Childcare Payments Bill

Baroness Eaton Excerpts

Tuesday 9th December 2014 Lords Chamber

[Baroness Eaton (Con)]

My Lords, I start by applauding Her Majesty’s Government for the commitment that they have shown to helping families through a broad range of measures, which include, but are not limited to, greater flexibility in parental leave and the expansion of assistance with childcare costs. I and many others on these Benches particularly welcome the early steps that have been taken to tackle the biggest family policy challenge that we and many other western countries face, which is our epidemic levels of family breakdown. The wider family policy landscape is highly relevant to the Bill receiving its Second Reading here today, because the financial help with childcare that the Bill provides will be cast as a significant part of the fulfilment of the Prime Minister’s pledge to make this the most family-friendly country in Europe. Certainly, it is taking the lion’s share of the family policy budget.

The Institute for Fiscal Studies has calculated that the taxpayer is subsidising childcare to the tune of more than £7 billion a year. The rationale for adding to this enormous bill is that doing so will enable parents to play a full part in the labour market. It is concerning, however, that the IFS has concluded that we still lack a proper rationale and evidence base to support the assertion that these subsidies will succeed in getting more women into work. The IFS was particularly sceptical of the cross-party support for significantly greater help with childcare costs, saying that this does not always lead to the best policies. Moreover, the Government announced an increase in support for childcare before the Office for Budget Responsibility could estimate the costs.

Although this is a money Bill, surely it is our role at this end of the corridor, when necessary, to point out the downsides to generosity that could begin to look like profligacy when seen alongside other demands on the public purse, particularly those associated with supporting families. Calls to help dual-earner families with paid, formal childcare costs should not be allowed to drown out pleas for recognition of the considerable financial hardship facing many single-earner families. There are many reasons why one parent—often the father these days—takes some time out of the labour market when children or elderly relatives need more time than even flexible work arrangements will allow.

This Government’s introduction of transferable tax allowances for married couples is a huge achievement in a very difficult financial and political climate, but it is worth only around one 10th of the available support for one childcare place—a little over £200 per family in contrast to £2,000 per child. This is scant compensation for the many people who lost their child benefit or saw it reduced, yet we were assured that this cut to discretionary household spending power was essential to tackle the deficit. Many people who supported the withdrawal of child benefit to higher rate taxpayers have been appalled that a far more generous subsidy per child is being made available to families where each individual earns up to £150,000.

Canada’s Conservative Party has recently been able to make good on its 2011 election pledge to allow married couples to use income splitting to reduce tax bills by a maximum of 2,000 Canadian dollars—a benefit approximately five times the value of our transferrable tax allowance. However, there is a big difference, and that is that the Canadian Government are running a surplus. Canada’s income tax system, which treats families the same as roommates living under the same roof with no financial attachment, was judged by Prime Minister Harper to be unrealistic and unfair.

That assessment applies equally well to this Government’s tax-free childcare plans. I urge them to reconsider thresholds for this and the amount that can be claimed per child. This would allow some rebalancing of help for single-earner families during that period in their life cycle when finances are very tight but both parents working is unrealistic or the least family friendly option they can imagine, given their circumstances.

Polling by the Centre for Social Justice found that 82% of adults and 88% of parents thought more should be done to help parents stay at home in the early years. It has recommended doubling the amount parents with children aged under three can transfer, so that the allowance is worth around £400 per year. This would cost around £500 million.

I conclude by returning to the issue of family breakdown. We are all familiar with the enormous costs incurred by the state when couple relationships, and the families they are founded on, falter. This country is now at the point where almost half of all children are no longer living with both their parents by the time they are 15. We cannot put off the essential task of addressing family breakdown through a wide range of measures, some of which must include support for marriage, which leads to the most stable family form. Recognising marriage in the tax system also takes into account and supports the sacrifices and interdependencies within single-earner families.

However, to a certain extent our hands are tied until the public finances are in better shape. That date is likely to come later rather than sooner if we make our current and future generations of parents dependent on large childcare subsidies and resentful of any reductions to that entitlement at whatever point on the income spectrum the axe may have to fall. Let us obviate the need for the axe by being restrained from the outset.