VAT on schools did damage

My speech in Lords

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 fact that the energy and the standards they set, and what they expect, also contributes  to their great success. So, when we have a great achievement like 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 with a free place 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. 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. 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. 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 including government money. 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 society 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.