“(1) The Secretary of State must, within two years of the passing of this Act, publish a report on the impact of charging VAT on private school fees.

(2) A report published under subsection (1) must include the following information—

(a) how many private schools have closed as a result of the decision to charge VAT on private school fees;

(b) how many pupils have moved school because of the decision to charge VAT on private school fees;

(c) an analysis, considering paragraphs (a) and (b), of the impact of the decision to charge VAT on private school fees on maintained and academy schools, including on—

(i) the availability of school places nationally and in areas where private schools have closed;

(ii) the percentage of children which are placed at their first-choice school; and

(iii) the number of schools which have had to increase their Publish Admissions Number.”—(Neil O'Brien.)

This new clause would require the Secretary of State to publish a report on the impact of charging VAT on private school fees.

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

Around my constituency, we have seen the closure of a couple of local independent schools, which have blamed the decision to introduce VAT. This will mean more people looking for places in local state schools that are already oversubscribed and, in turn, fewer people getting their first choice. New clause 25 is not about the principle of the tax, but about having a proper mechanism to monitor the impact on the state system, among other things.

An importance piece published in The Times over the weekend found, based on freedom of information requests, that at least 27 local authorities have no spare school places in certain year groups, which will make it difficult to find places for children forced to move schools. Those are exactly the kinds of issues that we need to monitor very carefully, which is why this new clause calls for a report on the impact of the policy.

I rise to speak in support of new clause 25, which seeks to monitor the impact of VAT on private school fees. There is, however, something missing in the new clause, which I have urged Ministers repeatedly to look at. I hope that even if they will not publicly talk about it, they are looking privately at the impact of this policy on the 100,000 children with special educational needs in private schools who do not have education, health and care plans, and may be displaced into the state sector. That will have an impact on the state sector and the demand for EHCPs, which is already in crisis. When Ministers respond, I hope they might address that point.

New clause 25 would introduce a requirement for the Government to publish a report within two years of passing of the Bill on the impact of removing VAT exemption on private school fees. The report would need to provide details of any private school closures, the number of pupils from private schools who have moved schools, the availability of state school places at local and national level, what percentage of children are offered a place at their parents’ first-choice school, and whether any admissions authorities have increased their published admissions numbers as a result of VAT policy.

Before proceeding any further, I would like to note that the issue of VAT on private school fees has been subject to extensive debate during the course of the Finance Bill and the Non-Domestic Rating (Multipliers and Private Schools) Bill. As the Government have noted on many occasions now, a thorough impact assessment of the removal of VAT exemption has been conducted. A comprehensive tax impact and information note was published alongside the autumn Budget and provides much of the information sought by the hon. Members for Harborough, Oadby and Wigston and for Central Suffolk and North Ipswich. This policy, as Members will be aware, took effect from 1 January 2025.

Does the Minister not accept that there is a fundamental difference between a projection of what is expected to happen and the reporting on what has actually happened? It is the latter that helps with future policy development by learning from experience.

I thank the right hon. Member for his interventions, and I ask him to be a bit more patient in the light of what I am going on to say. The Government’s impact assessment shows that we expect the number of private school closures to remain relatively low and that will be influenced by various factors, not just this VAT policy. Around 50 private schools, excluding independent special schools, close each year, and the Government estimate that 100 schools in total may close over the next three years in addition to the normal levels of turnover, after which closures will return to historical norms.

The Government also estimate that, in the long-term steady state, 35,000 pupils are expected to move from private schools to UK state schools. That represents less than 0.5% of all state school pupils and the resultant impact on the state education system, as a whole, is therefore expected to be very small. Differences in local circumstances will mean that the impact of this policy will vary between parts of the UK. The number of private school pupils who might seek state-funded places will vary by geographical location, and that will interact with other local place pressures.

In addition to the impact assessment, regular data is published by the Department for Education on pupil numbers and pupil moves. Data on the numbers of pupils in private schools is collected and published through the annual school census, and data on how many parents receive offers from their preferred schools in the normal admissions round is also collected from local authorities and published annually. We cannot definitively correlate pupil moves with the ending of the VAT exemption, as pupil numbers in schools fluctuate regularly for a number of reasons.

Moreover, admissions decisions must strictly be made in accordance with a school’s published admissions criteria only. We should therefore be cautious of measures that would require parents to state the reason why they are choosing to move their children to a different school, to avoid any impression that this information may be misused. School’s published admission numbers may be raised to respond to a wider local demand; in some cases and in some areas that may include, but will not necessarily limited to, increased numbers of pupils from the private sector. Where schools wish to raise their published admission number, they should do so in co-operation and collaboration with the local authority, and with a view to what is needed in the local area. Indeed, there are other measures in the Bill that stress the importance of co-operation on this issue.

Local authorities will consider pressures following the removal of the VAT exemption on school fees alongside other pressures as part of the normal place-planning cycle—this is business as usual. The Department for Education will be monitoring place demand and capacity using our normal processes and will be working with local authorities to meet any pressures. While I am grateful to Members for their interest in the issue of removing the VAT exemption on private schools, I hope that they are reassured that the Government have already addressed the impact of this policy and continue to monitor it.

I have been trying to exercise my best patience as the Minister entreated me to do. I think he is saying that it will never be possible to know, in reality, what the effect of this tax change is. Is that right?

I know the right hon. Member will have been listening very carefully to what I said, and I made it very clear that there is a census published each year, which sets out those figures. We will work very closely with local authorities to understand the impact that the policy has.

The hon. Member for Twickenham made a number of points on children with SEND. The vast majority of pupils who have special educational needs are educated in mainstream schools—whether they are state-maintained or private—where their needs are met. Where parents have chosen to send their child to a private school but their special educational needs could be met in the state sector—such as in England where children do not have an EHCP—VAT will apply to fees. The Government do not support the new clause for the reasons that I have outlined, and I ask the hon. Member for Harborough, Oadby and Wigston to withdraw it.

I think it is clear from the Minister’s response that there are certain things we will not be able to find out in the absence of this new clause. We will not be able to see the numbers moving from the private sector to the state sector. In particular, as the hon. Member for Twickenham raised, we will not be able to see the critical flow of those with undiagnosed or unofficially recognised special needs, as they potentially move into the EHCP process and into state schools. Nonetheless, we will continue to monitor the impact of this policy over time, and I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.