HL Deb 24 June 1996 vol 573 cc589-90

2.41 p.m.

Lord Boyd-Carpenter asked Her Majesty's Government:

Whether they have given further consideration to the effect of the provision in the Finance Act 1996 for withdrawal of the tax concession in respect of future tax on money set aside to finance the education of children.

The Minister of State, Department for Education and Employment (Lord Henley)

My Lords, the Finance Act 1996 does not withdraw tax relief here. The Charity Commission has concluded that a small number of educational trusts operating school fee plans are not truly charitable. If a trust loses charitable status it is no longer entitled to charitable tax reliefs. However, relief will not be withdrawn until 1st April 1997. In the meantime the Government are reviewing the implications for the trusts and their planholders.

Lord Boyd-Carpenter

My Lords, I thank my noble friend for that moderately reassuring reply. When a tax concession is withdrawn in a case where money is being held in reserve to finance the education of children, will it be only in a case where there is a clear lack of any charitable intention?

Lord Henley

My Lords, I confirm exactly that. I ought to make clear to my noble friend that under the 1993 Act the charity commissioners have a duty to remove charities that are no longer charitable. They have been conducting a review into that kind of trust for a number of years. They first gave notice to trusts as long ago as 1994 that things would not be all right. This year they made it clear that such trusts were to be withdrawn from the register. Discussions are now taking place with the Inland Revenue, the charity commissioners and the trusts in question with a view to restructuring them. That is why we have also made it clear that we shall not be withdrawing tax relief until April next year; nor will that withdrawal be retrospective. That gives time to those trusts to restructure.

Lord Eatwell

My Lords, is the Minister aware that I agree with him that the cost to the Treasury in this case is relatively small? However, does he agree that in respect of another aspect of the funding of private education the cost to the Treasury is very high? For example, as regards the assisted places scheme, in a situation where parents are separated or divorced, will the Minister confirm that the income of the father is not taken into account in determining the scale of an award and that therefore the Treasury gives large grants to children of wealthy parents? What is the basis for that profligacy with taxpayers' money?

Lord Henley

My Lords, I do not believe there is any profligacy with taxpayers' money. We are committed to the assisted places scheme. The noble Lord's reference goes somewhat beyond the Question on the Order Paper, but I know that the party opposite dislikes it. We are committed to both the maintained sector and the private sector. Our commitment to the assisted places scheme is a sign of that commitment. We shall continue with that commitment. As my right honourable friend the Prime Minister made quite clear, we look to seeing that provision double in the years to come.

Lord Eatwell

My Lords, as the noble Lord has indicated his willingness to discuss the assisted places scheme, will he refer to the question that I asked? Why in a case where parents are separated and divorced is the father's income, even when the father supports the child, not taken into account in determining the scale of an award?

Lord Henley

My Lords, the noble Lord dislikes the private sector. I suspect he also dislikes the charitable status given to private education. I remind him of exactly what happened to one of his friends on the Opposition Front Bench the last time his party questioned the charitable status of the private sector. He withdrew that remark pretty quickly when comments were made by others in his party.

Lord Monkswell

My Lords, will the Minister answer the question posed by my noble friend Lord Eatwell in terms of the effect on grants or loans paid to young people—whom I still consider children—at university? Surely the same kind of problem arises in that sphere.

Lord Henley

My Lords, I am not aware that the position regarding grants to young people at university has anything whatever to do with the Question on the Order Paper. That goes even wider than the original question put by the noble Lord, Lord Eatwell.