Childcare Payments Bill

Debate between Alison McGovern and Alex Cunningham

Monday 17th November 2014 Commons Chamber

[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.