Childcare Vouchers

Catherine McKinnell Excerpts

Monday 15th January 2018 Westminster Hall

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I beg to move,

That this House has considered e-petition 200585 relating to childcare vouchers.

I am pleased to serve under your chairmanship, Mr Bailey, and to lead this debate as a member of the Petitions Committee. I must also declare an interest as a beneficiary of the childcare vouchers scheme.

The e-petition, entitled “Keep childcare vouchers open beyond April 2018”, was signed by more than 116,000 people, including almost 400 across my own city. It reads:

“Hundreds of thousands of parents will lose out under the new tax-free childcare. The voucher schemes should be kept open alongside tax-free childcare to give parents a genuine choice for the support that best suits their family.”

The creator of the e-petition, Ellie Symonds-Lloyd, is in the gallery with her family. I am particularly pleased to be leading this debate, given the importance of the wider issue to our society and to the economy as a whole. Increasing the availability of affordable childcare, particularly for younger children, is one of the key issues for many of Britain’s families, with a huge impact on their standard of living.

As the Joseph Rowntree Foundation highlighted after the publication of the 2017 childcare survey by the Family and Childcare Trust last March:

“The biggest cost for many working households with children, after housing, is childcare. The cost of all types of childcare has risen much faster than overall inflation. The cost of childcare can affect the real increase in disposable income gained by a parent taking a job or working for more hours. This can affect families’ living standards directly and also indirectly by influencing whether parents work at all, what jobs they take and how much they work.”

The Family and Childcare Trust commented:

“British parents now pay an eye-watering average of £116 per week for a part-time nursery place—or over £6,000 every year, more than double what families spend on food and drink… It is a disgrace that so many parents are effectively shut out of the workplace by crippling childcare costs. Recent Governments have rightfully invested in childcare, but too many parents are still struggling to find and pay for childcare that they and their children need.”

[Alex Cunningham (Stockton North) (Lab)]

I am pleased to have the opportunity to debate this issue. Does my hon. Friend recollect that when we were both on the Childcare Bill Committee, there was much discussion of the costs associated with provision for disabled children? It is therefore all the more important that we place on the record how tremendous the additional pressure is on parents in such circumstances.

[Catherine McKinnell]

My hon. Friend is right. Some of the changes introduced by the Government have been positive in that regard, but far more still needs to be done to support families with disabled children. He is absolutely right to raise the issue so early in the debate, and I will return to it as we progress.

It is critical, if we are to tackle increasing rates of child poverty and a lack of social mobility, that we address this issue. Increasing the availability of good-quality, affordable childcare clearly enables more parents to get into or return to work or access education and training, while also improving educational outcomes for their children. It is not just an issue for individual families; it is of critical importance to our whole economy and our productivity levels.

That is why the Treasury Committee, of which I am a member, recently announced that we will be holding an inquiry into childcare policy and its influence on the economy. While examining the role that high-quality, accessible, flexible and affordable childcare can play in supporting labour productivity, our inquiry will also scrutinise the processes for delivering childcare schemes and the overall package of Government initiatives aimed at making childcare affordable, as well as how the individual initiatives interact with each other and their effectiveness and whether they have delivered an adequate provision of affordable childcare that facilitates parental employment.

I am delighted that we will be investigating that crucial issue. As the Family and Childcare Trust has commented:

“Childcare is as vital as the rails and roads for helping our country to run”.

I am not quite sure whether the Government have fully made that link, given that childcare received the briefest of mentions in the recently published industrial strategy, and no mention whatsoever in the autumn Budget speech, despite the Chancellor’s stated commitment to tackling the UK’s poor and downgraded productivity levels.

There is a raft of early years and childcare-related concerns that I could touch on, starting with the cuts to Sure Start. Funding for Sure Start services has fallen by a staggering 46% since 2010 across the north-east, which is my region. Parents were promised that 30 hours of free childcare would be in place for their three and four-year-olds by last September, but the Pre-School Learning Alliance recently reported that 18% of families registered for the scheme still cannot access that support. The long-term sustainability of the childcare sector is also at risk due to underfunding—more than 1,100 nurseries and childminders have gone out of business since 2015. However, this debate focuses on childcare vouchers and the new system of tax-free childcare, and whether one must replace the other, or indeed whether the two can coexist.

As hon. Members will be aware, the childcare voucher scheme was introduced in 2005 under the Labour Government, as part of the wider system of employer-supported childcare. Working parents signing up to the childcare voucher scheme agree to sacrifice up to £55 of their salary a week, or £243 a month, before tax and national insurance deductions, receiving in exchange vouchers that must be used to pay for Ofsted-registered childcare providers—nurseries, childminders, pre-schools, after-school clubs or holiday schemes—for children aged up to 15, or up to 16 for children with a disability. That equates to a maximum saving of £77.76 per month per parent for basic rate taxpayers, or £1,866 per year for a working couple who are both in receipt of childcare vouchers.

The Childcare Voucher Providers Association calculates that some 780,000 parents are currently using vouchers, with millions of parents having received support since the scheme was introduced almost 13 years ago. According to a Library briefing paper, the Government state that more than 50,000 employers offer childcare vouchers to their staff, which the CVPA estimates equates to between 20 million and 26 million of the 31 million UK employees working for organisations that offer the scheme. Indeed, one of the benefits of childcare vouchers has been that employers have used their membership of the voucher scheme as an incentive to attract potential staff, which has helped organisations to recognise the importance of childcare and family life for their workforce, often leading them to consider what more they can do to support the working parents they employ. The CVPA highlights that childcare vouchers are the second most popular company benefit; only workplace pensions, which employers must offer by law, are more popular.

However, there are a number of well-documented flaws in the current childcare voucher scheme. A person’s ability to receive that support depends on their employer being registered for the scheme, which means that those whose employers are not registered cannot receive it. That includes the ever-increasing number of self-employed people in our economy, which the membership organisation IPSE, the Association of Independent Professional and the Self Employed, estimates at around 4.8 million people in the UK.

A further concern is that the level of support available per family via childcare vouchers is linked to the number of parents, rather than the number of children. For example, a lone parent with three young children working full-time and facing high childcare costs is entitled to less tax relief than a couple, both claiming vouchers, with one older child who only attends an after-school club twice a week.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

My hon. Friend mentioned lone parents. I wanted to flag the launch last week of a new all-party parliamentary group on single-parent families. There are all-party groups for every subject under the sun, but this is the first time that anyone has managed to create one on this subject. It is a fairly common form of family nowadays: according to figures from Gingerbread, more than 51% of families in some London seats are single-parent families. People talk about a benefits trap. Under tax-free childcare, some lower-paid single parents will automatically lose tax credits and universal credit. Does my hon. Friend not agree that the systems must be worked out better, so as to apply to all forms of family?

[Catherine McKinnell]

My hon. Friend makes a crucial point and I will go on to highlight that key concern. She is right that we must focus on all types of families, not just the notional two-parent family that this childcare scheme seems to benefit most.

As I have outlined, there are many downsides to the voucher scheme, which the Government cited to justify the introduction of the tax-free childcare alternative that was announced in March 2013. At that time, Ministers pledged that the new scheme would be phased in from autumn 2015 and that it would be available to families where all parents were in work and each earned less than £150,000 per year, as long as they were not in receipt of support for their childcare costs via tax credits or, when introduced, universal credit, as mentioned by my hon. Friend the Member for Ealing Central and Acton (Dr Huq). Such families would receive 20% of their annual childcare costs up to a fixed limit, which was set at £6,000 per child, so parents would receive a payment of up to £1,200 per child per year. Eventually, that would cover all children aged up to 12, or up to 17 for children with disabilities.

Tax-free childcare is entirely independent of the parent’s employer, thereby dealing with the problems associated with the requirement for organisations to be registered for childcare vouchers. The value of the support available is linked to the number of children in the family and, therefore, to the likely childcare costs rather than to the number of eligible parents.

In March 2014 the Government published the outcome of their consultation into how tax-free childcare would work. They stated that the scheme was still on track to roll out from autumn 2015; that it would be rolled out much more quickly than previously announced so that all parents with children aged up to 12 would be covered in the first year; and that they would provide 20% of support for childcare costs up to £10,000 per year per child instead of the previous limit of up to £6,000, which equates to support of up to £2,000 per child per year, or £4,000 per year for disabled children.

Crucially, the Government confirmed that although existing members of childcare voucher schemes could choose to remain in receipt of vouchers, those schemes would close to new entrants once tax-free childcare was introduced. Quite understandably, it would not be possible for parents to benefit from both.

However, the original timescale for the introduction of tax-free childcare was significantly pushed back, partly due to the unsuccessful legal challenge from childcare voucher providers who were unhappy about the way in which the contract was awarded to National Savings and Investments. That meant that the new scheme could not be rolled out until April 2017, and then only for children born on or after 1 April 2013.

Eligibility requirements for tax-free childcare also changed. Each parent must now earn less than £100,000 per year to receive the support instead of the £150,000 limit previously envisaged. In addition, to access tax-free childcare, eligible parents must open an online account through the Childcare Choices website, pay money towards their childcare costs into that account, and have those payments topped up automatically by the Government at a rate of 20p for every 80p paid in by the parent, subject to the maximum limit. Parents then allocate that money to the qualifying childcare provider of their choice and the account provider makes the payment directly to that provider.

The ability for other parties to make contributions to those accounts and for parents to withdraw money from their childcare account—minus the Government’s contributions—should they need to do so, is clearly an advantage over the childcare voucher system. However, as we all know, the Childcare Choices website has been beset by technical difficulties since it launched in spring 2017 and many parents have been unable to access their tax-free childcare account or the 30 hours of free childcare that the website also supports.

As a consequence, Ministers confirmed to the House on 15 November that tax-free childcare would be rolled out for children aged six or under on 24 November. The assumption was that it would not be available to children aged 12 and under until the end of March 2018. That anticipated schedule has changed again, however: the Chief Secretary to the Treasury confirmed this morning—coincidentally—by written ministerial statement, that the scheme will be open to children aged nine and under from today and that all remaining eligible families will be able to access it from 14 February. If all that represents a simplification of the childcare support system, I would be interested to see how the Government could make it more complicated.

In July, the Financial Times’ personal finance, digital and communities editor, Lucy Warwick-Ching, published an article, “Why tax-free childcare account website makes me want to bawl”, that succinctly summed up the situation. She commented:

“What do you get when you take one frazzled parent and sit them in front of an officious government website? Answer: confusion. Add technical glitches to the mix and that bewilderment quickly turns to anger and frustration… No matter what time of day or night I tried to sign up, things kept going wrong. Once I had found the correct web page I had multiple problems logging on.

First, I had to set up a username and password. Then HMRC set me up with a government gateway user ID (via my mobile phone and email). This is a 12-digit number which you will need every time I log in…(you will need both parents’ national insurance numbers, payslips and/or your passport details—plus details of parental employment). If you go away to look for any of these, guess what happens? The website logs you out.

The last straw was the failure of the website. Even when I had the documents to hand, it repeatedly kicked me out, citing ‘technical difficulties’ and directed me to the government helpline instead… I finally managed to sign up to the tax-free childcare account. Can I sit back and relax now? No chance. HMRC says I must ‘manage’ my childcare service account, reconfirming my eligibility (by filling in a form) every three months.

If one of its aims is to encourage parents to stay in work, the new system appears to fall woefully short. Without rapid improvement, it risks becoming another chapter of disappointment in the saga of digital government.”

Crucially, the author highlighted that it is not possible to avoid those issues by signing up via post or over the phone; it must be done online. That leads me to ask the Minister: how many parents eligible to receive tax-free childcare will be prevented from receiving that support because they do not have easy, regular, and—crucially, given the type of data being provided—secure access to the internet?

When I was a member of the Finance Bill Committee in 2014, alongside my hon. Friend the Member for Stockton North (Alex Cunningham), I asked the then Exchequer Secretary to the Treasury, the right hon. Member for Witham (Priti Patel), how many families would lose out as a result of that requirement. I received the answer that the Government estimated that as many as 9% of those eligible—up to 200,000 parents—did not have access to the internet, and therefore would be unable to receive tax-free childcare. Will the Minister set out whether that figure has changed and, if not, explain what the Government intend to do about it?

Concerns around the tax-free childcare scheme are not restricted to its digital woes but include the inescapable fact that it provides the greatest benefits to families who can afford to spend the most on childcare, because it is effectively linked to parents’ expenditure rather than income. That could mean that some families, such as a lone parent of two disabled children with high childcare costs, receive more support than under vouchers, which I strongly welcome, or that a couple earning a joint income of £195,000 receive £2,000 towards the costs of their childcare.

As the CVPA has pointed out, the way that tax-free childcare is structured means that it disproportionately favours wealthier families living in London and the south-east, who are more likely to have higher childcare costs and be higher earners. Tax-free childcare provides the same rate of saving on childcare costs irrespective of income—whether a family earns £240 per week or just under £200,000 per year.

[Ruth George (High Peak) (Lab)]

I must declare an interest, as my husband and I both claimed childcare vouchers when our two children were young, after I had gone back to work and needed to support our children through childcare while on a very average wage. I certainly would not have been able to do that without childcare vouchers, and I know from working with retail workers in Tesco and the Co-op, who also have access to childcare vouchers, that they are in the same boat. Does my hon. Friend agree that in order to keep women in work it is very important to allow the voucher scheme to continue?

[Catherine McKinnell]

My hon. Friend makes the point very well, because ordinary working families are more likely to be better off using childcare vouchers than using tax-free childcare. The vouchers are tapered, so that basic rate taxpayers save more than higher rate taxpayers, who in turn save more than additional rate taxpayers. Also, as we have already touched upon, lower-income families can benefit from accessing childcare vouchers alongside other forms of support for working families, including working tax credits and universal credit, while those using tax-free childcare cannot.

Crucially, tax-free childcare requires all parents in the family to be in work within each three-month qualifying period, meaning that any change in circumstances, for example one parent leaving work to care for an elderly relative, results in the family losing all eligibility for childcare support. That is not the case with childcare vouchers.

So how popular is tax-free childcare proving? The Office for Budget Responsibility has previously estimated that the tax-free childcare case load would reach 415,000 by October 2017. Instead, the case load was just 30,000 by that point. We were informed in today’s timely written statement by the Chief Secretary to the Treasury that the figure now stands at 170,000, which is still well below half the number forecast by the OBR for October last year. It would be helpful to have an explanation from the Minister about the ongoing issues with take-up of this flagship policy. I would be particularly interested to know what proportion of eligible self-employed parents have registered for tax-free childcare to date, given that an increase in uptake is one of the main reasons cited for moving to the new system.

When I challenged the Chancellor on the uptake in the Treasury Committee shortly after his autumn Budget, he said:

“There have been some IT issues around the early rollout of the programme. It is in a much better place now. The Government have not yet conducted a paid-for advertising campaign to raise awareness of the tax-free childcare programme. We are doing social media advertising, but not a wider paid-for programme. There will be such a programme in the new year, and we expect that to increase registrations and use of the programme.”

Tellingly, he went on to say that

“it is also the case that the childcare vouchers scheme closes to new entrants in April next year. Once that scheme closes, because the tax-free childcare scheme will then become the most attractive scheme available to parents, we expect that that will increase the level of interest and take-up of the scheme as well.”

He also said:

“The voucher scheme is closing next year, and we expect that uptake of the tax-free childcare scheme will then increase. At the moment, they are alternatives to each other. There will be one route available.”

In other words, the Government accept that the only way to make tax-free childcare more attractive than the childcare vouchers scheme is to close the childcare voucher scheme to new entrants, forcing people to register for tax-free childcare instead.

In conclusion, this debate could perhaps be best summed up by early-day motion 755, which was tabled earlier this month by the hon. Member for Brighton, Pavilion (Caroline Lucas) and has now been signed by around 50 hon. Members, including myself. It states:

“That this House notes that childcare vouchers are a widely-used benefit that are popular with parents and employers alike, with more than 60,000 businesses of all sizes offering vouchers to more than 750,000 parents; further notes that, with childcare costs having risen faster than incomes in recent years, a large majority of parents still find their decision to work dependent on the availability of good quality, affordable childcare; regrets the Government’s decision to close childcare vouchers to new entrants from April 2018; is concerned that the lack of any formal role for employers in the new Tax-Free Childcare scheme will lead to falling levels of engagement by employers in the support of working parents around their work-life balance and childcare needs; calls on the Government to keep childcare vouchers open alongside Tax-Free Childcare, so that parents can choose the scheme that is most suitable to their needs and offers the most support to their family; and further calls on the Government to consider how childcare vouchers could be extended to the self-employed.”

Like the instigators of the petition, the early-day motion is not arguing against tax-free childcare; it simply calls on the Government to allow childcare vouchers to co-exist alongside tax-free childcare for new entrants and existing recipients alike, to enable families to make a choice about the form of childcare that best suits their individual circumstances and their families’ needs, and that is a call that I support.

--- Later in debate ---

[Alex Cunningham]

He is not the Children’s Minister. I understand that we do have a new Children’s Minister, but I am sure that the Treasury Minister wants to understand childcare as much as anyone else does. Believe me, he has some way to go, being a member of the Tory Government.

Childcare delivered fairly for all children plays a major role in ensuring that no individual fails to get the chance of having a better start in life, even before they get into the school classroom. It also helps parents to realise their potential and make the most of their lives. I served as the cabinet member for children and young people at Stockton Council, and I well remember speaking with head teachers after Labour’s groundbreaking Sure Start centres were developed and nursery provision was expanded beyond all recognition. They told me how children were far better equipped and ready for school than the groups that came before them. Their social skills were better, they were used to structure, they were already participating in activities and they had a level of confidence that made them ready to learn. That was all great stuff. The hon. Member for Belfast South spoke about how much more possible educational attainment is for children who have had proper childcare and proper nursery provision. We must not lose sight of that, as it drives results. We see those results in our primary schools and secondary schools today. The children coming out of secondary schools now were among the first to benefit from the Sure Start programme.

I always acknowledge that the coalition Government and the last Conservative Government helped build on Labour’s legacy—children continue to benefit even more—but it is crucial that that success is not undermined by the gap between the haves and the have-nots being widened. We have always had a two-tier system. Even when Governments of the past got sensible and first offered free childcare, those who could afford more and better provision gave some children an advantage. I doubt that will ever change, but surely there is no need for the current Government to make changes that will disadvantage those least likely to be able to afford top-up fees, effectively creating a two-tier system.

When discussing areas of policy relating to childcare and the education of children, it is vital that we focus not only on cost, but on outcome. We know that the early years are one of the most formative times of a person’s life and have significant influence over their development. That is why I urge the Government not to treat childcare as something that can be cut back. By cutting back or reducing access, we put a stop sign in front of the poorest children in our country. From what I see, the changes proposed around the voucher scheme will effectively do just that: reduce provision.

I have looked at the childcare voucher scheme, as other Members have—they have already talked about it—and I compared it with the tax-free childcare system that parents will have no choice but to use if they sign up after April. From my observations, tax-free childcare is considerably the less favourable of the two options. Existing users of childcare vouchers will be able to choose the system that benefits them most, whereas applicants after April will have no such choice. That creates a two-tier system, where some children will be disadvantaged, depending on the amount their parents can afford to pay.

The Prime Minister’s words on the steps of Downing Street 18 months ago are much quoted. She said:

“We will do everything we can to help anybody, whatever your background, to go as far as your talents will take you.”

It is a well-worn quote. I have to believe that those words applied to young children as much as to anyone else, and I just wonder if the Prime Minister knows how these particular proposals fly in the face of her pledge and affect the families she may have once described as “just about managing”. I doubt the new Education Secretary, with whom I served on the Education Select Committee and with whom I share a passion for early years’ provision, would really want to see his first few months in office marred by the creation of a system that was far from equal. Has he even had the chance to reconsider the policy ahead of today’s debate? Since we are debating childcare vouchers, I am sure many of us would tell the Prime Minister and her new Secretary of State that the new tax-free childcare service is not fit for purpose. It does not fairly replace childcare vouchers and they should think again.

There is a real opportunity for the new Secretary of State and the new Children’s Minister—it is a shame he is not here to debate with us today—to demonstrate their listening credentials and order a review of the whole policy area. Potential inequality is not just about the ability to pay; it is also very much about the status of an individual or couple. In the gig economy we are now living in, are we putting the provision for some children at risk because their parents are likely to face rapidly changing working environments? I raised that with the Minister of the day, the right hon. Member for Witham (Priti Patel), when the policy was being developed in 2014. I said:

“For many, particularly those with fluctuating incomes such as the self-employed, or those likely to have a change in circumstances later in the year, the complexity will be so great that it is likely to be impossible to provide a better off calculator that can cover many of the situations in which claimants find themselves.”—[Official Report, 17 November 2014; Vol. 588, c. 90.]

My hon. Friend the Member for Newcastle upon Tyne North, who has spoken widely today, also spoke in that debate. She said:

“It is worth remembering that some 520,000 families currently benefit from ESC vouchers. The Government’s impact assessment sets out a number of case studies where families might be better off or, indeed, worse off under the new top-up payments.”—[Official Report, 17 November 2014; Vol. 588, c. 68.]

That was three years ago, so the Government have had enough time to find answers to those problems and inequalities.

The Childcare Vouchers Providers Association highlighted that some families will actually lose money under tax-free childcare compared with vouchers. That point has been repeated several times today, but it is worth repeating: people will lose out. Does the Minister know who will lose out and who will benefit? What is he doing about those who will lose out? Are there any plans to ensure equality of opportunity and access to provision? What happens when a parent in the gig economy earns less than £120 week for a while? At what point do they lose that tax-free childcare? I do not know the answer to that; I hope the Minister does. It seems to me that the system is a wee bit messy and confused. Until there is proper understanding of the change to a complete tax-free childcare system, the Government should at least extend the deadline for childcare vouchers. Has the Minister or the new Secretary of State considered that?

I also note the difference regarding the age of a child receiving tax-free childcare. Vouchers can be used for children up until the September following their 15th birthday, but that figure drops to the September following their 11th birthday under the tax-free system. Can the Minister share with me the logic behind that decision? Are the Government suggesting that 11-year-olds can be left home alone while their parents are at work? Are they assuming that everybody has grandparents and other family members to stay with, or do they have to find the cash themselves to help pay for childcare? We cannot escape the fact that this all boils down to cash: the cash that the Government are prepared to invest in childcare and the cash that some parents will have to find if their children are to be looked after so that they can have peace of mind while they are at work.

[Catherine McKinnell]

I am very much enjoying my hon. Friend’s speech. He raises an important point that I did not elaborate on in my speech, which is the age difference between tax-free childcare and the vouchers scheme. That change seems to totally ignore the reality for the many working families who use the vouchers to fund activities for their children to keep them safe and occupied during the school holidays. Those activities not only have educational and social mobility benefits, but keep their children safe. I do not think the Government recognise that there are ongoing childcare costs up to a much later age than 12.

[Alex Cunningham]

For me, it boils down to a matter of equality. Why should one person at one end of a street have their children cared for until the age of 15 while a person at the other end of the street has to apply under the new system and does not get the same provision? Surely there must be some sort of equality law associated with that. The Government should recognise that issue and take action.

We should not forget that these challenges for parents come at a time when working families are finding life very tough. We have public sector pay freezes, the increased cost of living, escalating transport costs and a lack of wage growth generally. Parents cannot afford to pay extra money over and above what everyone else is paying. I come back to the word “equality”—we should have equality of provision for everyone. Things should not be different from one person to another. It is time not for the Government to add to the burden of some families and exacerbate inequality, but for the Treasury Minister, the new Children’s Minister and the Secretary of State to step back and think again.

--- Later in debate ---

[John Glen]

I am certainly very discontent with a situation where only half of employees are able to access childcare support and no self-employed parents can access any childcare.

[Catherine McKinnell]

Will the Minister give way?

[John Glen]

I am going to make a little progress, and then—[Interruption.] Go on, I will take a third intervention, as the hon. Lady opened the debate.

[Catherine McKinnell]

I thank the Minister for giving way. He is making an argument for broadening access to support with childcare, with which no one would disagree, but he is not making a compelling case for closing down the support that hundreds of thousands of working families already access. He needs to explain that before he can convince anyone, in the Chamber or outside, that it is a good idea to shut the voucher scheme.

[John Glen]

I thank the hon. Lady for her remarks and for the way in which she introduced the debate. She must reflect on the fact that the Government are closing the scheme, but not to existing recipients. There is no question of existing recipients not being able to continue making their current arrangements. It is unrealistic to say that that is the case—we are not shutting it down to existing claimants.

Let me make some progress. As the hon. Lady said in her remarks, tax-free childcare will be rolled out by 14 February 2018, and HMRC has done extensive work to ensure that the childcare system is ready for full roll-out. The advent of tax-free childcare will bring greater benefits to British families: it is better targeted and simpler than childcare vouchers. It is therefore right that we continue with the reform as planned, to the benefit of millions of households. The Government recognise that working parents have to make difficult financial decisions, and we are committed to supporting families to ensure that the cost of childcare does not deter them from working, or working more, if they wish to.

The hon. Member for Belfast South (Emma Little Pengelly) made a thoughtful point about female employment and the gender pay gap. The female employment rate is at a joint-record high of 70.8%. Since 2010, the number of women in work has increased by 1.4 million. I acknowledge that there is more work to be done, but the gender pay gap for full-time employment is at a record low. While I am not complacent—three days into my job at the Treasury, I am already focused on pay equality—we must acknowledge that some progress has been made.

Beyond introducing tax-free childcare, we have demonstrated our commitment to supporting families through multiple measures, to ease the burden that bit more. That is why the Government will be spending more money on childcare support than ever before. By 2020, we will be spending about £6 billion to help parents with the cost of childcare. That includes doubling the free childcare hours for working parents of three and four-year-olds from 15 to 30 hours a week, saving families around £5,000 per year per child. That is making a real difference to the lives of families across the country.

We are supporting working families on the lowest incomes who receive universal credit. We have increased the amount that working parents can get towards their childcare costs through universal credit from 70% to 85%. As wages increase, parents can use the online calculator to decide which offer best meets their needs: staying on universal credit or moving to tax-free childcare.

The Government have been gradually introducing tax-free childcare to replace childcare vouchers since April 2017 and, as I have said, tax-free childcare has a greater reach than childcare vouchers. Today, we announced that the offer is now open to families whose youngest child is under nine, and on 14 February it will open to all families with children aged under 12 who meet the earnings criteria. Each parent in the household must earn the equivalent of 16 hours at minimum wage a week—about £120 a week—and each parent must earn less than £100,000 per annum. Those criteria will ensure that the majority of working households will benefit, and it means that those working parents who are excluded from childcare vouchers because they earn at or just above the minimum wage will be able to access tax-free childcare.

Because tax-free childcare does not require any input from an employer, many self-employed parents will be able to get help with childcare costs for the very first time. Tax-free childcare is also a simpler system for parents to navigate. Parents open an online account and manage their deposits and childcare payments through it themselves. The system will also be easier and simpler for childcare providers to manage as they will no longer have to deal with multiple voucher providers. Tax-free childcare also offers more generous support for parents of disabled children, who can get up to £4,000 a year and remain eligible for tax-free childcare until the age of 17.

I will have to look into the assessments and write to the hon. Member for Birmingham, Selly Oak (Steve McCabe). At this point, I do not know whether that data exists. However, once tax-free childcare is open to all eligible parents and fully established, we expect it to be worth around £1,100 a year per household. That additional support is essential for many parents to return to work. It is clear that the replacement of childcare vouchers with tax-free childcare will bring huge benefits to parents.

I want to address points made by a number of hon. Members on delivery. The childcare service is a groundbreaking new digital service and, as of today, more than 300,000 parents have opened an online account. The hon. Members for East Lothian (Martin Whitfield) and for Newcastle upon Tyne North (Catherine McKinnell) referred to internet access, and the hon. Gentleman referred to banking issues, which we discussed on Thursday. The childcare service helpline can be called when online access cannot be secured.

We have seen a reduction in errors on screen down to 2%—it was 5% to 6% last summer. Enormous progress has therefore been made. The hon. Member for Oxford East (Anneliese Dodds) asked about an iron-clad guarantee, which is a little unrealistic given what has happened to Government IT projects for all parties over all generations since we have had IT. However, HMRC is working closely in partnership with National Savings and Investments, and with Atos as a delivery partner. Significant progress is being made to reduce those error screens significantly, to give a greater level of confidence on the roll-out of the new scheme.

While the vast majority of parents have used the service without difficulties, I acknowledge that some have experienced them. I can only apologise to those individuals. HMRC has apologised to those parents and has already made significant improvements to the childcare service, as I just set out. Overall, parents are receiving eligibility results more quickly, with the vast majority receiving a response within five working days, if not immediately, and fewer parents are experiencing technical difficulties.

HMRC will continue to implement technical updates to improve further the experience for all customers. It has arrangements in place to ensure that no parents miss out as a result of technical issues, and it is providing payments directly to parents in lieu of the Government top-up. Where individuals have missed out, compensation is available for those sums missed out on due to those technical issues. As I mentioned, a dedicated helpline is provided.

I want to address the reach of tax-free childcare. The scheme is designed to be responsive to parents’ needs. All parents who would have been eligible for childcare vouchers will be eligible for tax-free childcare provided that they have a child aged under 12 and that they and their partner, if they have one, earn around £120 a week. The generous upper earnings limit of £100,000 per parent means that the vast majority of working parents will be able to claim help with childcare costs.

However, the Government recognise that a small number of parents who were eligible for vouchers will not be eligible for tax-free childcare. Most of those parents will no longer be eligible as they are couples with only one partner in work, or where one is earning over £100,000 a year. Government spending has to be prioritised where it will have the biggest impact. We have struck a balance between universal childcare offers and those targeted to support families who need help the most with the costs of childcare. Tax-free childcare is better targeted than vouchers, where support is dependent on who a parent works for rather than the needs of their household.

--- Later in debate ---

[Catherine McKinnell]

Although I welcome the Minister to his new post, I do not think that anyone listening to the debate will be impressed by that response. It does not provide the reassurance that people are looking for—they want reassurance that the Government are serious about providing options so that families with children can meet and manage their childcare costs. I pay tribute to every Member who made a speech today, because if this was a football match, although we do not quite have the numbers, it would be 9-0 given the arguments that have been rehearsed. The Minister’s response does not adequately address the sincere and genuine concerns expressed by hon. Members, and by 116,000 members of the public who signed the petition.

I and hon. Members thank the person who started the petition, and everyone who signed it. They are right: the Government are wrong to close the voucher scheme to new members. The Minister is not being entirely clear when he says that it will remain open and that those within it should retain their confidence in it, because the Government’s actions are undermining it. Obviously, the numbers in the scheme will diminish. Who knows what the future holds? How far will employers be able to remain involved in the scheme as numbers inevitably diminish when the children currently benefiting from it grow up and no longer require the vouchers, and there are no new entrants?

That is obviously the Government’s strategy, but it is a mistake to close a scheme that works for so many families. Each of those families currently has the option to sign up for the tax-free childcare scheme, yet they either choose not to, or would not be eligible. The Government do not seem to acknowledge that, potentially, they are letting a huge number of those parents down. Unless they can give a cast-iron guarantee—the Minister has already said they cannot give one on the IT system—that every parent currently benefiting from the voucher scheme will benefit by the same amount or more from the tax-free childcare scheme, they are doing the wrong thing in closing it to new entrants. They should retain both schemes and give a much longer period to see how the tax-free childcare scheme performs. The issue is ultimately the children and the benefit that they will get if their parents can go to work and be provided with high-quality, affordable, or at least supported, childcare by the Government.

I make a final plea: I hope that the Minister can take this away and come back with a different answer. I hope he will hold the voucher scheme open for the huge number of parents and children who currently benefit from it, and that the Government will not undermine it.

Question put and agreed to.

Resolved,

That this House has considered e-petition 200585 relating to childcare vouchers.