Free Childcare: Costs and Benefits

Debate between Chris Elmore and Darren Jones

Tuesday 19th February 2019 Westminster Hall

[Darren Jones (Bristol North West) (Lab)]

I beg to move,

That this House has considered the costs and benefits of free childcare.

It is a pleasure to serve under your chairmanship, Mr Davies. I probably ought to declare that I am father to 14-month-old Ophelia and expectant father to another child, which is on its way, so I have a vested interest in this topic. Somewhat ironically, a number of colleagues asked me to express their disappointment at not being able to make the debate, given that this is half-term week. This week was supposed to be a parliamentary recess, but the Government cancelled it, so the debate was drawn for a time when lots of colleagues have to look after their children.

The motion refers to free childcare. Clearly there is no such thing, given that someone will always have to pay—parents directly, the state or a bit of both—but the premise of my argument is that childcare that is fully funded by the state should be seen as a redistributive investment rather than a cost. Such an investment could create a more productive, more equal and happier country due to the contribution that fully paid childcare can make to the economy, the impact it can have on tackling class and gender inequality, and what it can do for family happiness.

It is worth summarising where we are today. I think it is fair to say that most parents, if not all, would say the childcare system is far too confusing. Someone with a two-year-old child can get 15 hours of childcare per week if they receive certain benefits or have a child with disabilities, or if the child is looked after by the local council, but parents who do not fit into those categories have to fund the equivalent childcare or not be in work to look after their children. For children aged three or four, parents can get 15 hours of childcare per week until reception class for up to 38 weeks each year, and an additional 15 hours per week can be claimed by a single parent in work, a couple of parents earning less than £100,000 a year—that is, of course, a generous income bracket—and those in some other technical situations.

On top of that, we also have childcare vouchers, tax-free childcare, working tax credits and universal credit. Childcare vouchers are claimed through work, but the Government are phasing them out. Tax-free childcare involves a prepayment top-up by the Government, with parents using an online system to make payments to registered childcare providers, but is only for those who do not receive childcare vouchers. People on low pay can claim universal credit or working tax credits, but doing so means they cannot claim tax-free childcare.

All those schemes rely on someone receiving a regular income from employment, creating difficulties for those who rely on commission—one of my constituents, who is an estate agent, found it very difficult to evidence her income to fit into some of those categories—who are in flexible work or who are self-employed. I recognise that the Government have made welcome changes to tax-free childcare for those in self-employment, but those difficulties come up frequently in my constituency surgeries. That is especially true for tax-free childcare, which has been mired in IT problems since its launch. Parents now have to take the time—every three months, I think—to log in, register their children and make payments into the system, and must find a childcare provider that is able to receive money through the system.

There were significant problems, which have now been fixed, for people with children with disabilities. Those people get a 40% top-up rather than a 20% top-up, but that was not calculated properly on the system. Constituents in well-paid jobs told me they were having to think about selling their car in order to pay for their childcare and stay in work. That just cannot be right. Not only is the system too confusing but parents do not use it because it is too much hassle. Only last week, we heard that only one in 14 eligible families claim their tax-free childcare. The system is too hard to use—it is too confusing—and parents are not using it.

All that is in the context that childcare is an enormous cost in the family budget. In 2014, which I appreciate is now some time ago, the Family and Childcare Trust conducted research into the cost of childcare across the country and concluded that, on average, families pay about £10,000 a year. That cost will now be higher, because of welcome changes such as having to pay the living wage and other costs faced by childcare providers.

Even with families paying such large costs, however, the system is still not sustainable. Childcare providers tell me that they cannot afford to make ends meet without applying additional costs to families, on top of the core costs of childcare. A Twitter follower of mine made the point that, under Government-funded childcare, and obviously with the right ratio of staff to children, her childcare business receives only £3.84 per hour per child. She says she is on the brink of closure. We have a system that is too complicated, that parents are not fully using, that is not sustainably funded and that is bringing the childcare system to the brink of closure.

[Chris Elmore (Ogmore) (Lab)]

My hon. Friend is making an eloquent speech on the realities that parents face. I congratulate him on his wonderful news. The situation in Wales is different, and I may come back to that in a later intervention.

I have anecdotal evidence that, in order to reduce the pressure on family budgets, lots of my friends who are our age and who have children find it more cost-effective to work part time or to rely on elderly relatives—not just grandparents but great-grandparents in some cases—for childcare. Does my hon. Friend agree that, in the long term, regardless of which Administration lead on childcare, that is simply not sustainable?

[Darren Jones]

I agree with my hon. Friend and thank him for his intervention. It has been shown that parents—especially mums, as I will come on to in a moment—often go from working full time to part time and do not return to full-time work until their children are in primary education. They are out of the labour market for years when they may wish to be in it. That is a systemic issue associated with the pressures of childcare.

I am not moaning about looking after children; I enjoy looking after my children. However, the fact of the matter is that I also want to contribute and to have a career, as does my wife. We should not have to live in a system where having a career is a trade-off between one and the other; where the childcare system is not fit for purpose; and where our way of life does not allow us fully to contribute to the success of the economy. The system is ripe for reform, not only so that we can help families or spend taxpayers’ money more efficiently but to create a country in which we can all be happier and more productive.

Moving on to the economy, OECD research shows that moving to a culture in which men and women are able to share parental duties, without mum or dad trading off who looks after the child, and therefore creating equal participation in the labour market, would increase GDP by about 10% by 2030. Under their current policies the Government seem to be in the mood to surrender GDP growth in the coming years, so reform of the childcare system may be a welcome contribution to increasing GDP.

This issue is particularly relevant to parents of children with disabilities, who find the system even harder and more expensive. I am proud that the Flamingo Chicks charity in my constituency teaches ballet to children with disabilities because there was no such provision. It not only provides excellent services for young people in Bristol and across the country—it is a growing organisation—but does research, too. I hosted the charity in Westminster a few weeks ago, when it launched research showing that only one in 10 dads feels able to tell their employer that their child has a disability. They fear telling their employer because they think that it might impact on their career. How sad is that? People ought to be able to tell their employer that they need to claim their right to flexitime or childcare leave in order to care for their children. In order to maintain their career, they should not feel pressured into having to put their job first and hiding the fact that they have children who need to be looked after. That is entirely incorrect.

I am also pleased that several Bristol businesses have signed up to the new Flamingo Chicks employers’ charter, under which employers should proactively encourage their staff to take flexitime, if required, to look after their children—whether they are disabled or otherwise—and which encourages policies to support staff in playing a more positive and proactive role in looking after their families without it having an impact on their career.

If more parents are in work, it has the obvious benefit of more people paying tax, which, which is welcome and helps to fund systems such as these. That is especially true for in respect of properly funded childcare providers. If we have a sustainable, fully funded childcare provider system across the country, we will create lots of reasonably well paid jobs that people value. Creating a public service we can be proud of will help us to rebalance the regional economies, invest in the next generation and help families to do better today.

Some have suggested that fully funded childcare could increase economic productivity because it would give parents more flexibility around their working days and around the way in which they take time off work to care for their children. That means that we would get more output from them at work, because they would not have to take so much time off at short notice or reduce their hours to fit what the current childcare facilities provide.

The Minister may wish to refer to some studies, including that from the Institute for Fiscal Studies, that say that there is little connection between childcare policies and parents in work. Of course, some parents will choose to stay at home and care for their children, and it is absolutely their right to do so, but surely we would not wish to miss the prospect of increasing GDP, tax returns and productivity. Surely we should aim to help those who want to be in work to lead more productive and meaningful, less discriminatory and happier lives. Not that long ago, the Government started to measure happiness—I think it was under Prime Minister Cameron. I do not know whether they still do so, but it would be interesting to see the statistics.

Moving on to gender and class, we should not shy away from the fact that the childcare system facilitates discrimination in the workplace and the education system. Gender inequality is obvious, isn’t it? The Government admitted that in testimony for the Treasury Committee’s excellent report on childcare of March last year. In that inquiry, the Chief Secretary to the Treasury said that women having children end up on the “mummy track”—that well-known phrase—doing less skilled work than they are perfectly able to do, for a salary that is less than they are worth.

The Institute for Fiscal Studies, in its report on wage progression and the gender wage gap, said that by the time a woman’s first child is 20, she will have lost on average three whole years’ worth of salary compared with men, and will have spent the equivalent of 10 years out of work in terms of time lost, loss of progression and lack of career development. Those are enormous numbers; it is an enormous impact. Even in our increasingly modern society, it is disproportionately applied to women and mums.

In my view, we should talk more about class inequality. The childcare system has a really important role to play here, too. The Sutton Trust and others have shown that, by the time children leave secondary school, the attainment gap in terms of education, training and skills, means that children from disadvantaged backgrounds have lost nearly two years’ worth of schooling, compared with those from more advantaged backgrounds. That has to be unacceptable in our country. We know that the class gap starts from the earliest of ages, with attainment gaps of more than four months of equivalent schooling having been noted at the compulsory education age of five.

I saw that frequently, because I used to be the chair of governors at the primary school that I used to go to in what is now my constituency. Everyone who has been a governor knows that they look at lots of data on progression, attainment, attendance and all that stuff. The primary school is in Lawrence Weston, where I am from, which still has one of the lowest levels of attainment in the country for education, training and skills. When children come into the reception class, the gap between those who are the most prepared for mainstream education and those who are the least is really quite significant. Primary schools like Nova Primary School—it was called Avon Primary School when I was there and it was not an academy—put in enormous effort to try to bring children up to the average by year 6. Primary schools do a really good job, but it takes a huge amount of effort and support from teaching staff and teaching assistants to get them there.

Then, of course, the environment changes in the secondary education system—there are more children and less one-to-one support—and the children who were brought up to the average in year 6 start to fall back again. That is when we get an attainment gap at the end of secondary school of so many years’ equivalent of educational outcome, compared with those from more advantaged backgrounds.

[Darren Jones]

I agree entirely. I am pleased that, in Bristol, we have managed to keep our children’s centres open by coupling them with nursery schools in the majority of cases, and by creating a funding environment that means we have not needed to close them.

We do not need to look far from my constituency, however, to see how many centres have closed around the country under the current Government. I wish that my predecessors in the Labour Government had thought about the scheme sooner, because they introduced it late in their time in government. It was the right thing to do and I hope that we will be able to reintroduce such schemes under a future Labour Government. The evidence is clear: intervention at an earlier age is essential for tackling the inequality gap.

I will touch on maintained nursery schools and the link to childcare.

[Chris Elmore]

My hon. Friend talks about the closure of centres across England, but of course things are different in Wales. In my constituency, two new Flying Start centres have opened in the last two years. I was previously a cabinet member for education in a local authority in Wales and we continued to open such Flying Start centres.

All the evidence from Welsh Government analysis and local government analysis shows that early intervention works. It can be clearly shown that, where early intervention takes place around potty training, interaction with adults and early learning, as my hon. Friend the Member for Stockton North (Alex Cunningham) mentioned, it makes a huge difference. Things can be done differently and are being done differently by the Labour-led Welsh Government.

[Darren Jones]

I declare an interest because there are two islands within my constituency—Steel Holm and Flat Holm. One of them officially belongs to Wales, so I class myself as a Bristolian and a Welsh MP. I take great pride in joining my hon. Friend in recognising the achievements of the Labour Government in Wales and I long for such achievements in Westminster too.

One issue with the Sure Start centres was that some data suggested that they were being utilised most by more middle-class families, although the policy intention was to tackle the inequality gap that I have referred to. My argument is that a fully funded childcare system, because it is considered a public service, is not seen as a nanny state or someone trying to intervene to tell people how to parent; it is just available and it is what it is. We could have a more mainstream application of early years intervention in this type of system, which would tackle some of the challenges of the past.

I return to my soapbox on maintained nursery schools, which I and my hon. Friend the Member for Bristol West (Thangam Debbonaire), and other hon. Members, have talked about frequently. We have some excellent maintained nursery schools in Bristol, which have the costs of and are regulated as schools, but which are funded as private childcare providers. Some of the Minister’s colleagues have recently responded about them in the House of Commons.

The evidence from maintained nursery schools clearly shows that putting in the intervention and assistance before mainstream school has a huge impact on bringing those children up to the average when they get to mainstream education, which helps to tackle the inequality gap. We should take that evidence seriously and apply it to our public policy, to show that it could be done not just in cities and regions that still have maintained nursery schools—they do not exist everywhere in the country—but across all the regions and nations.

On happier families, the Resolution Foundation produced an interesting report last week that looked at wellbeing markers for the happiness of families. To no one’s surprise, it concluded that being in meaningful work and having more disposable income generally makes people happier. It specifically showed that an extra £1,000 a year of disposable income can have a measurable impact on the wellbeing and happiness of someone’s family life, especially for those on the lowest incomes. To perhaps no one’s surprise, as income gets towards £100,000 a year, extra disposable income has less of an impact, but it can have an enormous impact for someone on £13,000.

Helping parents to be in work and providing fully funded childcare could have an impact on the average cost of £10,000 a year for working families [Interruption.]. One of the consequences of reading a speech from an iPad, Mr Davies, is that pressing the wrong place on the screen returns the speech to the start, rather than staying where I was speaking from. Reducing the amount of disposable income that working families spend on childcare, especially those on the lowest incomes, would have a measurable impact on their wellbeing and happiness. In many situations, parents are having to trade off between each other’s jobs, after-work arrangements, work trips, having to look after children, who does the school run and all those things. We could make a difference not only to family life planning, but to their income.

I do not have any evidence for this, and I would be interested in the Minister’s view, but surely fully funded childcare is an investment in the country. If we allow parents to work, reduce the amount of disposable income they spend on childcare, give them more money to spend on the high street or elsewhere in the market, allow them to pay taxes and VAT on the products they buy and fund properly paid childcare providers which then pay their own income tax through their workers in a fully funded childcare system, that money will not just go into a black hole, but will create a system that could help us achieve public policy priorities on gender, class, economic productivity and all the issues I have raised today. It seems an obvious thing for the Government to want to look at and reform, because it will mean something to so many people across the country, while also stimulating all those important factors.

In conclusion, it is clear that the current childcare system is too complicated, does not work and is not sustainable. When we speak to anyone involved, that is what they say. Parents are not aware which system is most relevant to them. It is very confusing. People might think they are on a better scheme with childcare vouchers, which are easily done through work, and they are being told that is coming to an end and they should consider tax-free childcare, but then the IT system does not work and they cannot calculate which scheme is better. If someone is about to be or has already been pushed on to universal credit, they are told they cannot get tax-free childcare, even though they may have been able to get childcare vouchers if they were on working tax credits. It just does not work.

As a consequence, the Treasury has been saving money. The budget allocation for tax-free childcare alone—that is just one aspect of this complicated service—went from £800 million to £37 million. The Treasury has made a saving of hundreds of millions of pounds. Where has that money gone? Why is it not being invested back into reforming childcare systems? The fact of the matter is that while the Treasury is clawing back this money and spending it on God knows what—ship companies with no ships, or whatever it might be—childcare providers are having to charge parents on top of the already expensive price of childcare, whether it is for food, activities or private hours outside of the hours provided by the system.

We see that time and again. Whether it is policing, council services or childcare, the Government cut the funding to public services and those who provide for our constituents, and then push those costs on to hard-pressed families, whether it is through increased council tax to pay for the police funding that the Government have cut or to cover their cuts to the core grants to councils, or passing on more costs to parents from the attempt to save money on childcare systems. Enough really is enough.

We should be aiming for a fully funded childcare system, with qualified and decently paid childcare professionals. It is an investment in our future. It will break down gender and class inequalities and will help foster happier and healthier families right across our country. I do not see why it is even a debate. I hope that the Minister will set out today what he will do to make it a reality.