ALR & Ors, R (on the application of) v Chancellor of the Exchequer

This judicial review concerned the legality and human‑rights compatibility of ss. 47–49 of the Finance Act 2025, which remove the VAT exemption for supplies of education by private schools (and related boarding and lodging). The claimants (pupils, parents and some private schools) alleged breaches of Article 2 of Protocol No.1 (A2P1) and Article 14 read with A2P1 and, in Claim 3, Article 1 of Protocol No.1 (A1P1). The court held that the tax change interfered with A2P1 and with Article 14 in respect of some claimants but that Parliament’s decision fell within a broad margin of appreciation and domestic margin of discretion in taxation and social policy. The court also held that A1P1 was not engaged in respect of the school claimants’ businesses (or, in any event, any interference was justified). Permission to apply for judicial review was granted but the substantive claims were dismissed.

The claims challenged the imposition of VAT on private school fees given effect by Budget Resolution 34 and, after Royal Assent, by ss. 47–49 Finance Act 2025. Claimants included children with special educational needs (SEN), children and parents from particular faith communities, parents preferring single‑sex education, children following foreign curricula, and a number of small Evangelical Christian schools and parents. Remedies sought were declarations of incompatibility under s.4 Human Rights Act 1998.

Procedural posture: three rolled‑up first instance judicial‑review claims were heard together. The Speaker of the House of Commons and the Comptroller and Auditor General intervened on questions of Parliamentary privilege.

Issues framed:

• whether the tax change impaired the "very essence" of A2P1 or was otherwise disproportionate;
• whether the uniform tax measure amounted to unjustified discrimination under Article 14 read with A2P1 (claims based on SEN status, religion, nationality/foreign curriculum and single‑sex education);
• whether the tax measure engaged A1P1 and Article 14 read with A1P1 (Claim 3 schools and parents); and
• the admissibility of Parliamentary materials (select committee and NAO reports) in litigation given Article 9 Bill of Rights and Parliamentary privilege.

Court’s reasoning: the court summarised Strasbourg and domestic authorities on A2P1, recognising both (i) the core importance of the right to education and (ii) the limited nature of positive obligations to fund or secure particular forms of private education. The court rejected the argument that VAT on fees ipso facto impairs the very essence of A2P1, observing that many regulatory or fiscal measures may increase the cost of private education without rendering A2P1 inapplicable. On proportionality, the court applied the Bank Mellat four‑stage test, concluding that raising revenue, fairness and administrative workability were legitimate aims and that the Government’s OBR‑certified modelling provided a rational basis for the policy. The court afforded a broad margin of appreciation and a broad domestic margin of discretion because the measure concerned taxation and redistribution and was enacted after debate and as a manifesto commitment. On Article 14 the court analysed Thlimmenos and indirect discrimination claims for each group. The court accepted that Charedi Jewish pupils were seriously disadvantaged because of lack of state alternatives and socio‑economic factors, but nonetheless concluded Parliament’s decision not to craft narrow exemptions fell within its margin of discretion given practical and principled objections to workable, non‑arbitrary exemptions. The court accepted that pupils with SEN but without an EHCP are likely to suffer disproportionately if displaced to the state sector, but held that the competing distributive considerations and the risk of behavioural effects from an exemption were weighty justifications for Parliament’s choice. The Claim 3 schools’ A1P1 complaints failed because anticipated future income or customers did not constitute protectable possessions in the sense required by the Strasbourg jurisprudence, and because any interference was justified. Finally, the court held (for present purposes) that NAO Value for Money reports fall within “proceedings in Parliament” and are therefore protected by Article 9; courts may not admit Parliamentary materials attracting that protection to establish contested facts, but agreed facts from such reports can be relied upon.

Permission to apply for judicial review was granted, but the substantive claims were dismissed. The court concluded that (i) the tax change under ss.47–49 Finance Act 2025 interfered with rights under Article 2 of Protocol No.1 and with Article 14 in some respects, but (ii) Parliament’s decision lay within a broad margin of appreciation and domestic margin of discretion on taxation and redistributive policy and the interferences were proportionate. The Claim 3 A1P1 complaints were not made out; in any event any interference was justified. The court also held that NAO Value for Money reports fall within Article 9 protection and courts may not use Parliamentary materials attracting that protection to prove contested facts, though agreed facts derived from such materials may be used.