Child Care

Debate between Lucy Powell and Jim Shannon

Wednesday 13th February 2013 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Lady for bringing this important issue to the House. Not everyone can call on grandparents, uncles, aunts or other family members to provide care—that is true right across the United Kingdom, including in my constituency of Strangford—hence the importance of the child care systems that are already in place. Does that not underline the point that an extra tax allowance should be available for those who are working, to enable them to take full advantage of child care services?

[Lucy Powell]

I thank the hon. Gentleman for that. It is a good point that many people rely on paid child care, not the support of their families, which is why this evening’s debate is so important.

The allowance of child care costs that can be claimed through tax credits has been reduced from 80% to 70%, losing a family with two children £30 a week or £1,560 a year. With the introduction of universal credit in April, things are set to get even worse for the lowest-paid families. A recent report by the Children’s Society, “The Parent Trap”, found that the lowest-income working families will have to pay up to seven and half times as much towards their child care costs under universal credit, leaving many unable to continue working. Over the coming years, the 1% uprating of tax credits and maternity pay will leave all recipients worse off in real terms. Many middle-income families have seen tax credits cut completely or their child benefit cut.

The third element of the triple whammy for families is that the crisis is creating disincentives either to work or to work more. Moreover, the introduction of universal credit builds in even greater disincentives, especially for lone parents. A recent report by the Resolution Foundation, “Counting the Costs of Childcare”, found that for lower to middle-income families, the extra income generated by a second earner is almost entirely lost on child care costs, leaving lower or middle-income-earning households no better off in work than out of work. That just cannot be right. With the introduction of universal credit, Barnardo’s has calculated that a lone parent family—with two pre-school children—working 16 hours a week would be zero pounds—yes, zero pounds—better off if they increased their hours to full time. This is a perverse situation that needs looking at urgently. This is a real crisis for many families—who in turn are opting to work fewer hours or not work at all, which in turn is costing our economy and costing the taxpayer—and it is a crisis of this Government’s making.

One of the Government’s flagship policies to address the triple whammy was announced a couple of weeks ago, yet the Minister’s plans to loosen the ratios of childminders to children—to 1:4 for under-twos and 1:6 for over-twos—have been met with anger and derision by parents and providers. What is more, there is little or no evidence that these plans will have any impact on costs at all, yet there is evidence—especially from France, which the Minister is so keen to look to—of quality being compromised. Parents are overwhelmingly against these proposals. A recent survey by Mumsnet found that 94% are happy with the current arrangements. I have been contacted by many anxious parents. If parents are not happy with the quality and care options they have, they are more likely to opt to stay at home and look after the children themselves.

Providers are also united in their opposition to these proposals. Some 94% of respondents to a Pre-school Learning Alliance survey of members said that the quality of care would be compromised if ratios were relaxed in this way. I have been contacted by many working in the sector. Their comments are damning. Neil Leitch from the Pre-school Learning Alliance said:

“We are absolutely appalled by this fixation to alter ratios...This is a recipe for disaster.”

June O’Sullivan, chief executive of the London Early Years Foundation, one of London’s highest rated providers and providers of the excellent and well-used nursery we have here at the House of Commons, said:

“It beggars belief that a minister can wreak havoc on a sector that has explained the negative consequences of her actions....France is now the country with the highest sickness level in Early Years in Europe.”

Kids Academy, which operates in the north-west, contacted me to say:

“We oppose these changes and believe they are fundamentally wrong.”

Even the Minister’s own child care adviser, Professor Helen Penn, has described the plans as “grotesque”.

As reported in The Independent recently, a report commissioned by the Minister’s Department, but which has yet to be published, is believed to conclude that these plans will lead to a “deterioration” in the quality of care and will not reduce the costs to parents. Perhaps the Minister will take this opportunity to tell the House if and when she will publish this important report that she commissioned. The evidence from France is sketchy too, with many believing that quality has been compromised.

As the Minister failed to come to House at the time to debate the proposals, I hope that she will take the opportunity this evening to answer a few questions. Which stakeholders, parents and providers has she found to support these changes? What evidence does she have that the changes will do anything to reduce child care costs? Will she publish the evidence that she has received on quality and costs?

I turn now to the issue of additional financial support, on which the Government have provided a running commentary in the newspapers. Perhaps in recognition of the effect of the Government’s own policies on places and funding as well as their severe cuts to tax credits and family support, they have been briefing for some time now about a new package of financial support. However, on the face of what they are proposing it appears that not everyone will benefit, and how it will be delivered remains a mystery.

We are led to believe that the Government, if they can agree among themselves, are to offer a tax break of up to £2,000 a year per child to each household. This would be paid for by scrapping the child care voucher scheme and only

“a bit of extra money”.

By my reckoning, many families who currently benefit from the voucher scheme, especially dual-earning couples who currently get nearly £3,000 a year of tax breaks each, would be worse off under this proposal. Can the Minister today guarantee that no family in receipt of child care vouchers would be worse off under her new proposals?

Will the Minister explain how the tax-break scheme will work? Many people in the sector, and leading experts, think that there are only three different options for how it can work—through the employer, which places an extra burden on them; via self-assessment; or through providers, who would need to claim it back and then supposedly pass it on to parents. So which of these unappealing options does she favour? Will she say more about when these long-awaited proposals will be brought forward?

I am conscious that it is getting very late, but I would finally like to set out what I would like to see as the scope and framework for future child care policy, as I believe the scale of the crisis we face—and its impact on the economy—requires more radical thinking. The Government’s proposals are just tweaking at the edges. Before we even get into this debate, it would be useful if the Minister clarified what the current Government spend is on child care and child care support. I have heard her use different figures, ranging from £5 billion a year to £7 billion. Which is it? How is she calculating it? The OECD figures that she is fond of quoting, indicating we spend more than most, do not compare like with like, as children start school younger here than in many other European countries, a cost that is included.

Starting with what we currently spend on child care, we then need to look at how much the economy would benefit from more women returning to work immediately following maternity leave. All the evidence shows us that women—I am afraid it is still women—who take a break from work and their careers suffer a pay gap for the rest of their lives, very rarely returning to the level, hours and pay they were on previously. In many cases, they work part time on low pay for years after having children and do not return to their previous job.

So, we not only need to eradicate the disincentives to work, as outlined earlier, but we need to make the case to the Treasury of the long-term added value to the Exchequer of the tax revenue from women returning to their existing jobs. The recent Institute for Public Policy Research report “Making the case for universal childcare” argues that point extremely well. It argues that over a four-year period, there would be net return to the Exchequer of over £20,000 per parent from a returning mother, even when 25 hours a week of free child care is provided over that same four-year period.

Once this case is made, I believe we should look at investing up front the extra tax generated from parents earning more and working more, through more radical child care support. In my view, that should be focused on the points at which parents make decisions about how and when to return to work, especially when their maternity leave comes to end or when they have had their second child. These are critical moments of choice, but too often child care policy is centred on older children; by then, the parent might either have chosen to return to work or already have managed to struggle along with the extra support—however welcome it is when it comes. We need a parent-centred child care policy.

Critical to this parent-centred approach is parental leave and flexible working. I welcome the Government’s bringing forward proposals for parental leave to be shared between both parents—as Labour would have done. This is an important component to changing the nature and culture of workplace attitudes to having children, and I believe it will enable more parents to stay in the work force.

I know I have raised a number of big issues in this evening’s debate, and that we can only scratch the surface in half an hour. I hope, however, that this will help to develop some of the issues on the table.