School Fees: VAT

Monday 13th October 2025 Lords Chamber

Question

14:49

Asked by

[Lord Lexden]

To ask His Majesty’s Government how much money has been raised from the imposition of value added tax on school fees.

[Lord Lexden (Con)]

My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I declare my interest as a former general secretary of the Independent Schools Council and the current president of one of its constituent bodies.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, at the Budget last year, the Government set out that ending the VAT exemption for private schools would raise £460 million in 2024-25 and £1.7 billion per year by 2029-30. The Government remain confident in these costings, which are certified by the independent Office for Budget Responsibility. The OBR will recertify these costings at the forthcoming Budget in November. The money raised by this measure is helping to raise standards for the 94% of pupils who attend state schools.

[Lord Lexden (Con)]

My Lords, have the Government noted a recent detailed survey by the Independent Schools Council which shows that their appalling education tax is producing an exodus from independent schools eight times larger than Ministers predicted? Does it not follow that the Government will have to fund many extra places in the state sector for pupils driven from independent schools, while simultaneously the proceeds from their tax raid on those schools plummet? Is it not the case that the Government stand no chance of extracting the £1.8 billion that they hoped to receive from independent schools to fund an enormous range of improvements, including, most surprisingly, the largest investment in affordable housing in a generation, according to the Prime Minister in June?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question—I think the short answer is no. We estimated that the introduction of VAT was likely to lead to around 35,000 more pupils in the state sector over the course of this Parliament. This is fewer than 0.5% of all pupils currently in the state sector and will take place gradually over this Parliament. This assessment was certified by the OBR at the time, and we remain extremely confident in it. Pupil movements so far are absolutely in line with this estimate and are in line with trends over the past 20 years. They represent, as I say, a very small proportion of the private school population. It should be noted that not all pupil movements are the result of this policy; they can happen for a large variety of reasons and will reflect wider demographic trends.

[Baroness Ramsey of Wall Heath (Lab)]

My Lords, given that the money raised from this will be spent on increasing teacher numbers in state schools and that 93%—although as my noble friend the Minister mentioned 94%, I will go with his statistic—in England attend state schools, does my noble friend agree that this is an excellent example of the Labour Government’s commitment to benefiting the many, not just the few?

[Lord Livermore (Lab)]

I absolutely agree with my noble friend on that point. This is a necessary decision that will generate additional funding to help improve public services, including the Government’s commitments relating to education and young people. This Government are committed to breaking down barriers to opportunity and are determined to drive up standards in those schools serving the overwhelming majority of children in this country so that they may receive the opportunities they deserve.

[Baroness Kramer (LD)]

My Lords, one of our greatest concerns is that SEN pupils without an EHCP are forced from private schools that have the capacity to support them to state schools without the resources to do the same. Have the Government been tracking how many of those SEN pupils without an EHCP have moved, and are they looking at the impact on both children and schools, including school finances?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I know that this is an issue that she cares deeply about; we have had discussions on this point in the past. We recognise that the current SEN system is not delivering the outcomes that pupils and parents rightly expect and is placing unsustainable burdens upon schools, local authorities and taxpayers. The Government will set out the detail of our reform plans in the context of the wider schools strategy later this year. In terms of specific pupil movements, as I say, those movements are in line with the estimates that we set out at the time of the last Budget. Those estimates were assessed by the OBR and we remain confident in them. It is worth noting that so far this year 49 private schools have closed but 70 private schools have opened, and of those 70 private schools, 59 are special educational schools.

[Lord Gove (Con)]

My Lords, the Government pledged at the last election that this tax increase would pay for 6,500 new teachers in state schools. Over the past year, this Government have seen the number of teachers in state schools drop by more than 400. How can minus 400 be an addition, even in the crazy mathematics of His Majesty’s Treasury?

[Lord Livermore (Lab)]

The noble Lord mentions crazy mathematics—I think he was one of the leading proponents of Brexit, so he would know all about crazy mathematics. This measure raises £1.7 billion to spend on state schools. He will have seen in the previous SR settlement for schools that, to raise school standards for every child and break down barriers to opportunity, the Government are increasing the core schools budget by £4.7 billion per year by 2028-29. This is a real-terms increase of 1.1% on average each year, on a per-pupil basis, taking per-pupil funding to a new record high.

[Baroness Watkins of Tavistock (CB)]

Will the Minister comment on data that seems to suggest that schools are using some of this additional money to fund free school meals—because there is insufficient funding for the level of the cost of those meals—rather than employing more teachers?

[Lord Livermore (Lab)]

I do not know about specific decisions that each individual school is making. Obviously, how individual schools fund a specific policy is a matter for them, but I am very confident that our free school meals policy is fully funded.

[Lord Watts (Lab)]

My Lords, has the Minister noticed that when this was announced the Opposition claimed that it would shut schools, yet it has not? They are switching their arguments on a daily basis. Does he also agree with me that this is hard to take from a party which cut state school spending virtually every year that it was in power?

[Lord Livermore (Lab)]

I am grateful to my noble friend for the points that he makes, and I agree very much with what he is saying. As he knows, we are increasing per-pupil funding to record amounts. It is absolutely correct that we have heard many scare stories about this policy—that schools would close. Since VAT was applied on 1 January, private schools have continued to open and close in line with historic trends. As I have said already, 49 private schools have closed but 70 private schools have so far opened.

[Baroness Neville-Rolfe (Con)]

I start by echoing the tributes to Lord Campbell. It seems only yesterday that he was with us. I believe that taxing education is a shabby policy, and we have seen some 50 schools close since the VAT on private schools was introduced. This is another example of Labour attacking the sectors of Britain that are most successful: in this case, our private schools. They are very well regarded internationally and key to our country’s academic successes. Has the Minister learned anything from this regrettable episode about how and where we tax?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. What I have learned from this episode is not to listen to scare stories from the party opposite. She talks about school closures; I am sorry that she did not listen to the figures that I gave. Yes, 49 private schools have closed but 70 private schools have opened, so obviously there is a net increase in the number of private schools in our country. There has historically been a significant turnover in this sector, with around 75 private schools in the UK opening and closing each year and the overall number of private schools remaining broadly stable.

[Baroness Coussins (CB)]

My Lords, will His Majesty’s Government consider using some of the money that they expect to get from this policy to reverse their recent decision to remove funding from state schools for the international baccalaureate?

[Lord Livermore (Lab)]

I do not know about the specific policy that the noble Baroness is talking about but, as I say, we significantly increased per-pupil funding in the previous spending review to a new record high within our state schools.

[Lord Leigh of Hurley (Con)]

Would the Minister like to confirm that, without Brexit, his Government would not be able to put VAT on private schools?

[Lord Livermore (Lab)]

Without Brexit, GDP would be 4% higher, so we would not need to.

[Lord Naseby (Con)]

As the Minister knows, there is very little boarding availability in the state sector. Against that background, will His Majesty’s Government look at understanding that all the families who need boarding are probably heavily involved in exporting and helping our nation? Will he consider removing VAT on the boarding element when there really is no other choice than to go to the private sector?

[Lord Livermore (Lab)]

The answer to that is no. VAT applies to private boarding fees as well as private tuition fees. At private schools, boarding is very often included as part of a single overall tuition fee. Not applying VAT to private boarding fees would open up significant risks of value-shifting from school fees to boarding fees in order to avoid VAT.