BIS – VAT REGIME FOR SIXTH-FORM SCHOOLS & FE COLLEGES – 28 January 2014

Dr Julian Lewis: The principal of Brockenhurst College in my constituency has made similar points about people who have gone on to serve the nation – for example, in the police and armed forces. Does the hon. Lady [Rushanara Ali] have a policy on the point that was made so clearly by the hon. Member for Cambridge (Dr Julian Huppert) about the differentiated VAT regimes for sixth-form colleges and other schools? If so, what is that policy, and will she urge it on the Minister?

[Rushanara Ali: The issue has been discussed; my hon. Friend the Member for Stretford and Urmston [Kate Green] mentioned it, and hon. Members have raised concerns about it. The question today is for the Government, and the hon. Member for New Forest East (Dr Lewis) should focus on getting a response from them. We will certainly look at the issues and at how we respond when we form a Government. There are deep concerns about the issue, and we need to look at how to ensure parity across providers. He should focus his question at the Minister. Too often, the Government throw questions back at the Opposition as though we were still in government. The Government are in their final year and they should take responsibility for issues, particularly today. Perhaps the Minister will respond to the question.]

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Dr Lewis: I had an exchange with the hon. Member for Bethnal Green and Bow (Rushanara Ali) earlier. Given that there will be this extra emphasis on people up to the age of 18, is it at least the Government’s aspiration to get rid of the value added tax anomaly?

[The Minister for Skills and Enterprise (Matthew Hancock): I am well versed in the VAT issue and recognise the argument. Removing the VAT anomaly would cost £150 million, which is the same amount that we have had to save through the measure we are debating, so I am afraid that I simply have to plead having no money to deal with it. All I will say is that I fully acknowledge the argument. A sixth-form or FE college has a private sector designation from the Office for National Statistics that leads to the VAT charge, but it also gives the college much more power over borrowing. On the one hand, a sixth-form or FE college has much more power to manage its finances, but on the other hand, it has to pay VAT. I note that in the past couple of years, there have been two new sixth-form colleges. Yes, there have been new 16-to-19 free schools, but there have also been new sixth-form colleges, so some people have taken the decision, even though they know that they will have to pay VAT, to go down the sixth-form college route, because they get extra flexibility in managing their finances. I completely acknowledge the VAT issue, but there is a flip side to the argument, which is why some people go for paying the VAT, even though they might not need to do so.]