Finance (No. 2) Bill

Catherine McKinnell Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

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

The Chancellor heralded these proposals two weeks ago as “a Budget for growth”, and thank goodness, after 13 years of a stagnating economy and with the OECD confirming that we are the only G20 economy that will shrink this year, with the exception of Russia—what a record. It is completely shameful.

I want to talk about the proposals on childcare and the extension of the free childcare entitlement, which is aimed at boosting growth and getting more parents of young children, particularly women, back into work. That is a welcome ambition. At the moment, about 1.7 million women are prevented from taking on more hours of paid work due to childcare issues, representing an estimated loss of £30 billion to the economy every year. Those numbers are as true now as they were before the Budget, because although the £1 billion tax cut for people making large tax savings on their pensions comes into effect straight away, the implementation of the free childcare arrangements is still a long way off being delivered. Parents will not receive the full benefits of the scheme until September 2025; a child who is two today will not see any of that entitlement.

The policy also risks embedding inequalities and widening the attainment gap. I worry that the Government are missing an opportunity to truly tackle the issues that are dragging growth in our economy, by not supporting parents into work, and are compounding the inequalities in our society, which are also holding people back from reaching their full productive potential. Some 80% of families earning less than £20,000 a year will not benefit from any of these entitlements—only one in five will. The north-east has the highest rate of child poverty in the country. One in five children live in workless households, and 38% of children live in households where someone has a disability, which might mean that they are unable to work. Yet those children will not receive any of this entitlement. We know that the poorest children are, on average, 11 months behind their peers when they start school. Leaving them out of this policy will just embed that inequality further. I fear that the policy confirms what we already know: levelling up is no more than a billboard announcement. If we scratch the surface, we find that there is very little underneath.

Even on the Government’s own terms, the childcare entitlement falls short. If it is about getting parents back into work, why are those who want to train as nurses, paramedics, teachers or midwives, and those who want to be apprentices, not entitled to this childcare support? Parents are trapped in low-paid work and low-skilled jobs. They dare not take time out to train because if they do so, they will lose any childcare support that they might be entitled to.

As Chair of the Petitions Committee, I know that childcare is an issue that has been raised with us time and time again, with thousands and thousands of petitioners signing petitions calling on the Government to think again. Although the Government do seem to have finally listened, it is far from job done. The provision offered covers only term time—38 weeks of the year—so for the rest of the year parents need to find the money to pay for childcare. The long-standing problem with the Government’s free childcare offer that is already in existence has been baked into these new provisions, with the risk that prices will be driven up even more.

The Government acknowledge that we have one of the most expensive childcare systems in the world. According to the Women’s Budget Group, the current provision already falls short by £1.8 billion. The new proposals from the Government have a projected £5.2 billion shortfall—the shortfall is increasing, along with the promises. Without proper funding, childcare providers will have to drive up prices, because for every hour that they provide for which there is a shortfall in funding they have to find the money to top up the rest. We must be honest here: it is parents who are picking up the tab, because the hours that parents are paying for cost far more as a result. This really should not have to be said, but crashing the childcare sector and taking money out of the pockets of hard-working parents are the absolute opposite of helping our economy to grow.

[Bob Stewart (Beckenham) (Con)]

I thank the hon. Lady for allowing me to intervene. I am getting a few cases now of people who are going to the Government to get the voucher for childcare, but the Government are taking far too long, which means that those people miss the deadline for giving the voucher to the local council—Bromley Council—so that they can get funded. This is a real problem, and it is increasing in my view.

[Catherine McKinnell]

I thank the right hon. Gentleman for raising his concern. That is just one of a number of complexities in the childcare system that are holding parents back. Adding more complexity in the system, which I fear some of these reforms will do, will only compound those problems. Parents, who are so busy, so stressed and so under pressure trying to work and bring up their children, are having to navigate the various Government offers of childcare. They call these offers free, but parents have to pay for so many hours. They also say that it is tax-free, but it is no such thing and parents need to apply for it and get the money back. It is an incredibly complex system. We could provide a much more simplified system that truly helps parents to reach their full potential and that also helps their children to reach their full potential in a quality early years environment.

That brings me to my next point, which, again, reflects my genuine concern about the Government’s proposals. To make up for the inadequate funding that the Government know they are providing, they are looking to cut corners and, I fear, to drive down quality. Against the advice of parents, providers and childcare experts, the Government are proposing to amend the ratio for two-year-old children from one adult for four children to one adult for five children. I wonder whether the Prime Minister or the Chancellor has ever tried looking after four two-year-olds, but add another into that mix and it does not get any easier. Significant investment is required in training to enable staff to manage that larger workload. Furthermore, comparing us with other countries that have much higher regulatory and training standards for their early years education staff is just a false comparison.

I urge every Member to listen to parents such as the Steepers, who, tragically, lost their son while he was at nursery. They brought a petition to Parliament to raise awareness of the danger of increasing the ratios, because they are desperate that no parent will ever face the same pain. Nobody supports a reduction in childcare quality or safety, but many warn that that is what these changes will bring. The risk is as well that it will only compound the current challenges in the early years workforce, who are leaving in their droves. Seventy five per cent. of nursery and pre-school staff have said that they are likely to leave the sector if their childcare provider increases the ratios. They are already underpaid and under pressure. Adding another child into the mix will only tip them over the edge. That will not help the Government’s target of finding 39,000 extra childcare staff to meet the needs of the new provision. That explains the delay in bringing it in, because the Government face a mammoth task to build up the workforce.

The only attempt I can see to tackle this—other than reducing the ratios, which people have said and I believe will have the opposite effect—is giving bonuses to prospective childminders. Here is the deal: if someone signs up as an individual, as people have for many years, they will get a bonus from the Government of £600. However, if they sign up with a private childcare agency, of which there are currently six in the country, all listed with hyperlinks to their websites on the Government website, they will get a double bonus of £1,200.

I asked the Prime Minister why the Government are driving people to go through an agency rather than sign up directly with their local authority. The answer I got was:

“I think it is a reflection of the fact that it is through intermediaries, so there are additional costs.”

That rather sums up how backward this policy is; there is £10 million allocated to it, and we could get two for the price of one if we cut out the middleman. Why the Government are doubling bonuses for people who sign up with agencies, I do not know. The Prime Minister has promised to write to me with answers and I eagerly await his response.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

Is it not something of a contradiction to appear to benefit nurseries over childminders when, in a Westminster Hall debate that I led on childcare, the Under-Secretary of State for Education, the hon. Member for East Surrey (Claire Coutinho), decried the loss of childminders and said how much the Government wanted to see the number of childminders return to previous levels?

[Catherine McKinnell]

I think there are many contradictions in the Government proposals, and I am attempting to set them out here. I admire the ambition, but I fear the reality does not match it. I would be interested if the Minister were able to shed some light on some of these issues when he sums up the debate.

I also want to focus on wraparound care. We know the crisis in childcare does not stop when a child starts school; the juggle only increases. Parents need help with breakfast clubs and after-school clubs and the Government must ensure that not only are they available, but they have funding to support them. Although the Government have announced an ambition to provide 8 am to 6 pm care for all primary schools, there is not much in reality to meet that ambition. The money that has been provided is for start-up funding. It runs out after 2025 and parents are left to pay the bill with no support with those costs.

The hon. Member for North East Bedfordshire (Richard Fuller) suggested that Labour is keeping its election plans very tight, but this is one policy that we shout loud and clear and are very proud of, and are disappointed that the Tories have not stolen. With our wraparound care offer we will guarantee breakfast clubs for all primary school children, paid for by abolishing the non-dom status. I would be delighted, and I think the country would too, if the Government were to steal that policy.

I will conclude, because I am aware that some hon. Members have gone on very long in this debate. The Government finally appear to recognise that childcare is part of our vital infrastructure. I welcome that. It is fundamental to our economy, to tackling the gender pay gap and to giving all children the best start in life—something that is too often forgotten in these conversations. Childcare is about not only helping parents into work, but giving children the best start in life, ensuring that they have good-quality early years provision so they are ready to start school in line with their peers.

I fear that driving down quality and a race to the bottom on ratios will not achieve those ends. The real test of the policy is whether it will make childcare more affordable and more available and whether it will deliver economic growth. We have heard from parents and providers that at best, these measures are just not enough, and at worst, they might make the problems worse. I hope the Government listen to those concerns and keep the policies carefully under review, because the childcare system in our country is so broken that sticking plasters will no longer do.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (James Cartlidge)]

I join the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) in paying tribute to Betty Boothroyd on the day of her funeral. I thank all colleagues who paid tribute to our great female Speaker, including in a fascinating anecdote from the hon. Member for Mitcham and Morden (Siobhain McDonagh).

It is a pleasure to respond to the many contributions from hon. and right hon. Members. I start with the Labour Front Benchers and the hon. Member for Richmond Park (Sarah Olney), who speaks for the Liberal Democrats. As at Treasury orals, they once again used the word “loophole” to describe our investment allowance for North sea oil and gas, which is an extraordinary thing to say. When we debated the autumn statement, the shadow Economic Secretary to the Treasury, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), said that

“we need more oil and gas”.—[Official Report, 22 November 2022; Vol. 723, c. 180.]

That was what she said, but it is clear from Labour’s policy that it does not want that oil and gas to come from the United Kingdom. What an extraordinary position.

If we have learned anything from what has happened since Russia’s invasion of Ukraine, it is surely that we have to maximise our domestic energy production. The windfall tax is raising significant funding so that we can pay for all the energy support our constituents are getting, but we are balancing that with an allowance so that we continue to maximise investment in our energy security.

The hon. Member for Ealing North (James Murray) lamented the fact that the Bill does not cover business rates. Well, I have news for him: Finance Bills never cover business rates, which are local taxes. If he were to pick up the Order Paper, he would see that, before this debate, my right hon. Friend the Secretary of State for Levelling Up, Housing and Communities introduced the Non-Domestic Rating Bill.

The hon. Gentleman, along with many of his colleagues, including the Chairman of the Work and Pensions Committee, the right hon. Member for East Ham (Sir Stephen Timms), and the hon. Members for Brentford and Isleworth (Ruth Cadbury) and for West Lancashire (Ashley Dalton), continued the narrative that our abolition of the lifetime allowance is somehow a tax cut for the rich. They talk of the beneficiaries as if they were oligarchs, but we do not see it like that. These people have worked hard all their working life, doing the right thing and paying into a pension.

My hon. Friend the Member for Amber Valley (Nigel Mills), in an excellent speech, like my hon. Friend the Member for South Thanet (Craig Mackinlay), made an important point about the complexities and issues that would arise if we tried to have a scheme purely for one profession. I said last Thursday that we would have to consult on such a scheme, and then we would have to respond to the consultation. All those things would take months, but our tax cut will come in on 6 April because we need these doctors on our wards now, and we do not want them to retire early. We are backing all our professions because we want to get Britain growing again.

[Catherine McKinnell]

It is interesting that the hon. Gentleman speaks with such passion about moving fast to help these very high earners. Could he explain why the Government are incapable of moving any faster than a snail’s pace on providing childcare for some of the lowest earners in the country?

[James Cartlidge]

The hon. Lady knows why we need a staggered implementation, and I will return to that point.

At the beginning of his speech, the right hon. Member for Dundee East (Stewart Hosie) referred to our progress, or lack of progress as he sees it, on reducing debt, before setting out a load of spending requests and demands for more support. He wants more energy support and more support with the cost of living. He does not want alcohol duty to be uprated by RPI, and I understand why he makes that point, but it scores £5 billion. He cannot have it both ways.

Once again, the right hon. Gentleman spoke about our relative performance following Brexit. By definition, and we can have this debate, our growth compared with other nations must always be an estimate. This is not “Sliding Doors”—my hon. Friend the Member for South Thanet mentioned that film—and there is no parallel universe, but there is one area on which we can speak definitively, and that is the saving accrued by not paying our membership fee. I can confirm to the House that, net of the divorce settlement, £14.6 billion has been made available in the current spending review by not having to pay the membership fee. That is an absolute gain from Brexit that the Opposition would not have enjoyed.

My hon. Friends the Members for South Dorset (Richard Drax) and for South Thanet and my constituency near neighbour the former Home Secretary, my right hon. Friend the Member for Witham (Priti Patel), all spoke about corporation tax, and my right hon. Friend made the brilliant Conservative point that the Government do not create jobs—she also spoke very well about eastern region entrepreneurialism, which I obviously support her on.

On the corporation tax issue, I would make this key point: we legislated for the increase in 2021 when we were still in the pandemic, and one only has to look at the graph for borrowing that followed the pandemic, showing the most extraordinary surge, to realise that it is impossible to have such a surge in borrowing without fiscal consequences. So we had to take difficult decisions. Like my right hon. Friend, I ran a small business and I did not enjoy paying corporation tax. As Conservatives we do not want to put up taxes, but we also have a duty to run the public finances in a sound and stable fashion, so we have taken difficult decisions, but they have given us the platform to cut corporation tax in this Budget and Finance Bill for businesses that invest.

The right hon. Member for Dundee East asked about tidal stream energy. We recognise the opportunity of that, which is why we are allocating a ringfenced budget for the technology in allocation round 5. The hon. Member for Richmond Park complained about our performance on inflation relative to the EU; there are 12 countries in the EU with higher inflation than us.

My right hon. Friend the Member for Witham and my hon. Friends the Members for South Dorset and for South Thanet, and I think also my hon. Friend the Member for North East Bedfordshire (Richard Fuller), raised a point about pillar 2 and sovereignty, and I totally respect the points and arguments they make. I reassure them that pillar 2 is implemented through domestic legislation in each implementing nation, rather than as an international treaty. The UK has a primary right to impose any top-up tax due on UK-headquartered groups or on foreign groups’ UK operations. If the UK does not exercise that right, the same top-up tax can be imposed by other countries, and businesses would therefore incur the same level of top-up tax but the tax would be paid to that nation, not to the UK.

I said I would respond to the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) on childcare. As she knows, we are increasing support for those on low incomes. We are increasing support for those on universal credit, not least by paying it up front. We will be phasing in the childcare support—from April 2024 working parents of two-year-olds can access 15 hours per week. From September 2024 all working parents of children aged between nine months and three years can access 15 hours per week. [Interruption.]

There seems to be a cold going round or something, as there is a lot of coughing, so I will conclude by referring to the point of the right hon. Member for East Antrim (Sammy Wilson). He is not in his place but he asked an important question, especially in light of our announcement in relation to the Windsor framework. I can confirm that the Government have today published secondary legislation that will extend full VAT relief for energy-saving materials to Northern Ireland. The Windsor framework now enables the relief to be expanded to Northern Ireland, with a single UK-wide relief set to take effect from 1 May 2023. The relief supports households across the UK to improve their energy efficiency. I hope the hon. Member for Strangford (Jim Shannon), who is always present, will relay that back to the right hon. Gentleman.

To conclude, the Prime Minister has three economic targets. We want to halve inflation; this year we are forecast to more than halve it, but we know times remain challenging for households. We want to get debt down; that is why we are running public finances in a prudent fashion. Above all, we want to get the economy growing; that is why I commend this Finance Bill to the House.

Question put, That the amendment be made.