Report launch calls for VAT Reform to unlock investment in skills

A new report by the London School of Economics (LSE) and the Large College Group, which includes New City College, is calling for VAT reform to unlock investment in skills, opportunity and growth.

The report, Funding Futures: Making the Case for VAT Reform in Further Education, was launched at a high-profile event on November 4 2025, at LSE, attended by sector leaders, economists, policymakers and the journalist Robert Peston, who delivered a keynote speech.

The research examines the financial and operational impact of the current VAT regime on further education colleges. It concludes that aligning VAT arrangements for colleges with those of schools would be fiscally neutral for the Treasury, but would release hundreds of millions of pounds for reinvestment in skills, technology and community growth.

Robert Peston, award-winning political editor, journalist, author and founder of Speakers for Schools, spoke about the current economic context and challenges, and how further education and skills are an absolutely key part of the solution.

He said: “The single most important task for the government is to increase growth, productivity and living standards. Further education colleges can be such an important contributor. Ministers rightly highlight the scandal of a million young people not in education, employment or training. And when I talk to employers, they tell me there are not enough people in this country with the skills that they need. Further education colleges should be front and centre in resolving these.

“It matters that the future of further education is a confident future. The country depends on it. You deserve the nation’s support. You need proper resources.”

Gerry McDonald CBE, Group Principal and CEO at New City College, added: “I am very encouraged by this report. Recent statements by the Prime Minister alongside the post-16 skills white paper place colleges as central to economic growth.

“This new report makes a sound economic case for the Treasury to enable colleges to deliver the skills and increased education and training capacity that the country needs.”

The LSE report highlights the essential contribution further education colleges make to local communities, employers and the wider economy – and argues that removing the VAT barrier would enable the sector to do even more to meet national skills priorities and economic goals, bringing growth and prosperity to the country.

The Large College Group consists of: New City College, Chichester College, LTE Group, Luminate Education Group, NCG, Activate Learning and Capital City College.

For more information and to read the full report, visit Funding Futures: Making the Case for VAT Reform in Further Education