Labour admit they considered exempting children with special needs from school VAT raid...but didnt partly because it would be revenue diminishing, High Court hears

Labour have admitted they rejected calls to exempt children with special needs from private school VAT partly because it was ‘revenue diminishing’, judges have been told.

In an extraordinary disclosure in the High Court, the Government said sparing these children from the tax would be ‘incompatible’ with ‘the principles underpinning the policy’.

These included ‘raising additional tax revenues’, according to documents submitted to the court by lawyers representing Chancellor Rachel Reeves.

Separately, an expert also told the court up to 6,500 children with special educational needs and disabilities (SEND) may be ‘displaced’ because of the policy.

The new 20 per cent VAT on private school fees, promised in Labour’s election manifesto, came into force in January.

Three groups of families – most of whom are anonymous – are joining private schools in bringing a judicial review claim against the tax.

In written submissions, Sir James Eadie KC, representing the Government, said ministers ‘consulted extensively’ and ‘weighed the pros and cons of various possible exemptions’ including those for SEND children.

In addition, they considered the ‘benefits and disbenefits of introducing the measure later’ – for example, in September 2025 ‘at the beginning of the school year’.

Labour have today admitted they rejected calls to exempt children with special needs from private school VAT (pictured: children not involved in the case protesting) 

The High Court heard exempting special needs pupils from VAT would be ‘incompatible’ with ‘the principles underpinning the policy’ (pictured: children not involved in the case protesting)

Judges were told one reason for not allowing a VAT exemption for special needs children was because it would be revenue diminishing (pictured: families not involved in the case protesting)

However, he added: ‘Having considered 17,502 consultation responses, the Government rejected the exemptions and the delay sought because they were incompatible with the principles underpinning the policy, namely being revenue diminishing, unfair, unworkable and/or administratively onerous.’

He said the ‘central objectives’ in implementing the tax included ‘raising additional tax revenue annually by 2029-2030 to invest in public services, including the state education system, and enhancing the fairness of the tax system overall.’

And he added that the Office for Budget Responsibility (OBR) projects the measure will yield exchequer revenue of £1.5billion in 2025/26, rising to £1.7 billion per year by 2029/30.

Jeremy Hyam KC, representing some of the families, told the court that the Government had estimated it would ‘lose’ out on £450 million per year from VAT revenue if they created an exemption for all children with SEND.

This costing included the assumption that some extra families may try to falsely claim their child had SEND to avoid the VAT, he said.

Mr Hyam said ministers took the view that it would be ‘unaffordable’ for the Treasury to let SEND children off paying the tax.

And Barry Huggett, an expert witness supporting the families’ cases, said the tax could ‘displace’ up to 6,500 children with SEND out of the private sector.

He said the effect of pricing out such vulnerable children appears to be something ministers ‘simply did not consider’.

Charlie Gunns, 12, who has transverse myelitis, and his mother Leanne, travelled from their home in Norwich to support the claimants

The case has attracted supporters from all over the country, with protesters not involved in the case attending the High Court with placards

Claimants Stephen White and son Josiah, 14, who have chosen not to be anonymous, attended the High Court with sister Joy

Mr Huggett is the principle adviser for SEND to the Independent Schools Association (ISA) and chair of the advisory group on SEND for the Independent Schools Council (ISC).

The former head teacher was awarded an OBE in 2014 services to SEND education.

In a witness statement to the court, Mr Huggett said his calculation is based on the fact that the Government’s own estimate suggests 35,000 pupils overall could be displaced, with a proportion of these expected to have SEND. 

Mr Hyam told the court: ‘There is a real problem and the Government knew about it.’

He said based on the ‘Government’s own evidence’, of the SEND families using private schools, ‘6,500 who presumably can’t afford it any more will be displaced.’

He added: ‘It is not fair to remove a vulnerable child who needs SEND support from an environment where their needs are met to one where they are not met without reasonable justification.’

And he said far from being wealthy, parents of SEND children choose private schools ‘as a consequence of desperation’ because their needs cannot be met in the state sector.

‘It is not fair because those children have been failed by the mainstream system,’ he added.

One claimant family is paying for their child with autism to attend a private school using disability living allowance but will have to pull them out due to the VAT.

Chancellor Rachel Reeves is facing a judicial review claim in the High Court over the Governments new VAT on private school fees

Children not involved in the case joined the protest on April 1 outside the High Court

Labour have put an exemption in place for SEND children who have an education, health and care plan (EHCP), which entitles them to a higher level of state-backed support.

However, only a small proportion are able to get an EHCP, leaving the vast majority of SEND families having to pay the tax.

In October 2024, the OBR estimated the policy would lead to 35,000 fewer pupils in private schools.

The Government’s submissions to the court say the 6,500 figure is a ‘flawed assumption’ but does not offer an alternative estimate.

The challenge is being brought on the basis the tax is a breach of children’s right to education under the European Convention of Human Rights.

The various families also say it is ‘discriminatory’ – either because their child has SEND, has a preference for a religious education, or because they need an all-girls environment.

Among the claimants are Jewish pupils at specialist religious private schools who fear anti-Semitic attacks if they go into the state sector.

There is also a girl who had to attend a single-sex private school – the only all-girls school in her area – due to ‘harassment’ by boys at her co-educational state school.

And there are also claimants using Christian private schools because they cannot obtain the same religious education in the state system.

One is Stephen White, who has chosen not to be anonymous, and whose eldest four children are at Bradford Christian School, a private Christian school in West Yorkshire.

On Tuesday, he helped stage a protest outside the High Court to mark the opening of the case, joined by dozens of other parents from around the country not involved in the case. 

A Government spokesman said: ‘We do not comment on ongoing litigation.