationalities are represented among our boarders. VAT has hit boarding schools hard. The number of boarders at independent schools dropped by 12% to around 65,000 pupils between 2024 and 2026, a rate double that of the sector as a whole. More than 25 independent boarding schools have either closed, announced their impending closure or stopped boarding entirely. In the three years before the imposition of VAT, that figure was only nine—a third of the current rate—destroying the Government’s erroneous assertion that closures are simply part of a long-term trend. That is nonsense. This has disrupted children’s education, put teachers and support staff out of work and had a profound impact on local communities, where local boarding schools are a vital part of the fabric of local and community life. Given these stark statistics, can the Minister tell us how she plans to stop this deeply damaging trend and protect the remaining boarding schools in the sector? There is also an international aspect to this issue. The Government’s own international education strategy, published only in January, aims collectively to “grow education exports to £40 billion per year by 2030” and “promote the UK as a preferred destination for study”. Well, to do that, the UK needs a healthy and competitive boarding school sector, yet the Government’s policies are deliberately undermining it. The number of international students in independent schools is down 12% since the imposition of VAT. If the Government are to stand any chance of meeting their own ambitions, they will have to revisit this policy. Following on from my noble friend Lord Blackwell, my final point is about music and the arts. I declare an interest as chairman of the Royal College of Music. The case has frequently been made in this House about the tragic decline of music education in state schools, which this Government, despite their promises, have absolutely failed to reverse. That has put a huge burden on the independent sector, both to protect the future of music as it dies out in the state sector and to do what it can to support those in state schools who are desperate to learn an instrument or take part in an orchestra, or even just to sing, but who have no opportunity to do so. The role of independent schools in this area is vital. It is not something we have to do; it is something we absolutely want to do. In the last year alone, the Independent Schools Council has recorded almost 10,000 partnerships between independent schools on academic collaboration and enrichment. About 2,500 of these are centred on the arts, with over 600 schools providing over 2,200 partnerships to support state schools with joint musical events, participation in music lessons, dance events, access to concert halls and many other areas. Schools like Brentwood, which has one of the finest music departments in the country, provide an excellent example. This year, we are committed to an amazing project to offer all local state primary schools the opportunity for their pupils to participate in a mass concert performance of Rutter’s “Mass of the Children” at Brentwood Cathedral, part of an ongoing commitment to local partnerships. One of the reasons we are doing it is that, tragically, even singing, so crucial for young lives, is dying out in primary schools and we want to help. That takes time and money—something which is now under real pressure as a result of the imposition of VAT and the impact on revenues. Elsewhere in the country we see other shining examples of partnerships to ensure children from state schools get access to arts education that their own schools cannot provide. King’s College School in Wimbledon partners with local schools to deliver an annual community drama production. For more than 20 years, Lichfield Cathedral School music partnership has enabled over 30,000 pupils in 500 schools across the West Midlands to benefit from high-quality music education. The King’s School Canterbury has for seven years provided pupils from Canterbury city centre schools with free access to orchestral instrument tuition. The list goes on and on. Yet the Government’s misguided policies have put all that at risk, and I cannot understand why they do not see that. As revenues come under pressure it becomes increasingly difficult to provide such partnerships, and bursary funding is increasingly in demand, particularly for quality music education. Who loses out? It is the children who lose out from this policy. Time is running out. This debate has revealed the appalling impact of the education tax on the sector. I hope that the Minister will reflect on it and at the very least commit to a fresh review of the impact of this policy—including the withdrawal of business rates relief—with clear methodology and an open mind. Preferably, that would mean a credible independent study. I also hope to hear from my own Front Bench a clear commitment to repeal this cruel tax when we return to office, although I suspect that I may not. I have no doubt that the Minister will again say that she is interested in the 93% who go to state schools. Of course she is right to be so, but I believe a Minister of the Crown must be interested in the 100% and not ignore 7% of children. Great damage has been done to our world-class independent schools. It is time to put dogma aside and put the interests of parents and children first.
Lord Shinkwin (Con)
My Lords, it is a great pleasure to follow my noble friend Lord Black of Brentwood, although I probably cannot match his passion and clarity. I join others in congratulating my noble friend Lord Lexden on securing this debate. As someone who benefited from an independent school education as a scholarship boy with parents on the staff, I thank him for his leadership on this issue. It seems incredible that almost two years have passed since we last debated this issue in this House and since I pleaded with the Minister to urge the then Secretary of State and the Chancellor to take the SEN and disabilities of the 99,000 pupils without an EHCP into account and exempt them from the extension of VAT to independent schools. I said that they and I looked to this Labour Government to show them some understanding and compassion and to give them hope. But hope there has been none. Instead, the policy was implemented regardless of the harm caused, especially to those pupils and their families. They were simply collateral damage in the wider ideological and, to quote my noble friend, dogmatic crusade against the so-called privileged class. No matter that many attended independent schools only as a result of huge sacrifices made by their families and at a time when the system underpinning state SEND provision is on the verge of collapse. In a series of Questions for Written Answer two years ago, I asked the Minister, among other things, what measures had been put in place to support children with autism and neurodiverse conditions, as well as their parents, who are required to move schools as a result of the education tax; what assessment the Government had made of the capacity of local education authorities to accommodate and meet the needs of children with autism and neurodiverse conditions required to move schools; what processes the Government had put in place to evaluate the impact on their mental health and educational attainment; and what stakeholder groups had been involved in developing such processes and at what intervals the evaluations would be conducted. I would be very grateful if the Minister could answer those questions today, as I am afraid that her response almost two years ago came nowhere close to addressing any of those points. The pupils with SEN and disabilities and their families still deserve answers. What she did say in response was that the Government did not anticipate that the VAT change—the education tax—would “prompt notable movement into the state sector and any movement is expected to take place over several years”. Listening to what has been said in today’s debate, I am not sure that that has been borne out. According to the latest DfE figures, as we have already heard, the number of pupils in the independent sector has fallen by 33,231, or 5.6%. To put that in context, it is already greater than the total movement into the state sector that His Majesty’s Government projected by 2029-30. These figures are not just notable; they are unprecedented. I think it is fair to say that the Minister’s Answer to my Written Questions has therefore failed the test of time. Can she say whether the original cost-benefit assumptions and forecasts cited by Ministers—including, as we have heard, the then Prime Minister—as justification for the punitive education tax still stand? If they do, where is the monitoring and evaluation of the assumptions and forecasts to back them up? I am sure we all look forward to seeing the results of the evaluation, which the DfE has no doubt carried out in preparation for today’s debate. I would be grateful if the Minster would confirm that she will write to me to say when the results of the evaluation will be published and place the findings in the House of Lords Library. Unless and until the Minister does so, she should not be surprised if we reiterate the simple point that the education tax is not only disrupting SEND provision but undermining the Government’s ability to fix the SEND system, which is bankrupting local authorities as we speak. Surely, an unintended consequence of the policy is that more families are understandably seeking an EHCP for their child, thereby exacerbating pressure on the state because the state has, bizarrely, made private and independent school provision less affordable. How does that make sense? This counterintuitive policy reminds me that, however much I respect individual Members on the Labour Benches, and I do, I could never subscribe to socialism. This policy demonstrates that deep within its soul lurks a self-righteous spite and envy that blinds it to the tragic consequences of its actions. Nowhere is this more apparent than in the case of pupils with SEND attending independent schools. They and their hard-pressed families deserve not just an answer but a rethink. I hope the Minister will show that the Government are listening.
Lord Murray of Blidworth (Con)
My Lords, the sixth of the first steps for change—remember them?—in Labour’s 2024 manifesto, read: “Recruit 6,500 new teachers … paid for by ending tax breaks for private schools”. This remains an incensing canard. As we have plainly seen, it is not the case that the number of teachers in state schools has increased by 6,500. In fact, it has fallen. The worst of it was the idea, frequently peddled, that there were tax breaks for private schools. What rot. Step back and look at the system as a whole: parents of children at private schools who pay tax—I declare my interest as one such parent—not only pay handsomely for the educational places used by their children but are not using the places to which their children are entitled in the state sector, funded, of course, by their taxes, a point made so ably by my noble friend Lord Blackwell. Those places not taken up in the state sector can then be used by other children. All this is very far from being a tax break for private schools. The former system was a system of mutual benefit, as the noble Lord, Lord Alton, who is my friend, so correctly said during his speech. Our national neighbours do not tax education. In fact, it would be contrary to EU law for them to do so, as the noble Lord, Lord Alton, said during his speech. The ability to impose VAT on school fees was a Brexit benefit. The United Kingdom seems to be the only country in the world that chooses to tax charities that provide education, a factor which speaks for itself. This Government should learn lessons from the sensible, civilised and mutually beneficial approach to private education taken by the Irish Government—an approach that recognises the benefit to the child and the state itself of a flourishing fee-paid education sector. The Irish Government have a system that recognises the fact that parents have paid, by taxation, into a state education system that they have elected not to use. Ireland has roughly the same proportion of pupils in fee-paid education—6% to 7%—yet in the Republic of Ireland the state pays the salaries of all teachers and special needs assistants working in recognised private schools. Fees are set each year by the school; they are much reduced as a result of the policy. Therefore, fee-paid education is much more widely accessible. The justification for this system was pithily stated by Norma Foley, then Irish Minister for Education, in a response to a Question in the Dáil on 16 April 2024. “If the parents of children in the fee-charging sector chose to send their children to the schools in the free education system, the State would have to fund those school places”. Quite so. Here, as my noble friend Lord Blackwell pointed out, parents pay twice, and they now pay VAT and other additional levies on education charged by this Government. This extra tax revenue is used for what? It is not for more teachers, as promised. Presumably it is spent on the ballooning welfare budget and the interest on the ever-increasing national debt. As we heard from my noble friend Lord Lexden, we have had 33,231 fewer pupils in the fee-paid sector over the past two years, 106 mainstream schools have closed, and of those that have opened, 90% have been specialist schools which benefit from government funding, not least via EHCPs, and are largely exempt from VAT, a point already made but which certainly bears repetition. There are certainly many fewer mainstream school places. There are no winners from all this. As my noble friend Lord Lexden said, in Scotland, analysis from BiGGAR Economics published in April 2026 showed that the VAT rise there was costing more money than it was raising, and the same will surely be shown to be true in England. British private education is a world leader. Why damage something we do so well, undermined only for the sake of dogma? Over 100 schools have closed, thousands of staff have lost their jobs, and thousands of children have had their education disrupted at a formative time in their lives. State pupils have lost the benefit of the use of facilities which they would have been able to use as a result of partnerships between the fee-paying and the state sectors, as set out by my noble friends. This is a trend which will surely continue and accelerate. No one wins from this policy. As my noble friend Lady Laing so eloquently said, the whole community suffers. Can the Minister point to a single child who has benefited from the policy, remembering that not a single extra teacher has been hired? Very many have been harmed by it.
Lord Fuller (Con)
My Lords, I attended a boarding school in the 1980s and was the governor of another one for 10 years in the 2010s. I spoke two years ago at the debate in the name of the noble Lord, Lord Lexden. It hardly seems like two years ago, but it was, and it is great to see him back in his place. I regret to say that things are even worse than the warnings that we issued at the time, with more children impacted, more schools closed and none of the revenue to pay for more state-school teachers, who are now having to work harder than ever. The damage has been not just to the charities that run these schools, to parents who are ambitious for their children, or especially to the twice as many displaced children as the Government expected, with disrupted schooling, subjects not taken to examination, peripatetic activities curtailed and friendships broken. No, the collateral damage has spread much further than we foretold. It has spread to the staff. Back in 2024, I bumped into a man wearing a Langley School polo shirt. It turned out that he was responsible for running the minibus enterprise, comprising 27 vehicles, together with drivers, himself, assistants and mechanics—a 35-person sustainable transport business, all under threat. His colleagues—cooks, cleaners, matrons and groundkeepers, not just teachers—are the working people engaged in that education, and I want to speak for them. The damage has spread to the market towns, where these schools not just support the economy; they are the local economy. In the shires, 106 mainstream schools have closed in places such as Banbury, Bedstone, Haslemere, Windlesham and Warminster—lovely places with wonderful high streets and a much wider range of pubs, cafés and shops than their populations would normally sustain. These are not just market towns; these are factory towns. The schools are factories of education and learning. They underpin those economies, not just with their directly employed staff but with a local ecosystem of contractors and tradesmen in areas with few alternative employment opportunities. They are damaged. The damage is also to the national economy, where education has been a valuable, invisible export—not that Labour understands these things. We have heard about the additional burden of business rates and £100 million in national insurance. It is hard to quantify the impact on the 93% of children who are state educated, whose classes are now more crowded or who are forced to travel further as their natural catchments have been filled up. Surrey is a case in point—a county where the parents, to echo the noble Baroness, Lady Laing, are born with sharp elbows. If you start to treat these charities as businesses then why should they behave as charities? We have heard about the impact on music and the arts. Cancelling bursaries for the child prodigy or scholarships for exceptional sportswomen from disadvantaged families helps nobody and only drives social inequality, as well as harming our national sporting life. We are all poorer for this. Why should these charities have bursaries, scholarships, and public access to facilities in the evening and during the school holidays if there is no incentive or regulatory reason to do so? This Government have failed the public interest test. I will not echo the important points made by my noble friend Lord Shinkwin about SEND, but these schools are the solution to that, not the problem. I visited the headmaster of a public school in Norfolk where 30% of the roll need SEND support or are children of families in difficult situations. That is truly in the public interest—something that this Government have swept away. They have not raised any money. Labour’s class obsession has resulted in a net cost to the Exchequer. The Government have displayed a financial ignorance of the dynamic impacts of this policy because, if schools are forced to close, we are looking at the loss of PAYE and the payment of benefits. The fundamental premise that this is a revenue raiser is a false one, because the really rich have just shrugged it off while the striving children of police officers, nurses, firefighters, soldiers and airmen—working people with aspiration and ambition for their children—have felt the full force. It has benighted so many with their own challenges who just cannot thrive in the state sector and for whom at least specialist private classes have been an option—but that has been pushed out of reach. Well done, Labour, attacking those with the quietest voices who need the greatest help. It is not hard to see why this has been worse than expected. I was a governor of a school with just 450 places. It typically made a surplus of about £250,000 a year to fund reinvestment. It did not have a lot of fat on its back. It was a charity and, as in all these cases, the fees from about half a dozen boarders made the difference between profit and loss, surviving or failing. The finances were finely balanced. The fees from just five boarders amounted to the entire profit of the charity. If just five families found they could not afford the extra five grand a year or so, all the 450 children in that school fell on the state. I warned of this leverage, which has tipped these schools over the edge and spoiled the life chances and exam success of hundreds of others while adding to the burdens of the 93% educated by the state, throwing thousands of lower-paid staff, journeymen, local suppliers and, yes, teachers on the dole. That was always going to be the case. This policy has failed in its objective. It was dishonestly framed as a money spinner but has just been a class war pursued by the honourable Member for Sunderland, who is pursuing her personal obsession with class, with children paying the price. The Prime Minister said that things were going to be different, but it turns out he is just the same—jealousy, envy and grievance perpetuating the class war, not providing the social mobility that a scholarship or a bursary can unleash. There is so much more that I could say, but these proposals, born out of populist electioneering sloganning, have resulted in more elitism and social inequality; less opportunity for those with talent from the most modest backgrounds; less charitable purpose, for which the local communities will suffer; slipping down our national and international sports rankings; less choice; fewer exports and stunted economic growth; a catastrophic effect on the economic base of our market towns and their small tradesmen; working people in isolated areas put out of work; struggling parents; additional burdens on local authorities; listed buildings left to moulder; and driving even more children to oversubscribed state schools. The real victims here are among the lowest paid and most educationally challenged, while our economy is weakened and the soft power that helps earn our place in the world is damaged, alongside our global reputation, by levelling down that export for which the world used to beat a path to our door.
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.
Baroness Cash (Con)
My Lords, I join others in thanking the noble Lord, Lord Lexden, for securing this debate and I welcome him back to his place. As I am also relatively new to this House, I have not had the pleasure of spending time with him and am glad that that opportunity may now arise. I want to start by quoting from what the Minister said in response to questions from me on the repeat Statement earlier today. I had been asking about preserving all that was good in our education system and sought a reassurance that we would do that. The noble Baroness challenged that, saying that there was more work to be done. She said that we should now not “place in aspic the education system and not recognise the areas where, notwithstanding the progress, there is more work to be done. I am afraid that a disadvantage gap still exists for our children, and it is stubbornly wide. A gap between regions is widening. We have a growing SEND crisis, 1.5 million children persistently absent from school … a doubling of those educated at home since 2019 and now 1 million young people, all educated during the last 16 years, not in education, employment or training. Simply standing still and resting on our laurels will not be good enough for our children”. Noble Lords might wonder why I have quoted the Minister in this debate. It is to identify that this change was made at a time when there was no possibility of providing the children who were removed from the private system as a result with an excellent education elsewhere in the state system. I will come back to that. I want first to thank my noble friends and the noble Lord, Lord Alton, for their contributions today. I am grateful that they saved me from repeating the numbers in detail, and my thanks go in particular to the noble Lord, Lord Lexden, for his comprehensive summary of the facts and the data around the impact of this measure. I even find myself in the unusual position of agreeing with the noble Lord, Lord Mohammed, in challenging a review of this policy and the effects that were predicted versus what has since taken place. Two significant facts have emerged in today’s debate. The first is the data produced around Scotland, and the fact that—as we can already see in England—this change has not had the predicted effect and is costing the Scottish Government a great deal more. Indeed, that cost is predicted to increase. The second point of note is the anomaly created by this Government in making the change, as identified by the noble Lord, Lord Alton, with respect to EU law. We have heard plenty about the Government’s predictions and how wrong they were. I will not repeat those, but I have them in mind as we continue. I hope that the Minister will have heard the collective cry of pain and loss from the speeches on the Opposition Benches today. Real children are at the heart of this, as are real families, and there are hard consequences for all of them. Even if one agreed with the principle of the policy, its timing and implementation were at best indifferent, indiscriminate and punitive. For 50 years since VAT was introduced, education in this country was exempt. That exemption was not removed in a September, at the beginning of the school year, but in the middle. Worse, it was half way through some children’s GCSE and A-level courses. As we have heard from the noble Lord, Lord Shinkwin, it was removed before anything had been done about a special needs system that the Minister has said today is already under extreme strain, with tribunal appeals taking up to 14 months. The exemption was also removed before a single one of the promised teachers had been recruited, and we have heard from a number of my noble friends about those numbers. There was unquestionable indifference. The Government knew what would follow, not only via debates here and in the other place but from their own policy note: we know that they accepted in advance that children with special needs who moved schools would suffer disruptive impacts, to say the least. The wealthiest absorbed it, and a number of my noble friends have identified this today. The noble Baroness, Lady Laing, called attention in her very powerful speech to the unfortunate and regrettable Statement by the former Secretary of State for Education that she was interested in 93% of children in the education system. Whatever her intent, it is a message that landed a body blow on the 7%. The families who could not absorb the tax are those we have heard about today. More than 96,000 children at independent schools receive special needs support without a plan. Every one of those families now pays this tax in full. Tim Barrow, a father of three from Hertfordshire—two of them with special needs—withdrew his sons from their independent school to keep his 10 year-old daughter, whose needs were the greatest, in hers. He is quoted as saying that the policy forced him and his wife to determine “which of our children’s educational needs takes precedence”. No parent with children with special educational needs should face that; I would never have imagined facing such a thing under a Labour Government. Leanne Gunn, whose son Charlie uses a wheelchair and will be in one for life, took the Government to court alongside other families. She says that she will work all her life to pay his fees because “there is no other option for him”. Those are the families who lost. To families of modest means, whose children were at low-fee faith schools, the Court of Appeal observed that they would and could still resort to home education when it found against them and sent the problem back to Parliament. It was punitive. There is no doubt, from what we have heard today, that it was punitive. No one in government weighed what these schools give to the communities around them and the value of that—not just the economic value, but the human value. I will give some examples of what these schools do. Christ’s Hospital is 470 years old. Of its 900 pupils, 650 hold means-tested bursaries and it provides 15% of all full bursaries in the independent sector. The London Academy of Excellence in Stratford is a free sixth form sponsored and staffed with the support of independent schools. It has produced more than 150 Oxbridge offers in eight years, over one-third of them to pupils on free school meals. I could go on. Every closure extinguished that giving, that community outreach, permanently punishing the children who benefited. We have seen the beginning of the transition, with applications by independent faith schools to come into the state sector. A very serious issue has arisen at Barnet Hill Academy, where the state system now appears to be allowing and funding a school which mandates the wearing of the hijab for children as young as seven. When this was revealed during the week, the school said it changed its policy. It said it would not be mandated for non-Muslim girls. In this country, it is unlawful to mandate religious dress for any girl of any age and any faith. It is a complete breach of the Equality Act. I hope that, as this has been exposed—perhaps the one silver lining of the whole policy—the Minister will reassure us that this will be addressed promptly. No Government should have contemplated moving tens of thousands of children and taxing the education of the rest unless and until they could provide every child with a place in an excellent school; until special needs provision worked; and until the teachers they promised were standing in classrooms. At the very least, the Government should set out how they will replace the loss of the community contributions. I support the call from a number of Peers today, including the noble Lord, Lord Mohammed, for a review into this policy. To add one last thing, I can reassure my noble friend Lord Black that we will—and have pledged to—repeal this policy.
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.
Lord Lexden (Con)
My Lords, as is customary, I thank all speakers. The contributions today have been, I think, for the most part, especially powerful, with many rooted in personal experience. We have had almost total unanimity of voice about the devastating impact on independent schools of the education tax. It was notable that, as my noble friend Lord Caine, pointed out, not a single voice was heard from the Labour Benches in defence of this policy. A range of important topics have been covered: bursaries; the impact on local economies; partnerships; the impact on state schools; loss of opportunity; the vindictiveness of introducing VAT mid-year; the closure of historic institutions; music education and the threat to specialist music schools; special needs; the impact on boarding schools; and the doubts around the economics on which this policy is based—that really is the central issue that has been brought out. There is a widespread belief that at the heart of this is not economics but a vindictiveness towards independent schools. The Minister is so confident in her policy and the figures and data that she has used that she will surely have no reluctance in putting the issue to the test by establishing the independent inquiry review for which so many speakers have so rightly called. I end by thanking all those who have contributed. I beg to move.
Motion agreed.
Source: UK Parliament Hansard API. Debate ID: 5409263.