My Lords, this is a probing amendment because I am well aware that issues of VAT are somewhat outside the scope of the Department for Education. However, it is an issue that keeps recurring and it does no harm to raise it again occasionally. The purpose is to equalise the arrangement for VAT refunds between schools and colleges. Currently, colleges, schools and academies are all required to pay VAT on their purchases but schools are subsequently reimbursed for these costs. The Sixth Form Colleges Association argues that:
“The Government’s historic defence for the absence of a VAT refund scheme for … Colleges has been that the VAT costs of … Colleges are taken into account as part of their up-front funding allocation. But with the introduction of the new 16-19 funding formula, all 16-19 providers (including school and academy sixth forms, free schools and … Colleges) are now funded in the same way, using the same methodology. We welcome the steps that have been taken to equalise the funding arrangements … Yet schools, academies and free schools continue to benefit from a mechanism to recover their VAT costs, while …Colleges do not”.
A recent survey indicated that the average college pays some £300,000 a year in VAT. This is obviously a significant amount being taken away from the front-line education of students in a way that is not comparable in schools and academies. Apparently, it would cost around £31 million each year to refund the VAT costs of colleges—but perhaps I should not have mentioned that.
The parliamentary Library briefing on the funding of 16-19 education indicates some key points. In 2010, the Government made a commitment to “fairer post-16 funding”—closing the funding gap between 16-19 education in schools and that in colleges. This was set out in a White Paper called The Importance of Teaching. However, the Government do not seem to have followed this up. There was a ray of hope in an Answer given by David Cameron when he was Prime Minister to a Question from Ian Swales who was then the Liberal Democrat MP for Redcar—those happy days. He asked why colleges had to pay VAT while schools and academies did not. The Prime Minister replied that he would look carefully at what had been raised, particularly in respect of free school meals for sixth form colleges and for secondary schools. He added that it was very welcome that children in infant schools would not have to pay for school meals. He then said:
“I will look carefully at his point about VAT”.—[Official Report, Commons, 9/10/13; col. 158.]
However, looking carefully did not seem to mean that much happened afterwards.
This seems to be an anomaly which could and should be rectified. It would bring considerable benefit to the education of young people and adults in further education bodies, be they sixth form colleges or further education colleges. I raise it again just to see whether there is a more positive response from the Minister. I beg to move.