Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Parliamentary Under-Secretary of State for Education (Mr Sam Gyimah)
I thank my hon. Friend the Member for York Outer (Julian Sturdy) for the opportunity to have this debate. It is timely in the light of the Government’s commitment to double the free childcare available for working families. Like him, I am a father; I have a 14-month-old who goes to nursery, so I experience the childcare market from the point of view of a parent, not just a politician sitting in Westminster making decisions about the sector.
My hon. Friend dwelt on the challenges that the nursery sector faces, but I would like to counter that: the childcare market is much broader than the nursery sector. The vast majority of places are provided by private, voluntary and independent providers. We also have childminders and school nurseries, but the bulk of the formal childcare that the Department is concerned with is provided by those three sectors. When we talk about the market and the challenges it faces, it is important to recognise how broad the market is and the different types of service offered. For example, childminders offer childcare in a domestic setting, whereas nurseries are more of an organisation and children are taken to them. Each provides slightly different challenges to and opportunities for parents.
For many families with young children, childcare is not an issue, but the issue. Many parents want to go back to work or work more hours, but find that the cost of childcare makes doing so unaffordable. The Government want to reward hard-working families by reducing their childcare bill. That said, policies are not just about the parents; we also recognise that childcare is about the child. A lot of development happens in the early years, so the quality of childcare provision is as important as making childcare available. That brings me to the key challenge we face in the sector: how do we make childcare affordable, ensure sufficient quality and ensure that it is available in the form that parents want? Every parent knows that the childcare needs of parents are not consistently the same across the board.
In responding to my hon. Friend, I will take the opportunity to make general points about our childcare policy. I am proud of our record to date. We are the first to fund 15 hours of free childcare for all three and four-year-olds as well as 40% of two-year-olds. We legislated to introduce tax-free childcare; the 1.8 million families who want to buy additional hours can get up to £2,000 off per child per year. It is important that the policy applies to children from age nought to 17, in the case of children with disabilities. Tax-free childcare can help parents not only with childcare in the early years, but with wrap-around care, whether that is breakfast or after-school clubs. We have also increased the child element of tax credits and introduced shared parental leave.
We need to do more to ensure that we are enabling families to make the choices that are best for their circumstances. In doing so, it is worth recognising, as my hon. Friend implied throughout his speech, that in many cases it is businesses that are delivering these services for parents, so we need to ensure that the funding is sustainable. That is why we have talked about implementing the funding rate for the new 15 hours in a way that is not only fair but sustainable, to ensure—crucially—that children have the best start in life, with affordable, safe and high-quality childcare.
More broadly, our businesses and economy depend on working parents, who themselves depend on access to high-quality childcare. However, what the childcare and early years survey tells us is that 22% of working parents have found it difficult or very difficult to pay for childcare; for lone working parents, the figure rises to 38%, so there is a lot more that can be done.
The conundrum is that the Government already invest £5 billion per annum to support parents with childcare. How can we be in a situation where we are spending that money yet some parents still say that they find the cost of childcare to be too high? The Childcare Bill will take further the support that parents can get, delivering on our manifesto commitment to support children at every stage of their life.
We will extend the entitlement of 570 hours for all three and four-year-olds, and I am happy to report that take-up of the existing entitlement in York is already higher than the average. With the new entitlement, working families will receive more childcare support than ever. It will guarantee them about 1,140 hours of free childcare, worth more than £5,000 a year per child.
I will make a comment about the funding rate, which was a key part of my hon. Friend’s speech. Yes, we need to look at the funding rate for the first 15 hours as well as for the second 15 hours, and I hear the complaints that nursery providers have made. However, it is worth making it very clear that the impact of the funding rate on a business is as a result of a number of factors and not just the rate itself, although it is important. For example, whether or not the local authority top-slices the funding that goes from central Government to providers determines whether providers receive more or less than the rate that central Government determine. Also, the flexibility that local authorities allow providers to deliver their 15 hours is important, because if local authorities are quite inflexible in the scope for providers to allocate the 15 hours in a way that works best for their business, that will invariably impact on the profitability of providers. Thirdly, the business model decisions that operators make impact on how far that money can go. When we consider the sustainability of this model, we need to look at all those things in the round, as well as obviously focusing on the funding rate available.
To support the market beyond the funding rate, I worked with the Department for Communities and Local Government in the last Parliament, urging local authorities to work with childcare providers and to ensure that charitable and non-profit providers benefit from the business rate relief that they are entitled to. Any nurseries that are registered charities will already benefit from rate relief. The smallest providers, including childminders, benefit from small business rate relief, although any further relief would require local authority discretionary relief.
I heard what my hon. Friend said about local authorities granting or not granting that relief. I intend to continue to work with the National Day Nurseries Association to find ways to ensure that the necessary action is taken to help reduce the cost of provision for childcare providers. I understand where he is coming from and I will take action, as he suggests.
Having said that, I counter the idea that somehow the childcare day market is not thriving; in fact, I would say that the opposite is true. The childcare day market for children aged from zero to five is vibrant and thriving. In 2013-14, it was estimated at £4.9 billion, which means it is about a third larger than it was a decade ago. The number of places in the sector has gone up by 12%, and roughly 230,000 places were created between 2009 and 2015. We recognise the challenges, but those are signs of a sector that is rising to those challenges.
To help the sector meet those challenges we are listening to its input. I have announced a review on the cost of providing childcare and it is now under way, with more than 300 responses in the first 24 hours or so. Clearly, the sector is aware of and engaging with the call for evidence. The review will report in the autumn and I encourage providers in York and throughout the country to respond.
As my hon. Friend pointed out and as I touched on earlier, the issue is not only about the funding rate, but about payment practices. I have heard that from all sorts of providers, including some of the largest ones in the sector, so we will be looking at that. The average paid to local authorities by central Government is about £4.51 per hour for three and four-year-olds; that is in excess of what he said providers in his York constituency are receiving. In fact, that rate is higher than the one in the Family and Childcare Trust survey, which showed that an average nursery is charged £4.47 per hour for children aged two and over. That is an indication of why we need to look at what is happening between the rate set by central Government and the rate received by providers. Why does it differ so much between local authorities and between types of provider? That is not to say that we do not accept the need to look at the overall rate, but we need to look at the other aspects as well.
My hon. Friend touched on the funding formula, but the funding system for three and four-year-olds includes historical inconsistencies that result in large variations in funding distribution between local authorities. There are also variations in the funding passed on by local authorities to providers. In the previous Parliament, we started to look seriously at such problems to create greater transparency for parents and providers. We now publish an annual benchmarking tool that lists every council’s funding and how much it passes on to different providers. That should help parents and providers to have informed conversations with councils, but should also hold them to account. I am confident that if we look at all such things seriously, the extended entitlement will provide an opportunity for existing providers to expand and for new providers to enter the market, giving parents choice and helping to build our economy.
The market is healthy and growing. I am sure that my hon. Friend will be interested to know that in York 4Children has developed a fantastic childcare hub with a blended childcare offer, where schools and private, voluntary and independent providers are working together to provide high-quality childcare. That is one example of innovation in the sector that can be used to boost capacity, higher quality and flexibility for parents. Generally, to be able to deliver for parents in a cost-effective way we need more of such innovation, rather than having a sector that operates in silos.
My hon. Friend talked about nursery provision. Many maintained nursery schools deliver the highest quality early education, often in disadvantaged areas where it can make the greatest difference. I fully support such schools, because they are delivering high quality. We will ensure that they, as well as private and voluntary providers, can continue to thrive.
I am also proud to say that the quality of providers continues to improve. In York, 91% of early years settings are rated as good or outstanding, compared with 80% nationally. That is an encouraging statistic. Additionally, 64% of children in York achieved a good level of development in the early years foundation stage profile, compared with 60% nationally in 2014. The Government’s childcare policy will have a direct and significant impact on the lives of children and families throughout the country. It is right that it should be subject to the most thorough scrutiny, such as that from my hon. Friend this afternoon.
Motion lapsed (Standing Order No. 10(6)).