Childcare Payments Bill

Hywel Williams Excerpts

Monday 17th November 2014 Commons Chamber

The Institute for Public Policy Research has gone so far as to estimate that the inflationary pressures unleashed by the extra cash could negate the positive impact of the subsidy to families within a matter of just a few years. That is a crucial point of which the Government should be aware. If they really want each and every family in our country to see the benefit of growth, they must be aware of the risks that they face. Such an outcome would obviously be bad for parents, who would be paying as much as they do now for the same thing, but it would also mean that the Government had secured appalling value for money for their child care policy. We all have an interest, across the House, in ensuring that that does not happen. It is also why Labour is deeply sceptical about the wisdom of a demand-side-only approach.

[Hywel Williams (Arfon) (PC)]

Does the hon. Lady accept that there are particular stresses on parents in rural areas, as the cost of travel has to be added to the cost of child care itself? The money could be better deployed in such areas in increasing the provision rather than the amount that child care providers get.

[Alison McGovern]

It is important for all of us to recognise the extra pressures on families in rural areas. People’s circumstances are different. We want to increase employment in rural areas as well as in suburban and urban areas. The hon. Gentleman makes an important point.

--- Later in debate ---

For those who are on the threshold between different systems, the complexity will be greater still. 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.

[Hywel Williams]

I very much agree with the thrust of the hon. Gentleman’s argument. His point applies particularly to people in seasonal industries such as agriculture or, as in my constituency, tourism. I am sure that he agrees that there is a particular problem for those sorts of workers.

[Alex Cunningham]

Yes. I am grateful to the hon. Gentleman for that intervention. I most certainly do agree with him. Pieceworkers and others can have hours and wages that fluctuate over a long period; they will most certainly be affected. I feel that the

“easy-to-use online tool”––[Official Report, Childcare Payments Public Bill Committee, 23 October 2014; c. 222.]

promised by the Minister in Committee will prove elusive.

On top of the sizeable potential for confusion, the different mechanisms by which child care costs are to be paid under the tax-free child care scheme and universal credit are also worrying. As we are aware, under the tax-free scheme, payments will be made through child care accounts. That will provide families who are in receipt of tax-free child care with an important budgeting tool to help them manage their finances; that is particularly important as payments will be made through child care account top-ups before costs are paid by the parent. However, child care support received through tax credits and universal credit cannot be provided through child care accounts. That means that child care payments are not aligned, which gives rise to the potential for further confusion and complexity for parents, and it means that an important budgeting tool for households in receipt of tax-free child care is not available to those receiving child care support through universal credit.

It is worth highlighting that the Children’s Society report “The Debt Trap” found households in poverty containing dependent children to be twice as likely to be in some form of arrears as families on higher incomes. It is precisely these families who are most likely to need help with budgeting, but who will be given the least support. Moreover, universal credit payments of child care costs will be made in arrears. As Members will be aware, parents are usually required to pay child care providers one month in advance, but families on low incomes claiming universal credit are likely to have the lowest savings, if any at all; this will inevitably result in many being forced to borrow money to pay for their child care up front. We should be under no illusion: that could be a hefty sum, and if child care costs are higher during school holidays, further loans may be required to meet those costs. This runs the obvious risk of forging a cycle of dependence. Reporting requirements for universal credit are significantly greater than those for either tax credits or tax-free child care, and any failure to report in time will lead to the loss of all payments for that assessment period.