Labour’s education tax: A key election issue

Posted on: 03 Jun 2024
Posted by: Lord Lexden

On 23 May Alistair Lexden was due to open a Lords debate on independent schools, where he would have condemned Labour's plan to add VAT to fees. The debate was cancelled following the PM's decision to call an election. Here's what he would have said.

In view of some important recent developments—not least those for which the Labour Party has been responsible—this is surely a highly appropriate moment to reflect on the importance of the contribution that independent schools make to our national education system, and on their value to our country.

I declare my interests as a former general secretary of the Independent Schools Council, and the current president of the Independent Schools Association, one of the Council’s constituent bodies. I naturally judge the issues in this debate from their perspective, to which I will return.

No one, I think, doubts the excellence that abides in our independent education sector. It contains some of the best schools in the world. The majority of their pupils find places at leading universities. They go out into the world well-prepared for their careers in a meritocratic, multiracial society. They look to the future, not to a vanished class-ridden past, as is often asserted.

Four out of ten places in the schools represented by the Independent Schools Council are filled by the children of ethnic minority families.

The Jewish and Muslim faiths are among those who run schools within the Council’s ambit.

Over 2,000 youngsters from Ukraine have been given places at member schools; for the most part their families remain in their war-torn homeland.

It should not forgotten that independent schools possess the freedom to innovate and experiment with reforms that may benefit the education system as a whole. In a characteristically rumbustious speech a fortnight ago in a debate on skills, my noble friend Lord Baker referred to two independent schools, Bedales and Latymer, which are moving away from GCSE exams. Could they be leading the way to a reformed exam system for which some are calling?

Do not forget either the wider economic contribution which independent schools make to our country. Research by Oxford Economics in 2022 showed that they add £16.5 billion to the UK economy, sustain 328,000 jobs, provide in one way or another £5.1 billion in tax, and save the education budget £4.4 billion by educating pupils who would otherwise be a cost to the state.

Our country’s independent schools, which are helping to shape young minds in today’s values, should be encouraged, not assailed.

Generally, I think, old prejudices are fading, but not alas in all political quarters. Today, the ability of independent schools to provide places for the substantial number of families, many of them far from well-off, who want to secure them for their children is, for the first time, imperilled.

That is because of the Labour Party’s proposal to slap VAT at an expected rate of 20 per cent on their fees.

The Party’s education spokesperson refers with pride to “ending tax advantages for the super rich”. She seems to have no conception of what independent schools are really like today—which is perhaps unsurprising since she won’t visit them, and, according to some reports, Labour’s parliamentary candidates are being encouraged to follow that bad example.

There has of course never been an education tax of the kind that Labour are now proposing. It would be quite unprecedented. It would set us apart from other major Western countries, including those of the European Union and the United States. They all recognise that education is so great a public service, so vital a public good, with such profound implications for society, that it should never be made subject to tax.

Naturally Labour’s proposed education tax has provoked much comment and expert analysis. Not one of the detailed studies that has been carried out by specialists has concluded that independent schools would escape damage or harm. These studies differ only in their estimates of the extent of it.

Increased fees would inevitably follow the imposition of Labour’s unprecedented new tax, for it would be impossible for most independent schools to absorb it. They lack endowments or reserves which would enable them to pay it themselves, as Labour have blithely suggested that they should.

Labour’s education tax would therefore fall squarely on many hard-working families in our country, who ought to be spared such a damaging change to their circumstances.

It would be a tax bombshell that would inevitably lead to the withdrawal of pupils and the disruption of their education. Other families who want an independent education for their children would be denied the chance of gaining one by Labour’s sudden increase in its cost. The choice which they would otherwise have had would disappear.

All that would be bad enough. But in addition, there would be severe consequences for our country as a whole. The state sector of education would be swollen by new arrivals, forced out of the independent sector, adding to the pressure on its resources.

A few days ago, His Majesty’s Treasury made a major pronouncement on what could be expected to happen. In its view, VAT on fees could drive 100,000 pupils from independent schools into the state sector. To fund such an increase, an extra £650 million would have to be raised through new taxation.

So, with pupils leaving the independent sector, Labour would raise far less through its VAT bombshell than the £1.6 billion which they think would be possible (it is no more than a guess), and on which indeed they are relying to fund a clutch of substantial and expensive education initiatives. At the same time, they would have to put up other taxes significantly to cover the cost of the greatly increased numbers in the state sector.

What a farcical financial merry-go-round that would be. It would make no sense. The introduction of an education tax by Labour would be a most profound mistake.

The two linked organisations, with which I am connected that I mentioned at the outset, the Independent Schools Council and the Independent Schools Association, are naturally at the forefront of the efforts to alert the country to the dangers of Labour’s education tax, as the general election approaches. Views will be sought from the candidates of all parties.

The Council represents some 1,400 schools, where around 80 per cent of the half million or so pupils in the independent sector are educated.

The Independent Schools Association has some 660 of those schools—a big slice of the total—in its membership.

These schools are for the most part small in size, often having no more than 200 pupils (some far less), with deep roots in their local communities. They are virtually unknown to the wider world beyond them.

The important point is this. The 660 members of this association are far more representative of the true state of the independent sector than the comparatively small number of well-known schools—Eton, Harrow and the like— which exert so much fascination over the media.

They are the exceptions, not the rule. Those who want to see a typical independent school should think of visiting Oakhyrst Grange School in Caterham, which has around 150 on its roll, or the Old Vicarage School in Darley Abbey, Derbyshire with some 120 pupils. Their pupils would be delighted to show members of the Labour Party round their successful little schools.

Labour would not find the super-rich among the parents of pupils attending the members of the Independent Schools Association. Why should these pupils have their education disrupted by a move to the state sector because Labour jacked up their fees?

What all the diverse members of the Independent Schools Council have in common is a commitment to high standards, and to working in partnership with colleagues in the state sector in a whole host of different ways, from academic teaching to orchestral concerts, drama and sport.

There are now well over 9,000 flourishing projects, typically involving several different strands of activity in and out of the classroom, in which state and independent schools work together to their mutual benefit—I stress mutual benefit. Full details can be found on the Schools Together website.

Labour’s education tax would not make it easy for independent schools to keep up this partnership work. But they would not withdraw from it unless Labour inflicted insurmountable financial difficulties on them. They value their collaboration with state school colleagues. Where, incidentally, are the supporters of the education tax among state school teachers?

The education tax would put at risk the progress made by schools in widening access. A third of pupils now pay reduced fees at a cost to schools of more than £1 billion a year. That could not easily continue if Labour put their costs up.

How I wish it had been possible to induce our governments over the years to back an ambitious wider access scheme, with places being made available at all levels of ability co-funded by government, schools and benefactors.

Nowhere, I think, does the independent sector make a more valuable contribution than in the sphere of special educational needs. At least 120,000 pupils in independent schools—20 per cent of the total—are getting the special help they need. VAT would be slapped on the fees of most of them. Labour have said they will only exempt those with Education, Health and Care Plans, held by around 29,000 pupils in independent schools. How on earth would the state sector, which has a SEND crisis on its hands, cope with a large influx of additional pupils with special needs?

My noble friend Lord Black of Brentwood, a great champion of independent schools who cannot be in his place today, has illustrated the key themes I have mentioned by reference to what is happening at Brentwood School in Essex, where he is chairman of governors. He has said: “Access and academic excellence are our watchwords. That is why we are spending nearly £2.5 million each year on means-tested bursaries, with around 60 pupils paying no fees at all. That is why we work with over 110 state primary schools on science, sports and the performing arts. That is why we share our facilities to help young football and rugby players and athletes. All this means that we are at the very heart of our community.”

Government and Opposition are very different things. What may seem appealing now as party dogma will not serve our nation’s interests. If Labour were to form a government, they would, I hope, soon find cause to think again about the idea of taxing education.

Labour’s own history shows there is a better way. When they came to power in 1997, they immediately set about encouraging the steady increase of independent/state school partnerships. The noble lady, Baroness Morris of Yardley, then schools minister, drove the process, from which so much good has come.

How tragic it would be if a future Labour government reversed that great Labour achievement.

About Lord Lexden

Lord Lexden is a Conservative peer and president of the Independent Schools Association