Blow for Government as Lords vote against ending tax relief for private schools

The House of Lords has voted against ending tax relief for private schools in a major blow for the Government.

Peers supported by 232 votes to 141, majority 91, a Conservative amendment that cut this key provision from the Non-Domestic (Multipliers and Private Schools) Bill.

It came after a string of earlier defeats for the Government on the same Bill, as peers called for changes to their new plans for business rates, including an exemption from the higher band for hospitals.

This would mean that around 1,040 private schools, roughly 40% of all independent schools, would lose their current right to claim business rates relief.

Tabling the amendment, shadow education minister Baroness Barran said that she stands by the principle that education should not be taxed.

She said: “Clearly the Government does not agree with us and we have seen this from the egregious introduction of VAT on independent school fees, and now with this Bill.”

The former schools minister said that charities should not be subject to “any kind of political overreach” and that the Government is set to create a “two-tiered system, punishing charities that don’t conform to its views”.

Lady Barran also argued that ending tax relief for private schools will impact vulnerable children, such as those with special educational needs and disabilities (Send), many of whom are currently educated in the independent sector.

The Government has said that the change of status does not apply to organisations “wholly or mainly concerned with” providing full-time education for Send pupils with education, health and care plans (EHCPs).

However, it has been argued that many children with Send do not have EHCPs and that many are educated at private schools where less than half of children have additional needs.

He insisted that removing the part of the Bill set to end tax relief for private schools is the “only way to protect all pupils with Send that attend independent schools, like those that I attended, where the proportion with Send is much less than 50%”.

Lord Shinkwin said: “The sad fact is that, in the Government’s eyes, the damage to many of these children’s life chances seems to be a price worth paying.

“They are expendable, immaterial, inconsequential collateral damage caught in the crossfire of what appears to be an ideological obsession with punishing anyone they perceive as rich.

“Yet, many of these children’s families are not rich and the Government knows it. But they seem not to care…

“They seem not to care, incredibly, about pupils with Send’s mental health, which is undoubtedly going to be hurt by the impact of this measure.”

The Tory peer branded the measure “deeply damaging and wholly disproportionate”, insisting that schools could close as a result and that it will put more pressure on the overstretched state sector, which is “already failing to meet demand”.

Lord Black of Brentwood, deputy chairman of the Telegraph Media Group, accused the Government of burying its head in the sand and being “impervious to rational thought” on the topic of private schools.

“But they will end up profoundly impacting the independent sector and the lives of tens of thousands of pupils and their hard-working parents.”

He added that it will negatively impact military families, faith communities, gifted children who benefit from bursaries, and local communities through a loss of partnerships with private schools.

However, the Government said the ending of tax relief for private schools is necessary to fund improvements to state education, where 93% of children are educated.

Communities minister Lord Khan of Burnley said: “This Government committed in its manifesto to raise school standards for every child, to break down barriers to opportunity and ensure that every child has the best start in life, no matter where they come from or their financial background.

“As part of that, the Government committed to removing the VAT and business rates charitable relief tax breaks for private schools to help to raise revenue to help deliver on its commitment to education and young people.”

He added that Labour has promised to increase core school funding by £2.3 billion, including an almost £1 billion uplift for high needs, and that “this funding needs to be paid for”.

Lord Khan told peers that ending tax breaks for private schools – including removing their VAT exemption and ending charitable rate relief for those that are charities – will raise about £1.8 billion a year by 2029-30.

Meanwhile, the minister assured peers that the carve-out for schools that wholly or mostly cater for children with EHCPs will mean that “most private special schools will not be affected”.