Childcare Vouchers

Debate between Catherine McKinnell and Rupa Huq

Monday 15th January 2018 Westminster Hall

[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.

Agenda for Change: NHS Pay Restraint

Debate between Catherine McKinnell and Rupa Huq

Monday 30th January 2017 Westminster Hall

[Catherine McKinnell]

The hon. Gentleman makes another valid point. I hope that the Minister is listening, because although we are focusing specifically today on pay restraint for Agenda for Change staff, there is a much wider issue for the Government to take on board. A variety of factors is affecting recruitment and retention of NHS staff. The axing of bursaries is just one significant factor that the Government should seriously examine, and reverse.

What has the pay restraint for Agenda for Change staff meant to individual nurses, midwives, paramedics, cleaners and other healthcare professionals since 2011? Depending on the measure of inflation used, it has resulted in a drop in real-terms earnings of up to 14%. To put that in context, the trade union Unison has calculated that it is equivalent to annual pay cuts of £2,288 for a cleaner, £4,846 for a nurse, £6,134 for a midwife and £8,364 for a clinical psychologist. Indeed, ahead of the 2017-18 NHS pay review process, Unison surveyed its members working in the NHS and received the following responses, which are a matter of deep concern: nearly two thirds felt worse off than they did 12 months ago; 49% had asked for financial support from family or a friend; 13% had used a debt advice service; 11% had pawned possessions; 11% had used a payday loan company; 15% had moved to a less expensive home or remortgaged their house; and just under one fifth took on paid work in addition to their main NHS job, 64% of whom did so because their NHS salary was not enough to meet their basic living costs. More than 80% said they had considered leaving the NHS in the past year.

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

My hon. Friend is making a powerful speech. Does she share the concerns of the London nurses at the lunchtime lobby today, who said that punitive London housing costs are making the situation even more acute? They feel that they are being forced out of the capital, which needs nurses, and that what is happening is almost social cleansing by the back door, pricing nurses out of our city.

[Catherine McKinnell]

Yes, I share those concerns, particularly about the significant shortage of nurses in London. The issue affects places throughout the country, but I fully appreciate the acuteness of the situation in London.

The findings that I have set out are mirrored in the most recent Royal College of Nursing employment survey of its members. It found that 30% had struggled to pay gas and electricity Bills, 14% had missed meals because of financial difficulties, 53% had been compelled to work extra hours to increase earnings, and 32% were working extra night and weekend shifts to help pay bills and meet everyday living expenses. The RCN stated:

“This corresponds with our year on year increase of 30%, over the past five years, on the number of our members seeking specialist money advice from our RCN Welfare Service. This contact from our members focuses predominantly on dealing with unmanageable consumer debt.”

It is shocking and depressing stuff. It is bad enough that the Government continually expect NHS staff, many of whom are at breaking point, to do more with less and treat more patients with fewer resources in what are usually physically and psychologically demanding roles, but to expect them to do so while they face such anxiety and stress over their own financial situation is completely unacceptable.

We do not need to take Unison or the RCN’s word for what is happening. I have received emails containing powerful testimony from NHS staff in my constituency. One explained:

“I have been qualified as a children’s staff nurse for 12 years and I reached the top of my pay scale four years ago. I have not had a pay rise since. 4-5 years ago I was in a comfortable position, I could afford the basics and if I wanted extras like holidays or treats I would just do overtime or extra shifts to afford these luxuries. However, due to the fact my pay against my cost of living has reduced by 14%, I now struggle to afford the basics and am having to do extra shifts just to be able to provide food and pay my bills… I am missing out on valuable time with my family as I have to work nearly every weekend in order to be able to get a wage that can cover our costs. It is now becoming such a stretch each month that I may have to leave nursing and find a job that pays me better... Working as a children’s nurse in a busy A&E unit is amazing and worthwhile, but it is very stressful. On a daily basis we deal with and see things that are devastating and can be difficult to switch off from. Our pay should reflect this.”

Another constituent challenged the claim made in the Government’s response to the e-petition:

“Average earnings for qualified nurses were £31,214 in the 12 months to June 2016”.

She described herself as an average nurse in her 40s with a partner and a child:

“I have been qualified and working in the NHS for 11 years. I don’t earn £31,214. The top of my band (band 5) is £28,464. So, I am paid about £14.50 an hour to clean up faeces, vomit, blood and other bodily fluids. To hold the hands of patients who are dying. To comfort the relatives of patients who are dying. To maintain complicated machinery/equipment that is keeping a person alive whilst watching the newly-qualified staff nurse who doesn’t feel confident and make sure they don’t do anything dangerous.”

Another constituent painted a very concerning picture about her financial situation. She recently qualified as a nurse—a year and four months ago. She is a single parent of three children, and commented:

“After studying hard for 3 years mixing university, placements and guided learning, I gained my degree only to find myself in more dire financial circumstances than I was as a student.

I live to a tight budget, I drive a car that is 16 years old, I don’t smoke or drink, and I rarely socialise with my friends unless it’s a special occasion. This month I was paid £1,450 after tax—from that £300 is childcare; £400 is rent; leaving £750 for the month covering gas, water, phone, food, insurance etc. I also receive £35 tax credits a week which covers my daughter’s bus fare to college and her lunch money.

I am a qualified professional and yet I would class myself as being on the breadline. I know there are others in greater need than I am; however I feel like I work hard and sacrifice my family time for nothing.”

Finally, a senior sister with 30 years’ experience in an acute trauma unit explained:

“After six years of pay restraint, I now see nurses struggling day to day to make ends meet. Those who have stayed are now planning to leave the NHS early and newly qualified nurses are unable to stay without reasonable remuneration.

I feel like I grieve every day for my profession now. We have an NHS workforce currently willing to work as hard as the service asks them, but this goodwill is now eroding faster than I have ever seen in all my years’ service.

I am retiring within a couple of years. This request comes not for me, but for those who come after me and who will be caring for me and my family in the future.”

It is clear that our NHS is facing a crisis, yet the people the Government entirely rely on to make the NHS work are being badly let down. Nobody would suggest for a minute that those working in the health service do it for the money. However, we have reached a situation in which nurses, midwives and other invaluable NHS staff are struggling to pay their bills or put food on the table, or are pawning their possessions or taking out high-interest loans just to get from one month to the next.

How can we expect people to continue to provide high-quality care to us and our loved ones in what are already increasingly challenging circumstances when they are also facing this level of stress and anxiety at home? I strongly urge the Government to look at this situation again and to take on board the concerns being raised not only by organisations such as Unison, the RCN and the RCM, but by NHS frontline staff who are saying loud and clear that this pay restraint simply cannot continue.