Affordable Childcare (Select Committee Report)

Lord Patel Excerpts

Wednesday 18th March 2015 Lords Chamber

[Lord Patel (CB)]

My Lords, it was a privilege to be a member of the Select Committee on Affordable Childcare under the chairmanship of my noble friend Lord Sutherland of Houndwood and in the company of so many knowledgeable and sometimes very lively other members—they were certainly highly knowledgeable.

Today I will focus on childcare support and its effect on maternal employment, and the effects of demand-side subsidy on parents with low income. One of the three aims of the Government’s investment in childcare is to allow parents to work. The committee felt that there is another aim of childcare support: poverty reduction. I will briefly speak on both these issues.

Although childcare costs are a concern of both parents, it is usually the woman’s employment that is most affected. In the evidence submitted in response to the question, “Did childcare support improve the mother’s ability to work?”, there were fewer responses, but the majority commented that the key aim of returning to work was poverty reduction. The evidence from the Family and Childcare Trust and the Child Poverty Action Group was that both felt that by making the return to work possible, childcare support helped reduce child poverty, particularly for lone parents.

Has state support for childcare resulted in more women working? The initial introduction of childcare policies in the 1970s saw a dramatic rise in maternal employment rates, which reached 65% in 1998, but the current rate is only slightly higher at 68%—in contrast to the rate of employment of single parents, which has risen from 46% in 1998 to 64% in 2014. Both those figures suggest that there are other forces and policies that may have contributed to maternal employment rates apart from childcare policies. There has been no evidence-based evaluation of the impact of childcare subsidies on maternal employment—a view shared by Professor Brewer from Essex University.

Further, the Department for Work and Pensions has accepted that no estimates of the impact of either working tax credit or universal credit on the maternal employment rate has been carried out. HM Treasury, while believing that higher childcare costs act as a disincentive to work, admitted that there was a lack of evidence to link working tax credit to employment rates. The committee further looked at evidence on the impact of free early education on maternal employment rates. While the policy clearly increased the number of children who could access free early education, there was minimal effect on increasing employment rates for women. The assumption was that reducing childcare costs to the parents would inevitably result in gains to the Exchequer from more working parents and, to this end, the Department for Education and the Treasury provided impressive sums that they had assumed in terms of possible financial gains. However, there was a lack of evidence to support links between demand-side support and the maternal employment rate.

It is undoubtedly true that the government policies in relation to childcare have made a difference to meeting the objective of child development, as was referred to by others, and, to a lesser degree, the objective of reducing child poverty. However, there is insufficient evidence to judge whether they have made an impact on maternal employment rates. There is an urgent need to bridge the evidence-base gap on parental employment and childcare costs. Therefore, I say this to the Minister that I hope that this Government, and hopefully the future Government, will gather evidence to establish the link between parental employment choices and childcare costs, which is one of the recommendations of the report.

I turn briefly to the other issue and will comment on some aspects of the demand-side subsidy of childcare support and its effects, particularly on the less well off and single parents. I believe that there is a real concern here. Most of the evidence received tended to focus on the childcare element of working tax credit, possibly reflecting on the poverty reduction issues that were a concern for most who submitted evidence. Those who submitted evidence also commented on the complexity of the funding streams and the confusion that that causes.

My comments concentrate on the effect that childcare support has on the lives of single parents, a concern highlighted by the charity Gingerbread and others. Single parents rely on childcare to work, study and help reduce poverty. The Government’s commitment to make work pay and the general acceptance that it is the best way out of poverty have to be commended. However, increasing childcare costs, well above inflation, flat wages and the fact that single parents often are in insecure employment with lower wages mean that, for them, the reality is different. In 2011, the cut in state support from 80% to 70% of childcare support undermined the government policy of making work pay.

The government proposal to help low-income families by increasing state support to 85% of childcare support is welcome, but limiting it to new universal credit claimants and only from April 2016 has its drawbacks. While it will help single parents, those living in areas with higher childcare costs and lower wages will see little benefit. Added to that, single parents have different childcare needs, often have to work longer hours using different childcare providers and are faced with other costs, such as meals and upfront funding, which they find difficult to meet. For those and other reasons, for single parents and parents with disabled children there is a need for improved support for childcare.

We need a childcare support system that is less complex and works better for poorer families on lower wages. That may mean more targeted childcare support, removing any disparities resulting from the welfare system, and may mean revisiting the childcare cap. I hope that the Minister can say that this Government, and any Government who follow, will look at these issues and bring forward ways to implement a childcare system that works better for the poor and the disadvantaged. At least, I hope that the Minister can commit to review by autumn 2016 how the childcare reforms are working, whether the commitment to make work pay has been realised, and how universal credit and the new tax-free childcare support pathways are working. I hope that she will be able today to comment on those proposals.