Childcare Payments Bill

Alison McGovern Excerpts

Monday 17th November 2014 Commons Chamber

Brought up, and read the First time.

[Alison McGovern (Wirral South) (Lab)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

With this it will be convenient to discuss the following:

Amendment 12, in clause 11, page 7, line 8, after “may —”, insert—

“(a) repeal this section, or”.

Amendment 13, in clause 15, page 9, line 10, after “may —”, insert—

“(a) amend this Act to allow childcare accounts to be held by persons other than those specified in subsection (1),”.

Amendment 3, in clause 30, page 17, line 3, leave out

“an award of tax credit is or has been made”

and insert

“an award of tax credit which includes the childcare element is or has been made”.

Amendment 4, page 17, line 18, after “credit”, insert

“which includes the childcare element”.

Amendment 5, page 17, line 22, after “credit”, insert

“which includes the childcare element”.

Amendment 6, page 17, line 31, after “credit”, insert

“which includes the childcare element”.

Amendment 7, in clause 32, page 19, line 16, after “credit”, insert

“which includes the childcare element”.

Amendment 8, in clause 35, page 21, line 21, after “credit”, insert

“which includes the childcare element”.

Amendment 9, page 21, line 32, after “credit”, insert

“which includes the childcare element”.

Amendment 10, in clause 36, page 22, line 12, after “credit”, insert

“which includes the childcare element”.

Amendment 11, page 22, line 24, after “credit”, insert

“which includes the childcare element”.

[Alison McGovern]

It is a pleasure to speak in support of new clause 2, which stands in my name and that of my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell). Before I continue, may I pause briefly to pay tribute to the outstanding work that my hon. Friend the Member for Manchester Central (Lucy Powell) did as my predecessor in this shadow position, and in particular to her scrutiny of the Bill in Committee?

In and of itself, this is not a bad Bill. We agree with its aims; it sets out to address serious issues relating to child care costs and affordability, which we recognise form a major part of the crisis hitting so many families in Britain today. Our concerns with the Bill are that, for all its good intentions in proposing this scheme for payments towards child care costs, Treasury Ministers have not thought through all the potential consequences.

Some of the Bill’s weaknesses may arise from the fact that, as far as the Government are concerned, this is purely a Treasury Bill; it has perhaps lacked some valuable input from those with a stronger experience of how the child care market actually operates—or, in far too many cases, fails to operate—in this country.

In oral evidence to the Committee, numerous organisations and experts raised concerns about the long-term effects of the Bill, and we have seen little movement from the Government to address those worries. The new clause seeks to go some way to rectifying that, by requiring the Chancellor to keep under review the impact the scheme has on issues of child care cost inflation and, thus, affordability.

Let me say a few words about the situation in which we find ourselves. There is, undeniably, a crisis in child care costs. There is no need to take my word for that or to rely on the testimony we hear on the doorsteps in our constituencies. The Office for National Statistics tells us that between 2010 and 2014 the cost of placing a two-year-old or older in nursery rose by 31%—wages rose by just under 4% in that period—and for under-twos the figure rose by 27%. [Interruption.] If the hon. Member for Taunton Deane (Mr Browne), who is sitting on the Liberal Democrat Front Bench, wants to intervene, he is welcome to. [Interruption.] I shall take that to mean he does not.

The figures also reveal that, as we have seen so often during the past four years, the areas seeing the least benefit from this weak and uneven recovery have been hit the hardest by child care cost increases. In my region of the north-west, costs are up by 46% in just four years. Over the Pennines, in the north-east, the figure is 47%. A family in my constituency is having to find, on average, £31 a week more to fund 25 hours of nursery for their two-year-old, three-year-old or four-year-old. That is a hefty sum in almost anyone’s money. When that is tied in with frozen wages, reduced tax credits, increased VAT and soaring housing costs, it all becomes a pretty desperate recipe—I hear testimony on that from my constituents week in, week out.

We know that not only are there regional biases to costs, but families with disabled children are being hit disproportionately hard as well. I pay tribute to my hon. Friend the Member for Stockton North (Alex Cunningham), who was a doughty champion for the parents of disabled children in Committee and who has tabled amendments 1 to 13 today. The cross-party parliamentary inquiry on child care for disabled children, of which my hon. Friend was a member and which was chaired by my hon. Friend the Member for North West Durham (Pat Glass) and the hon. and learned Member for South Swindon (Mr Buckland), produced some valuable findings on that point.

--- Later in debate ---

[Hywel Williams (Arfon) (PC)]

Does the hon. Lady accept that there are particular stresses on parents in rural areas, as the cost of travel has to be added to the cost of child care itself? The money could be better deployed in such areas in increasing the provision rather than the amount that child care providers get.

[Alison McGovern]

It is important for all of us to recognise the extra pressures on families in rural areas. People’s circumstances are different. We want to increase employment in rural areas as well as in suburban and urban areas. The hon. Gentleman makes an important point.

[Alex Cunningham]

My hon. Friend helps me to talk about the needs of parents with disabled children. When inflation and prices go up, the increase is felt particularly acutely by those families. Does she agree that the Government really need to think again about that particular element?

[Alison McGovern]

Again, I support the views of my hon. Friend. Too often, parents of children with disabilities are forgotten in our debates. They have the most important responsibility. Children with disabilities deserve all our care and attention. I hope that, by raising this matter, we can remind ourselves that their parents might not have the time to make these points, so it is important that we all remember the extra costs and the circumstances that those parents face. We all have an interest in this matter. It is why Labour is sceptical about the wisdom of a demand-side-only approach.

In general, better value for money and better outcomes could be achieved through a radical expansion of the free child care entitlement to three and four-year-olds, from 15 hours a week to 25, paid for by an extension of the bank levy. There is no better week than this to be making the argument about extending the bank levy, as once again we are seeing banks being taken to task for their poor behaviour. I make no apology for reminding Members about the importance of that bank levy, especially as it could pay for something as vital as child care.

As we saw from the debate on new clause 1, the Government are not about to accept the policy—more fool them—but we want to ensure that Ministers are required to keep track of the inflationary impacts. New clause 2 requires that within three months of the Bill’s becoming an Act and every three years subsequently, the Chancellor will have to review the impact of the subsidy on making child care more affordable, on what the average cost of child care for parents in work is and on whether supply-led measures could be more effective. That is not a massively onerous burden on the immense capabilities of the Treasury, but a very valuable canary in the coal mine regarding child care inflation.

In Committee, the Minister was consistently against any suggestion of hourly rate capping or other means of placing a brake on any inflationary pressures arising from the policy. A regular review might demonstrate whether the post hoc implementation of such provisions might in fact be necessary if the subsidy is to be anything more than a damp squib.

The Bill is a blunt instrument that fails to target Government funding and gives the most financial support to the best-off families. It will possibly provide some short-term relief for parents, but does little to deal with the underlying problems of inflation, supply and quality in the child care system. There are 40,000 fewer child care places in England than there were when the Government came to power and almost 4,000 fewer suppliers. Childminder numbers are down by 13%. For tens and likely hundreds of thousands of families across the country, the proposals in the Bill will mean little or nothing because they simply cannot find a child care place or access one that will offer the flexibility in hours to fit around work. We need radical reform of the broken child care market. This Bill does not provide it, but by supporting new clause 2 today Members can at least take a step that will help guard against its being a worse than a useless creator of child care cost inflation.

[Alex Cunningham]

My hon. Friend the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) has already talked about the complexity of the Government’s scheme. Amendments 12, 13 and 3 to 11 are all aimed at simplifying the relationship and interaction between the tax-free child care scheme and other sources of support, particularly tax credits and universal credit.

Members might be aware that I tabled amendments 3 to 11 in Committee with the intention of broadening the provisions of the Bill and allowing those households in receipt of tax credits that do not receive any support for their child care costs in their tax credit award to receive support from the tax-free child care scheme. My hon. Friend the Member for Wirral South (Alison McGovern) has already outlined that the working poor have been hit most by the policies of this Government and I would like that not to apply to child care.

Giving those people help will entail several minor changes being made to the clauses dealing with the special rules affecting tax credits and universal credit claimants: specifically clauses 30, 32, 35 and 36. In Committee, the Minister was very clear about the need to deliver a welfare system that is

“designed to encourage progression into work”.––[Official Report, Childcare Payments Public Bill Committee, 23 October 2014; c. 223.]

However, that is not what will result from the Bill in its current form.

Let us take as an example a parent who is offered 15 hours of work a week on a low rate of pay. Most, if not all, of any gains from this employment could be totally lost in child care costs. They would not get any support from the Government to meet those costs and might therefore not be able to afford to take the work in the first place, and I for one would not be surprised if they chose to spend the time with their children instead. These amendments, however, would create a much greater financial incentive for people to start working part time.

It is important to be clear from the outset that the purpose of the tax-free child care scheme is to provide support for child care costs for those who are not eligible for help from elsewhere. As I mentioned when I raised the matter in Committee, there is an anomaly in the Bill if we are serious about encouraging people to go back into work or to stay in work—particularly those who are on the lowest earned incomes in our society.

The Bill as it stands says that the Minister recognises that there are some who do not get any help through tax credits but that the Government will do nothing to help. I am sure that that is not what she intends. Indeed, in Committee, she specified that the new scheme should not interfere with financial incentives for people to work more hours, let alone create perverse incentives, but that is precisely what the Bill will do.

Many parents who claim tax credits are both working and incurring child care costs, but they are not entitled to claim the child care element because, for instance, they do not meet the minimum number of working hours per week to qualify. Clause 30, however, makes it clear that any tax credit award will be terminated when a valid claim for the tax-free child care scheme is made, regardless of whether the child care element of working tax credit is received. Put into context, that means that households in which one parent is working full-time while the other works 12 hours a week will not be entitled to receive the child care element of tax credits to support them in the payment of child care costs. Similarly, single parents working 15 hours or fewer per week on average will also not be entitled to the child care element of working tax credit. Both would have to pay for their child care out of their own, potentially low, earnings.

--- Later in debate ---

[Alison McGovern]

The Minister mentions universal credit and making work pay—for too many families I only wish it did. Will she comment on the role of universal credit in discouraging dual earners? In the context of this child care debate, does she think the Government should look again at its operation?

[Priti Patel]

We had much debate in Committee on universal credit and the way in which the scheme interacts with it. The hon. Member for Manchester Central (Lucy Powell) made some strong and valid contributions in this regard.

Amendment 12, tabled by the hon. Member for Stockton North (Alex Cunningham), would allow regulations in future to permit parents to receive support under the new scheme and universal credit at the same time. As I have said, we must not forget that families in receipt of universal credit already rightly receive generous support with their child care costs. Child care support is offered to parents on universal credit as part of a welfare system designed to make sure that work pays and that those who need the support get it. Up to 300,000 more people are likely to be in work as a result of universal credit, and we expect a significant proportion of those to be households with children. But it is not right for a parent to receive support under the new scheme in addition to universal credit, when parents will receive 85% of their child care costs from April 2016. It will be easy for parents to access support that best suits their circumstances, so I reassure the hon. Gentleman that parents who are eligible for universal credit will be able to opt out and claim support under the new scheme should they wish to do so. We shall be supporting parents in making those decisions.

As we said in Committee—hon. Members have touched on it again today—we shall be launching the online support tools, the calculator and clear guidance. Draft guidance has been published well ahead of the launch of the scheme and shows our commitment to work in close collaboration with parents, child care providers and employers, and their feedback will ensure that guidance is tailored to meet their needs.

This is about ensuring that support remains focused on those on lower incomes, and the introduction of the scheme gives parents confidence that as they increase their income and move off universal credit, they will continue to receive Government support with their child care costs, which is vital.