Childcare Vouchers

Anneliese Dodds Excerpts

Monday 15th January 2018 Westminster Hall

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Thank you, Mr Bailey, for calling me to speak on behalf of the Opposition in this important debate. I declare an interest, as someone who has personally benefited from the childcare vouchers scheme.

I thank my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) for introducing the debate. I also add my thanks to that of my colleagues to the tens of thousands of people who have made their opinions on this issue clear by signing the childcare vouchers petition. All those signatories have stated clearly that they are opposed to the closure of the scheme to new applicants and, as has been mentioned, to existing applicants merely because they have the misfortune of changing jobs. In addition, as colleagues have said, the petition has been echoed by early-day motion 755, which indicates that 49 Members of this House are displeased by the scheme closure scheduled for April.

I also thank my hon. Friend the Member for Batley and Spen (Tracy Brabin), who has been working hard on behalf of the Opposition to raise the profile of this issue, as well as other problems with the delivery of Government promises on childcare, not least the patchy implementation of the 30 hours’ free childcare pledge, as my hon. Friend the Member for East Lothian (Martin Whitfield) has rightly underlined.

I congratulate the hon. Member for Salisbury (John Glen) on his appointment as Economic Secretary to the Treasury, rather than as Children’s Minister. It is good to see him in this debate and I am looking forward to his response to the very detailed points made by my colleagues. Evidently, as a number of colleagues have made the point, we need a Government response on the extent to which childcare costs are outstripping wages. My hon. Friend the Member for High Peak (Ruth George) maintained that the cost of childcare has risen at seven times the rate of the increase in wages in recent years. Therefore, it is necessary for the Government to offer stretched parents more support.

I am sure that the Economic Secretary will refer to today’s announcement about the extension of tax-free childcare. I, like others, was absolutely astonished to see that announcement being made today, given the context of this debate.

I take on board the points made by colleagues that the tax-free childcare scheme benefits some parents. For some self-employed people who were not able to access the childcare vouchers scheme, there had to be some kind of new approach, although I underline the comments made by hon. Friends that we need to see figures on how many self-employed people benefit. Many will also see, to an extent, an increase in the support that they can obtain but, as my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) pointed out, most of the gainers will be those who are already better off. That is very concerning. None the less, although some people have benefited, there are still significant problems with the roll-out of tax-free childcare, some of which may be shorter run and some longer run problems. It is disappointing to see the Government going ahead with cancelling childcare vouchers for new entrants and those changing jobs and not acknowledging those continuing problems.

I do not want to go on at too much length, but I shall reprise some of the comments made by colleagues and pose questions directly to the Minister. I hope that we will have some answers to the important points. First, there are the substantial IT failures that have accompanied the provision of tax-free childcare. Unfortunately, they are very similar to the problems that have been experienced by people trying to ensure access to 30 hours’ free childcare. As we saw in the media again this morning, thousands of people have been unable to access their 30 hours for this term because of technical glitches. My hon. Friend the Member for Batley and Spen informed me that one nursery owner she is in touch with understands that one of her parents has had to call the helpline more than 100 times.

It was reassuring that the technology underlying the childcare vouchers appears to work—certainly, in my experience and that of parents I have talked to. Sadly, the complete opposite has been the case for tax-free childcare. It shares the same platform, as colleagues have mentioned, with the delivery of the 30 hours provision and sadly, it has experienced many similar problems. We have heard many examples of those problems already. My hon. Friend the Member for Birmingham, Selly Oak talked about how he had heard that there was inappropriate release of data, which was worrying to hear. As a member of the shadow Treasury team, I have been contacted about some of those problems.

One person who contacted me said that it has been a “Kafkaesque nightmare”. He is a single parent—a widower—and he stated an issue that others have referred to:

“The government childcare service requires those who are claiming government support with childcare costs to reconfirm every three months. This requires going through a number of screens on the relevant website and pressing a button to either confirm that nothing has changed or to outline changes. The trouble is that there is a serious bug in the system.”

The bug was so serious that every time he pressed this button, it reset the system. It was a complete and utter system breakdown.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

My hon. Friend is making a passionate argument about why the system has failed so many families in our constituencies. Is she aware that the Childcare Voucher Providers Association said that thousands of parents will have no access to any form of childcare support come April 2018, because of the system failing? Does she share my shock and astonishment about that?

[Anneliese Dodds]

I absolutely share those concerns and I am grateful to my hon. Friend for mentioning that fact. There is a worrying combination of technical glitches, many of which seem to be ongoing and many of which have lost parents thousands of pounds—we are not talking about small amounts of money. Those parents are so frustrated; they have continually contacted helplines and different team managers, who have just said, “I’m very sorry; there are technical problems that we have been raising with those more senior.”

As well as that side of the issue, as we have heard from other colleagues, many parents do not have access to the kind of internet service that they need for the application every three months. As my hon. Friend the Member for Newcastle upon Tyne North and my hon. Friend the Member for East Lothian underlined, people need a secure, reliable and high-speed internet connection every three months to make this application. Parents I have talked to have told me that this is not a one-shot application, because of the numerous technical glitches that people have experienced.

Can the Minister offer us an iron-clad guarantee that no parent will be locked out of access to tax-free childcare, either because of IT glitches or because of a lack of access to safe, secure and permanent internet services? I would be grateful if he let us know what precisely he has done or will do, given he has just got his feet under the table, to push Atos in particular to speedily resolve these very concerning technical issues. I have no doubt that these kinds of technical problems, as well as many of the others that were referred to by colleagues, offer part of the reason for the low take-up of tax-free childcare.

There are nearly 800,000 families using childcare vouchers, as my colleagues mentioned, and the vouchers are provided by more than 60,000 businesses and employers, including every Government Department. Occasionally, the Government maintain that there is a low proportion of employers offering vouchers. That is the case for one-man and one-woman bands, but if we take them and very small businesses out of the equation, there is a much higher proportion of businesses that offer those childcare voucher schemes. There is an enormous gulf between the usership rate of childcare vouchers and that of tax-free childcare, even with existing restrictions.

Colleagues mentioned that the OBR report before the Budget indicated that the Government would pay out only £37 million this year for tax-free childcare, despite setting aside £800 million for it. There is also a strange issue of exactly how many people actually benefit from tax-free childcare. I am slightly confused, as are colleagues, about today’s announcement and what the figure of 170,000 referred to. In her statement, the Chief Secretary to the Treasury, maintained that 170,000 people have opened an account for tax-free childcare. I am interested to know whether those are live accounts—whether those accounts have paid anything out—because I understand that, as of November, only 30,000 accounts were actually live: a tiny proportion of the people who could have accessed the scheme have done so.

I am also concerned that the parents of disabled children may be considerably under-claiming. I was pleased that my hon. Friend the Member for Stockton North (Alex Cunningham) mentioned that, as well as my hon. Friend the Member for Newcastle upon Tyne North. I was surprised to hear in the response to a parliamentary question by my hon. Friend the Member for Batley and Spen that there are only 1,187 tax-free childcare accounts registered for disabled children. Of course, tax-free childcare is already fully rolled out for disabled children, so it would be helpful to hear the Minister’s assessment of the number of parents of disabled children who used tax-free childcare, compared with those who used vouchers, and why there is a disparity, as I expect there will be. I would also be interested to hear what the Minister has to say about the disincentive effect of the design of the tax-free childcare system. As many colleagues mentioned, parents need to pay around £10,000 into their account before they can receive the headline £2,000 per year. That enormous sum is simply impossible for the vast majority of parents to afford. It does not reflect their working patterns or their wages.

[Mark Pritchard in the Chair]

For that and other reasons, tax-free childcare will benefit people on large incomes who consume large amounts of childcare the most. As many colleagues said, the new scheme will generally leave people on lower incomes worse off. Indeed, the charity Employers for Childcare calculated that approximately 70% of the parents who approach it for help would be better off with childcare vouchers, tax credits or universal credit, or with a combination of those things, than with tax-free childcare. My hon. Friend the Member for Ealing Central and Acton (Dr Huq) rightly mentioned that the new system may negatively impact low-income single parents in particular.

Further calculations indicate that people in lower paid areas and people on lower wages generally are more likely to lose out as a result of losing access to childcare vouchers following the adoption of tax-free childcare. That is because—we might have discussed this issue more—tax-free childcare does not incorporate the progressive elements of the voucher scheme, which enables basic rate taxpayers to save more than higher rate taxpayers, who may in turn save more than additional rate taxpayers. In her insightful speech, my hon. Friend the Member for High Peak pointed out some of the disbenefits of tax-free childcare for low-income parents compared with people on low incomes who are already in the voucher scheme.

I would be grateful if the Minister indicated whether any impact assessment has been undertaken of how the closure of the childcare vouchers scheme will affect people who spend an average amount—not the very high amounts in Government projections—on childcare. It would also help to hear how the Minister expects the new system to affect people on lower incomes, who will largely see the support they receive proportionately reduced by these changes. That assessment should take into account the impact on employees’ ability to progress to higher paid jobs that require them to be more flexible with their working hours, which my hon. Friend rightly mentioned.

I would also be grateful if the Minister explained how the Government are promoting activity by employers to support employees who are parents. A number of colleagues made the point that childcare vouchers start a conversation about employers’ responsibility to consider their employees’ childcare responsibilities. Along with other benefits for working parents, vouchers often play a key part in recruitment and retention. Given that we will lose the vouchers scheme, will the Minister indicate what other measures the Government are putting in place?

We also need a response to the question that my hon. Friend the Member for Stockton North asked: why is there a tighter age restriction for tax-free childcare than for childcare vouchers? Have the Government considered the impact of that on parents who want to ensure that their children are properly cared for when they are not at school? My hon. Friend the Member for Birmingham, Selly Oak ably underlined that point—his speech was very important in that regard.

Given the low take-up of tax-free childcare, the extensive technical problems with its roll-out, its regressive impact and the apparent problems that parents with disabled children are having with accessing it, will the Minister see sense and keep the vouchers scheme open, as the petitioners request?