Childcare Payments Bill

Debate between Alex Cunningham and Mark Durkan

Monday 17th November 2014 Commons Chamber

[Alex Cunningham]

Yes. I am grateful to the hon. Gentleman for that intervention. I most certainly do agree with him. Pieceworkers and others can have hours and wages that fluctuate over a long period; they will most certainly be affected. I feel that the

“easy-to-use online tool”––[Official Report, Childcare Payments Public Bill Committee, 23 October 2014; c. 222.]

promised by the Minister in Committee will prove elusive.

On top of the sizeable potential for confusion, the different mechanisms by which child care costs are to be paid under the tax-free child care scheme and universal credit are also worrying. As we are aware, under the tax-free scheme, payments will be made through child care accounts. That will provide families who are in receipt of tax-free child care with an important budgeting tool to help them manage their finances; that is particularly important as payments will be made through child care account top-ups before costs are paid by the parent. However, child care support received through tax credits and universal credit cannot be provided through child care accounts. That means that child care payments are not aligned, which gives rise to the potential for further confusion and complexity for parents, and it means that an important budgeting tool for households in receipt of tax-free child care is not available to those receiving child care support through universal credit.

It is worth highlighting that the Children’s Society report “The Debt Trap” found households in poverty containing dependent children to be twice as likely to be in some form of arrears as families on higher incomes. It is precisely these families who are most likely to need help with budgeting, but who will be given the least support. Moreover, universal credit payments of child care costs will be made in arrears. As Members will be aware, parents are usually required to pay child care providers one month in advance, but families on low incomes claiming universal credit are likely to have the lowest savings, if any at all; this will inevitably result in many being forced to borrow money to pay for their child care up front. We should be under no illusion: that could be a hefty sum, and if child care costs are higher during school holidays, further loans may be required to meet those costs. This runs the obvious risk of forging a cycle of dependence. Reporting requirements for universal credit are significantly greater than those for either tax credits or tax-free child care, and any failure to report in time will lead to the loss of all payments for that assessment period.

[Mark Durkan (Foyle) (SDLP)]

Does the hon. Gentleman not think it strange that in this time of austerity and everything else that we hear about, the Government have come forward, under this Bill, with a child care payment scheme that gives more, including more flexibility, to those who have more? I am thinking of the bankable allowances and so on. Compare that with what the Government are providing, in terms of child care, under the universal credit rules. It really is one scheme for the better-off, and another, much worse scheme for the less well-off.

[Alex Cunningham]

I most certainly do agree with my hon. Friend. It is a peculiar world—I would use the word “bonkers”—when someone earning £100,000 can benefit more from a new Government scheme than somebody on perhaps £20,000. It is important that the Government think again on some of these points.

Let us not forget that families on higher incomes will get their child care accounts topped up by the Government before they have to pay their provider, so the rich get paid up front, while the poor do not get any payment at all. One possible solution that could be explored further is the provision of child care accounts and tax-free child care to families in receipt of child care support through tax credits or universal credit. Allowing these claimants to use child care accounts to receive their payments of child care costs would allow receipt in advance of payment, but without the risk of any overpayments being lost within wider family budgets. However, as things stand, the Bill would not permit that without additional primary legislation. These minor amendments to clauses 11 and 15 would allow the tax-free child care scheme to go forward as designed, while allowing us the time to consult and to assess these issues fully. We would have the flexibility to make changes by regulation, rather than through additional primary legislation.

Universal credit is still in its infancy and is being gradually rolled out. It seems to make little sense to limit how it may evolve by putting barriers, in the form of primary legislation, in the way of what may be sensible reforms. I would like to hear from the Minister what further considerations she has given to extending the tax-free child care scheme in this way, and expanding child care accounts beyond the scheme. I hope that she will support these minor amendments, which would allow for the potential benefits that those changes could deliver, particularly for some of the poorest people in our society.