HL Deb 24 March 1994 vol 553 cc745-6

3.32 p.m.

Baroness Castle of Blackburn asked Her Majesty's Government:

Whether they have yet reached a decision on the need to continue current VAT exemptions for education and training.

Lord Henley

My Lords, as I made clear on 10th March most education and training will continue to be free of VAT. The current review of this exemption seeks only to aid clarity and consistency and there will be no widescale change in VAT liability. It is hoped the final results of the review will be available shortly.

Baroness Castle of Blackburn

The Answer of 10th March was encouraging but it had gaps. Will the Minister give a categoric assurance that VAT will not be levied on adult students and graduates of overseas universities who are studying on the campuses of universities in this country? Is he not aware that these people, who come here to study us and to find out more about us, do not at present pay VAT and to re-impose it would not only constitute a tax on knowledge but also on closer relationships with other countries such as America?

Lord Henley

My Lords, the noble Baroness makes two points. First, adult local authority classes are not exempt and the proposals do not exempt them. But nearly all are subsidised and are regarded for VAT purposes as non-business and therefore VAT free as opposed to VAT exempt. There is no intention whatever to change that position and I hope that unnecessary confusion has not been caused by some answers given in the past. As regards United Kingdom campuses and foreign students, I accept the points that the noble Baroness makes. I can give an assurance that Customs are giving sympathetic consideration to the representations received and those will be taken into account in the final decisions which, as I say, will be announced shortly.

Lord Cledwyn of Penrhos

My Lords, that is a helpful reply. However, is the Minister aware, and will he confirm, that establishments such as Wroxton College, Oxford would be bound to close if VAT standing at 17.5 per cent. was imposed upon them? Does the Minister further agree that colleges like Wroxton are an important bridge between universities in the United States and British universities?

Lord Henley

My Lords, I do not know the exact status of the college to which the noble Lord refers. As I said, if it is one which takes foreign students, I understand that it is a matter which has been given careful consideration. The changes that we are proposing are really matters of detail to aid clarity. We do not intend to make any major changes which will cause problems to particular individuals. However, we believe it is necessary to assist and improve the clarity of the arrangements that exist at the moment.

Lord Eatwell

My Lords, on 10th March the noble Lord, Lord Henley, said that driving schools were likely targets for VAT under the review. Is any distinction to be made between those who are learning to drive as training for employment, such as heavy goods vehicle drivers, and the rest of us? If that distinction is to be made, how will it be done?

Lord Henley

My Lords, the point I was trying to make is that driving schools are already subject to VAT. That will continue in that all commercial training organisations are likely to continue to be subject to VAT if they are arranging their processes for profit. One has to be careful about suggesting that all such bodies should be exempt. There are many such bodies which would far prefer to go on paying VAT for the reliefs it gives them and reduce the costs to their customers who are themselves able to claim VAT back, if the noble Lord's noble friend Lord Peston can understand that.

Earl Russell

My Lords, will the Minister bear in mind that overseas students and scholars make a significant contribution to our balance of payments and such contributions are not so rare that we can afford to neglect them?

Lord Henley

My Lords, I can only repeat that Customs are giving sympathetic consideration to the representations already received.