Childcare Bill [ Lords ] (First sitting)

Jess Phillips Excerpts

Tuesday 8th December 2015 Public Bill Committees

[Jess Phillips (Birmingham, Yardley) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Dorries—we always have to say that, but it is a pleasure.

I will focus on the funding element of clause 1. I want to start by saying how much I welcome the move to 30 hours of free childcare. For me, as a young mum on a low and unstable income, the Labour Government’s introduction of 15 hours of free childcare was utterly game-changing. My son Harry was one of the very first children to receive that universal service, and I will be forever grateful for it. I am only disappointed that I will not be having any more children and getting the 30 hours. I am cursing the fact that I had my children just too soon—which is what my mum said when I told her I was pregnant.

--- Later in debate ---

[Mr Gyimah]

The hon. Lady quoted the PSLA’s comments on the childcare review. I believe that its comments were informed by a piece of research done by Ceeda. According to that research, the cost of childcare for three and four-year-olds is £4.53 per hour. The average funding rate announced by the Government, from 2017-18, will be £4.88 per hour. Where is the shortfall?

[Jess Phillips]

I invite the Minister to go back to the evidence that was given to this Committee. That same evidence states that the consultation undertaken by the DFE to come to the figures that he has outlined will be completely outdated by the time of the 2017 roll-out and does not account for all sorts of other costs that nurseries may face.

[Mr Gyimah]

Will the hon. Lady give way?

[Jess Phillips]

Yes, but give me a chance to answer one intervention before you make another!

[Mr Gyimah]

It is the same intervention: where is the shortfall?

[Jess Phillips]

The shortfall has been identified by the Pre-school Learning Alliance in its research. I can only work on the evidence that has been given to the Committee. There is already a clear shortfall with the 15-hour provision, which is why nurseries tell us time and again that they use other people’s fees to subsidise their rates. The cost of childcare has increased over the past five years.

[Alex Cunningham]

Would my hon. Friend be surprised to find out that in the Minister’s constituency, childcare already costs £4.85 an hour? That is today, at 2015 at prices. There is a tuppenny shortfall today; what is it going to be like in future?

[Jess Phillips]

Also, although one welcomes some of the increases in wages that the Government have instigated, they have to be taken into account in the cost of childcare provision. If the cost is already £4.85, by 2017 something will have to give. There is undoubtedly a shortfall. I really hope that the Minister proves me wrong, and that there is no rise in childcare costs for children aged nought to three. However, the evidence suggests that something quite different will happen. All I am asking is for reviews to be put in place to ensure that the Government take any rise in childcare costs into account in their policies, and perhaps that they adjust things to make the situation fairer.

As I have said, where I live, the average wage and the average cost of childcare mean that women pay 103% of their salary towards childcare and men pay 90%. I recognise the comments made by the hon. Member for Norwich North about a society in which men are also child carers. My husband is, and has been almost exclusively since my children were aged three, the full-time carer of my children. However, the simple fact is that is very uncommon, thanks to the gender pay gap. When parents have to decide who goes back to work, they usually do so on the basis of who earns the most money. Unfortunately, that is usually not the girls.

The cost of childcare where I live is a problem in itself, but the Government’s costing of the 30 hours of free childcare has the potential to push that burden even further, to the point where it will be completely unrealistic for the lowest earner in the household to maintain employment. It will be no surprise to anyone here that the lowest earner in most households is usually a woman, and there is a real threat that the rising cost will prohibit women from returning to work for the first three years after they have had their baby.

It should not be a shock to anyone in this room that women’s time out of the labour market is the single biggest contributor to the gender pay gap. For my constituents in the west midlands, where the national trend of the narrowing of the gender pay gap has not quite reached us, last year the pay gap grew from £98.90 per week to £105.60 per week. It is getting worse, not better. The Women and Equalities Committee, of which I am a proud member, is undertaking an inquiry into the gender pay gap. Although I do not want to pre-empt any of the report’s findings, I can guarantee—

[The Chair]

Order. The gender pay gap is not part of the amendment.

[Jess Phillips]

But it is entirely tied up, Ms Dorries, with the rising cost and reducing availability of childcare.

[The Chair]

Just try to keep to the point of the amendment.

[Jess Phillips]

I apologise for going on to my favourite subject. I can almost guarantee that the findings of the review will show that the cost of childcare and women’s time out of the labour market are major driving factors behind the gender pay gap. There is real potential for the Government to exacerbate that with the proposals in the Bill, rather than helping matters, if they are not properly funded.

[Alex Cunningham]

There is another issue as far as income is concerned, because those who work in the care sector are predominantly women. If the proposals are not properly funded, one of two things will happen. Either wages will be screwed down and people will lose income, or there will be an increased ratio of children to adults in childcare settings. Both those ideas are unacceptable.

[Jess Phillips]

I totally agree. Without a proper funding structure, if the clause stands part of the Bill, we will need a real focus on quality. Any one of us who has ever left their children with a childcare provider wants to know that their kids are in the best care possible. For those of us who can afford it, sometimes the best care costs a bit extra.

Will the Government commit to a review of the rising cost of childcare for children aged nought to three, and of the issue of women dropping out of the labour market while their children are that age? Will they adjust the funding scheme accordingly if it is found to affect families negatively? For the same reasons, will they also review the rising cost of wrap-around care? The same private sector providers will often provide before and after-school transport as well as the 30 hours of childcare. If there is a shortfall, there will be a knock-on effect for all nursery costs.

To further assess whether the Government have their sums right, they could conduct a simple review of the number of places in the private sector and, more importantly, the maintained sector, when the 30 hours provision comes into being. My children both received 2.5 days a week of free early years education for a year, in a brilliant maintained nursery setting attached to the school that they both now attend. The nursery operated 45 places for school hours on Mondays, Tuesdays and Wednesday mornings, and a further 45 places for Wednesday afternoons and school hours on Thursdays and Fridays. I do not know why more nurseries do not do it like that, because it seems much better for parents. Having 2.5 hours each day seems as useful as a chocolate teapot to me.

The nursery building that my children attended simply could not manage 90 children for the full 30 hours of a school week. No matter how tiny their little bottoms are on the mats, there is no way that 90 children would be able to go there Monday to Friday. That means that the brilliant, highly sought-after maintained nursery where I live, which is helping many disadvantaged children, has a brilliant special educational needs service and offers a service to disabled children, will go from being able to offer 90 places to, most likely, being able to offer 45 places. That will reduce the availability of childcare in an area where it is really needed.

We cannot just say that we will build extra room on the side. Not only will the £500 million that has been allocated for capital funding not touch the sides for the whole country, but there just is not enough space in city schools such as the one my children attend. Last week, I visited Yardley primary school in my constituency. It is being pushed to go to five-form entry. I imagine that the idea of a five-form entry primary school is probably not that likely in the constituencies of most Conservative Members.

[Chloe Smith]

I welcome the point the hon. Lady is making about the need for space. I represent an urban constituency, just as she does, so I have heard the point made before. Nevertheless, does she not think that the capital funding could be well targeted to help where it is most needed?

--- Later in debate ---

[Jess Phillips]

I recognise the hon. Lady’s urban seat in Norwich. It is famous for a famous radio DJ who went on about urban regeneration there, so I know quite a lot about the pedestrianisation of Norwich high street. Moving on from Alan Partridge, the problem with capital funding is that it will not create space where it does not exist. My children’s school cannot just expand if it is given money; there is no space for it to move into.

[Pat Glass]

Does my hon. Friend think, like me, that the £50 million will largely go into the maintained sector to deal with the increase in pupil numbers? More than 64% of childcare is delivered by the private and voluntary sector, which is unlikely to see any of that money.

[Jess Phillips]

I agree entirely with my hon. Friend. It is £500 million that, while well targeted in certain places—

[Pat Glass]

It is £50 million.

[Jess Phillips]

Sorry, £50 million—I overstated it. That is even less likely to have any effect. Although the maintained sector is crying out for that funding—almost every single school in my constituency has a waiting list of at least 50 to 100 pupils—it is unlikely that it is going to filter down and make any difference to the private sector and the childminding services that are much underused under the scheme.

[Alex Cunningham]

Even if there were the physical space, I wonder about the availability of sufficiently trained staff. There is greater demand from parents who want higher-quality staff, but there seems to be no plan to provide staff. That is all the more reason why we should review the measure over some time.

[Jess Phillips]

I think we have time to do that before the roll-out in 2017. I do not wish to delay it any further than 2017, and the Government have the time to make it right. On the training of staff, speaking from personal experience—my son has special educational needs; he has Asperger’s—I want to ensure that people who work with children such as my son every day have the training, qualifications and skills to make their lives and his life a little simpler, although I have not managed it yet.

[Chloe Smith]

The hon. Lady is being generous with her time. She argues that the capital funding will not help the private sector. We all recognise that the taxpayer cannot always help the private sector. There is an argument that when a business is successful, it should work on its own merits. Does she agree that the policy proposal in the Bill is a major business opportunity, and that we should encourage the private sector to see it as an investment opportunity in our constituencies?

[Jess Phillips]

I would agree, if the private nursery sector—I have spoken to nursery staff in my constituency—felt anything other than concern about the funding envelope. That is the main thrust of my argument. If it is left with shortfalls, that is a big risk to take in a difficult economy. I absolutely want new nurseries to spring up and take entrepreneurial risk; we need them to meet the demand, so I would be delighted if they did that. I hope that the Minister and the Government prove me entirely wrong and that loads of brilliant nurseries spring up in spaces where they did not exist before and can afford to offer brilliant childcare that allows women to go back to work, but at the moment I do not see that in the detail of the proposals.

[Pat Glass]

Does my hon. Friend agree that one of the problems in creating new nurseries and new provision is the lack of a suitably qualified workforce? That highlights the problem that one part of Government policy can have an impact on another. There has been an 85% reduction in recruitment for level 3 childcare courses and a 56% shortfall in new applicants since the new requirement for GCSE maths was introduced for apprenticeships.

[Jess Phillips]

I agree that we need to take a wholesale look at apprenticeships, training and how to encourage people to go into this area of work. I imagine that helping to raise people’s children is one of the greatest gifts, and we need as many people as possible to go into the sector. Unfortunately, if pay rates remain where they are—care work is one of the reasons for the gender pay gap—and unless nurseries massively increase their costs and training budgets, people’s desire to work in the field will not increase.

[Mr Gyimah]

I would like to give the hon. Lady some encouragement on some of the questions she asked. The number of providers delivering the three and four-year-old entitlement has increased every year since 2011. In 2015, a total of 43,800 providers did so.

The hon. Lady raised a concern about the workforce. The quality of the workforce continues to rise. Between 2008 and 2013, the proportion of full day care staff with at least a level 3 qualification rose from 75% to 87%, and the proportion with a degree or higher rose from 5% to 13%. I hope she finds that encouraging. The number of places is increasing, and staff qualifications are going up.

[Jess Phillips]

The idea that the number of places are increasing is interesting. I am sure that some nursery providers that did not previously exist have opened their doors, but I think that some that previously did not offer the Government’s scheme are now doing so. Many nurseries in my area that have always existed suddenly have a big banner outside saying, “Free three and four-year old places here”. There is still a supply and demand issue. In his next intervention on me, will the Minister say what happened in 2013? Why did the number go up before then and then stop in 2013, or do we just not have the figures?

[Mr Gyimah]

I am encouraged by what the hon. Lady says about nurseries advertising the free entitlement, which she said is so underfunded, and having banners outside trying to attract parents. If it is so underfunded and nurseries are losing money by offering it, why are they so keen to advertise it?

[Jess Phillips]

Perhaps they did not realise and thought the subsidies were bigger. As I said, I would be delighted if the Minister proved me wrong. However, I can almost guarantee that for the next five years after the roll-out, we will see a higher-than-inflation increase in the cost of childcare for parents of children aged nought to three. I really hope I am wrong, but something will have to give. I do not run a nursery, so I do not know—I am basing my comments on the evidence that has been given to me that there will be a massive shortfall. Maybe I will start a nursery—I like to take on new tasks.

As a parent, I know about the effect of growing demand. This year I was one of the many hundreds of thousands of parents who were told that they could no longer access childcare. There may be an increasing number of places and delight about the figures, the graphs and reports that we read, but the reality is different. I was told I could no longer access the childcare I have accessed for my children for years, because demand outstripped supply. That is happening to people every day, regardless of what the figures say. Supply is not growing to meet demand. I currently have no childcare before school for my children, which has fundamentally changed my family’s working habits. It has meant a reduction in the income of my husband, who is the full-time carer of my children. No chart or table will tell me that is not happening when I know it is—it is happening to me and to many other parents I speak to on the school run.

I want to be sure about the graphs, the funding and schemes that are being outlined. All I am asking for is a review of whether the funding will work. As I have said repeatedly, I want the Minster to prove me wrong. I want a review of whether there has been any rise in the costs of wrap-around childcare for children aged nought to three and those over four, like my children, and of how many women fall out of the labour market when their children are aged nought to three. I want to understand whether the Government have got their figures right.

[Christian Matheson (City of Chester) (Lab)]

I apologise for making the schoolboy error earlier of not turning my phone to silent and therefore disrupting the Committee. I meant no disrespect, Ms Dorries.

I would have expected the Government to welcome the opportunity of a pause and a review because it would provide a breathing space for them to dig themselves out of a hole. We should remind ourselves of the genesis of the policy of 30 hours a week of childcare which, in common with my hon. Friend the Member for Birmingham, Yardley, I genuinely welcome. The political genesis of the policy was that my party had offered a fully costed and prepared proposal for 25 hours a week, and the Conservatives entered the general election campaign determined to trump that with 30 hours a week, yet without doing the sums to work out where the money would come from, so I would have expected the Minister to welcome the proposal for a review and pause.

--- Later in debate ---

[Mr Gyimah]

I have a lot to say, Ms Dorries, and I am grateful for the opportunity to serve under your chairmanship. We have had a long debate on amendment 10. I would like to do three things: provide a bit of context; deal with the amendment and the clause; and address several of the points raised by Opposition Members.

First, on the context, both the Labour and Conservative parties promised to increase free entitlement for three and four-year-olds because we recognise that that will make a difference to parents by helping with the cost of living and enabling them to work more hours. We also know that high-quality childcare makes a big difference to children’s life chances. Both parties share the same objective, and I note that Labour Members supported the Bill on Second Reading.

Both parties can also lay claim to a tradition of making big moves in the childcare sector. The hon. Member for North West Durham talked about the Labour party’s track record. I am proud to say that the Conservative-led Government in the previous Parliament continued that when the free entitlement for three and four-year-olds went up from 12.5 hours to 15 hours. We introduced a new entitlement of 15 hours of early education for disadvantaged two-year-olds. We also introduced the early years pupil premium, which is worth £50 million, so that disadvantaged three and four-year-olds do not fall behind at school. We introduced shared parental leave, which is to be extended to grandparents, and we legislated for tax-free childcare, which means that for every £100 that parents spend on childcare, £20 will come from the taxpayer. That is for parents who are buying additional hours to the existing free entitlement, or who have children younger than three. Parents can use tax-free childcare for children up to the age of 12, and up to 18 in the case of disabled children.

[Jess Phillips]

I just want to check—partly for my own personal finances—when that tax-free childcare will be available. The Minister says that that has been put in place, but I understand that it is currently not available.

[Mr Gyimah]

I said that we legislated for that in the previous Parliament. Tax-free childcare will come into effect from 2017. I know the hon. Lady is concerned about the cost of school-based, wrap-around childcare, but she can use tax-free childcare to help to offset the cost of her wrap-around childcare. In addition, parents can get subsidies through childcare tax credits for up to 75% of the cost of childcare, and that figure will be 85% when we move to universal credit. The Bill is part of a package of reforms through which the Government will spend £6 billion in this Parliament to support parents with their childcare.

--- Later in debate ---

[Jess Phillips]

I recognise what the Minister says, but if a report does state otherwise, will he change his mind?

[Mr Gyimah]

If there is a report that disputes the £1 billion a year spend, I would definitely like to see it.

[Jess Phillips]

And would the Minister increase the amount?

[Mr Gyimah]

No, I would definitely like to see the report. Of the £1 billion, £300 million is for a significant uplift to the rate paid for two, three and four-year-old entitlements. We have increased the rate not just for the three and four-year-old entitlement, as promised at the election, but for the two-year-old entitlement. The new average hourly rate—we have to be clear about it—is £4.88 for three and four-year-olds and £5.39 for two-year-olds, and the equivalent rate per carer, for three and four-year-olds, is £39. The uplift will apply to all children accessing the free entitlement.

We did not stop there, however. We also announced £50 million of capital funding to help providers who wish to expand and increase the number of places they are able to offer, as well as committing to a fairer funding distribution through the introduction of a national funding formula for early years. Neither of those elements, which are critical to a comprehensive and sustainable system, is mentioned in the clause.

Introducing a fairer funding formula for early years is essential. Current funding for early years varies considerably around the country, enabling some areas to offer parents additional hours of provision above the statutory 15 hours a week. The additional investment is a strong signal of the importance that the Government place on early years, and of our desire to help hard-working parents back to work and help them with the cost of living.

The rate increase is underpinned by the comprehensive review of the cost of childcare that was published on 25 November. The review was based on the best published evidence available, with additional evidence being collected through the review itself. Some 2,000 pieces of evidence from the childcare sector were reviewed, and every major childcare organisation contributed to the review. Childcare providers generously even provided their own profit and loss accounts so that we could identify and understand how their cost base worked. We promised the view at the election, and we have delivered on that promise. It is the most comprehensive bottom-up analysis of the cost of childcare provision in the country, and I have no doubt that hon. Members will agree with the rigorous, evidence-based approach we have taken to the analysis.

On how the review was conducted, it was led by the Department for Education’s chief analyst, who analysed the best published evidence and went the extra mile by collecting additional evidence throughout the review. The review examined the cost of childcare provision at provider level and considered all evidence on the current demand for and supply of childcare places for two, three and four-year-olds, for whom there is free entitlement. It also considered cost pressures that providers will need to meet in future, including the national living wage, and found that there is scope for providers to be more efficient, for example by reducing under-occupancy.

That analysis has allowed us to understand the funding needs of the sector and gain better insight into the characteristics of a diverse market and how it might respond to deliver the entitlement.

--- Later in debate ---

[Pat Glass]

I am sorry, but from what the Minister has said today he has not convinced me that we have the funding we need to deliver this policy. I think he will have to try harder. He is refusing to accept that cross-subsidisation underpins the system. If we pull away the opportunities for that cross-subsidisation, it will either squeeze costs somewhere else or affect staffing ratios and quality.

[Jess Phillips]

Following the Minister’s intervention, is my hon. Friend as worried as I am about the fact that the Government are now saying they can afford the new measures because of the change in eligibility? Earlier, the argument was that eligibility had not reduced access for anyone. How has eligibility reduced the cost of the policy—is it because people cannot now get access to the offer?

[Pat Glass]

I am grateful for that intervention. If the threshold has gone up, it appears that it will push out families and children from the least advantaged homes—those who have the least money. The rise in the eligibility threshold will hit those who can least afford it.