Childcare Payments Bill

Bridget Phillipson Excerpts

Monday 14th July 2014 Commons Chamber

[Nicky Morgan]

I want to make some progress.

On flexibility, parents and families will be able to build up balances in their accounts, to meet the cost pressures of expensive times of the year. The scheme will also provide rigidity where parents need it. Once eligible for the scheme, parents can rest assured that they will continue to be entitled to support for three months, regardless of any changes in circumstances they may experience.

Hon. Members with further questions about the scheme’s practicalities may wish to note that we have today published the draft regulations for consultation. They contain the detailed rules concerning eligibility for the scheme—for example, what qualifying paid work means—and its operation, such as how and when a declaration of eligibility might be made.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

In relation to the transparency of the regulations and the clarity of the scheme, will the Treasury publish a distributional analysis so that we can understand how families will benefit? How much will the average family benefit per year from the new scheme?

[Nicky Morgan]

We already have figures showing that for the 1 million families who will gain from the introduction of the scheme, the average additional support will be £600 a year. Obviously, the Government top-up very much depends on how much families put into the accounts for themselves. For example, a working single parent with one child who has child care costs of £5,000 will receive £1,000 of support from the scheme. I will certainly take away the hon. Lady’s suggestion, but the figures are already fairly clear. The level depends on families’ contributions, which will then be matched by the Government.

As hon. Members will be aware, when the tax-free child care scheme is introduced, employer-supported child care will be closed to new entrants. Parents who already receive support through that scheme can continue to receive it in exactly the same way as long as they continue to work for their current employer and the employer continues to offer the scheme. Workplace nurseries will not be affected by the changes.

Those who favour the current arrangements need to remember that under the present system less than 5% of employers offer employer-supported child care, leaving more than half of all employees—as well as all self-employed parents, and most employees on the minimum wage—without support. In contrast, tax-free child care will be available to all working families provided that they meet the eligibility criteria. As such, we expect the scheme to be open to at least twice as many families as the current one.

We expect the new scheme to be much fairer. One of the main failings of existing employer-supported child care is that it disadvantages lone parents by providing twice as much support to couples in which both partners work for employers offering the scheme than it does to single parents. To be completely frank, that does not seem right, so the Bill addresses that unfairness. It will ensure that the level of support provided is determined not by the number of parents in work, but by the number of children in the household. That means that for a family with two children, the maximum level of child care costs supported by tax-free child care will be three times the maximum level supported by employer-supported child care.

It is worth reminding the House that the existing scheme is an inefficient one. At present, employers receive a national insurance contributions disregard of up to 13.8% for operating an employer-supported child care scheme, despite the fact that it generally costs them significantly less than that to run their scheme. We should remember that that taxpayer money is not actually spent on child care support. There will therefore be no employer’s national insurance contributions breaks in tax-free child care once the new scheme becomes available.

We know that many employers value the role they can play in supporting their employees, including by helping them with their child care costs. We hope that such employers will continue to take an active, voluntary role in the new scheme. In fact, many have told us that they intend to do so. Although it may disappoint some hon. Members that the Government have no intention of making any form of employer role mandatory, they should remember that that is because we want to minimise the burdens on small businesses. We also want to maximise the scheme’s fairness so that it is the same whether people are self-employed, employed by a small shop or employed by a huge multinational.

We want to increase the support available to hard-working families with their child care costs as soon as possible. We especially need to support the women of the United Kingdom, who are disproportionately impacted by the complexity and unfairness of the current child care arrangements. The more women we can help back to work—if they want and need to work—then the more people we can get back to work, the more we can drive growth in our economy, the more we can reduce some of the inequalities that still blight our workplaces and the more we can raise the quality of life not only for millions of parents but, crucially, for their children.

I was tempted to say that the Bill represents a baby step in the right direction, but it represents so much more. This is a hugely important change for mothers, fathers, children, families and employers. As such, I am incredibly proud to stand at the Dispatch Box and to commend the Bill to the House.

--- Later in debate ---

[Catherine McKinnell]

Of course child care costs will rise with inflation, but we have seen a spiralling increase. Child care costs have risen much faster than wages, and the increase has been much faster than previous increases in terms of the natural economic cycle. When I talk about lost ground, I am talking about the support that is available to families across the board, which we know has been reduced on a range of fronts—not to mention the reduction in the working tax credits and child care tax credits that are available to working parents. I think that, in introducing the Bill, the Government have recognised that they have a problem, namely that there is not enough support out there for working families. We need to ensure that this Government support, although welcome, goes further. We need to ensure that it goes far enough, and is implemented properly. That is the basis of the questions that I now wish to put to the Minister.

[Bridget Phillipson]

Is it not right that before 1997 child care was simply not regarded as an issue worthy of debate in the way that it is now? The action that the Labour Government took over 13 years brought this issue to the fore for the very first time. Previously people who raised this as a matter for Government to deal with were simply laughed at. For the first time, the Labour Government brought this issue to the fore and regarded it as a matter for Government action, not just for families to deal with on their own.

[Catherine McKinnell]

My hon. Friend makes a powerful and important point, and I think we should celebrate on a cross-party basis the fact that we now have consensus that the Government need to take on board this issue and that addressing it can improve the life chances of families, in particular children. That is a huge credit to the last Labour Government who pushed this issue forward and raised it up in terms of political acceptance and cross-party agreement and as an issue that Government cannot simply turn their back on.

None the less we have seen soaring costs, falling numbers of places and cuts in tax credits for thousands of families and, as a result, in 2015 families will be worse off than they were in 2010. Even when the help arrives, it is unclear who exactly will benefit from this scheme, and even then it is unclear how much better off some people will be and many might legitimately ask whether they will actually be better off. In the Government’s original consultation last August, they estimated that 2.5 million working families would be eligible for support under this scheme, but in their revised consultation, set out in the subsequent consultation response in March, that number was reduced to 1.9 million families, and therefore around 2.6 million children. However, the Government estimate that only two thirds of those 1.9 million working families—so, about 1.25 million—will have qualifying child care costs. As far as I can tell, however, Ministers have never properly explained what that crucial difference is, because clauses 1 and 2 of the Bill define qualifying child care based on two criteria—first, whether the child care is provided by a registered and accredited provider, and, secondly, where one of the main reasons for the child care is to enable parents to go to work—but that does not explain why 1.9 million families are eligible, yet only 1.25 million such families have eligible child care costs. In fact, as far as I can tell, the Bill does not specifically refer to qualifying child care costs anywhere. I see the Minister shaking her head and I am sure she would like to clarify this point.