Monday, 14 October 2013

Cambridge MP Acts To End Unfair VAT System For Sixth Form Colleges

MP Julian Huppert has called on Education Secretary, Michael Gove to stop the unfair treatment of Cambridge’s sixth form colleges through the VAT system. 

Unlike schools and the new academies with sixth forms, Long Road and Hill’s Road Sixth Form colleges are unable to claim back VAT on goods and services leaving them out of pocket by hundreds of thousands of pounds a year.

Julian has joined other MPs with sixth form colleges in their constituencies to send a joint letter to Mr Gove asking him to change the rules.

“It is completely unfair to treat Cambridge’s sixth form colleges differently from schools and academies which offer sixth form education,” said Julian who took the issue to the Treasury Minister earlier this year. “Our city is fortunate in having two excellent sixth form colleges but they are being discriminated against through this system.

“I don’t want to see our colleges forced to drop courses or cut back on extra-curricular activities which bring huge benefits to their students because the government won’t address this issue.”

Historically, the government has defended its decision to charge sixth form colleges VAT because it maintained it was taken into account as part of their funding allocation. But the new 16-19 funding formula means all schools and colleges offering education to this age group are funded in the same way.

“There is no excuse for the government to continue penalising sixth form colleges in this way,” added Julian. “It is time that it was treated in the same way as schools and academies so that it can put this money into courses and activities that will benefit its students rather than the treasury.”

The full wording of the letter signed by Julian reads:
Dear Secretary of State,  
As MPs representing constituencies that either contain or are served by a Sixth Form College, we welcome the introduction of the new 16-19 funding formula, which means all 16-19 education providers are now funded in the same way, using the same methodology.   We are writing concerning a modest step that could help to deliver more equal funding for Sixth Form Colleges, and bring the process you have started to a conclusion.  
Currently, Sixth Form Colleges are required to pay VAT on their purchases.   By contrast, schools and academies can reclaim these costs – in the case of maintained schools, through the local authority VAT refund scheme, and in the case of academies, via section 33b of the VAT Act 1994.  
This longstanding disparity could previously be defended on the basis that the VAT costs of Sixth Form Colleges were taken into account as part of their up-front funding allocation.   However, now that the new funding formula has been introduced, this anomaly seems unjustifiable.  The absence of a level playing field in funding terms makes it more difficult to introduce competition amongst 16-19 providers, and so drive up standards.  This problem is worsened because, as 16-19 specialists, Sixth Form Colleges cannot cross-subsidise from more generous pre-16 funding streams, as do many schools and academies, or from significant adult and employer-based funding, as Further Education colleges do.
At a time when almost half of all Sixth Form Colleges have had to drop courses, a VAT refund could help to rescue strategically important but less popular courses such as modern foreign languages and further maths.  It would also free up funds to enable the sort of partnership activities the Government is rightly keen for Sixth Form Colleges to pursue, such as sponsoring academies, becoming a teaching school or leading clusters of schools without a sixth form.   
We are told that officials at the Department for Education estimate it would cost in the region of £20 million per annum to refund the VAT costs of Sixth Form Colleges.   A VAT rebate would provide a much-needed injection of funding to build capacity in the sector and ensure that its high standards are maintained.   
We believe a VAT rebate for Sixth Form Colleges would be both effective and affordable, and hope you will give this idea serious consideration.