Childcare Bill [Lords]

Lucy Frazer Excerpts

Wednesday 25th November 2015 Commons Chamber

[Lucy Powell]

Most families under the Government’s plans for tax-free childcare will be eligible for support with childcare. The point is that the Government took away the financial support on which many families relied for childcare and are now reintroducing it by different means.

Today’s claim of significant resources for childcare belies the reality for parents. Families were promised that tax-free childcare would be delivered now, but it will be another two years behind schedule. The three and four-year-old entitlement, which is also due in autumn 2017, still has funding question marks, as we have already heard from Members today. Parents with a two, three or four-year-old at the last election might have expected to have received additional support for childcare after the election, yet none of them will receive an extra penny, as their children will have passed the eligibility ages by the time the policies are eventually introduced.

Childcare is vital to our future success for two key reasons: for growing our economy through enabling parents to work and to work more hours; and to close the development gap pre-school, which is critical to educational achievement throughout a child’s life.

High-quality, flexible childcare is critical to the economy. We have made great strides in childcare over the past 20 years, but important policy challenges remain. Our maternal employment rates—particularly for mothers with children aged between one and four—are poor compared with other OECD countries. More than a third of mothers who want to work are unable to do so because of high childcare costs, and two-thirds would like to work more hours but cannot because of unaffordable childcare bills. That is particularly true for second earners, as the Resolution Foundation and the Institute for Public Policy Research have illustrated.

Many mothers still face a pay and status penalty in the labour market for having children. Although the pay gap is small for younger women, once people hit the age of 40 the pay gap can be stark. Increasingly, work is becoming the only option for both parents as pressures on family budgets have increased. According to the Joseph Rowntree Foundation, single-earner households are now more likely to be in poverty.

To boost our economy and give families the chance of a decent job and income, childcare investment is essential, and high-quality childcare is vital to tackling the disadvantage that exists. We know that many of the most disadvantaged five-year-olds start school 18 months behind their peers. Good-quality childcare can close that gap and give children a firm foundation for school and later life.

The two aims of economic output and early education require different policy solutions, but too often they are conflated and seeking to improve one element sometimes comes at the expense of the other. That is why supply-side support—such as extra free hours—is a good way to deliver both aims. Although tax-free childcare is still some way behind being delivered, it is designed to put cash in parents’ pockets, and does not contain levers to deliver quality or control prices. The offer for two-year-olds aims to reduce inequalities rather than be an economic driver, although that will be a consequence. The extension of the 15-hour offer to 30 hours should be about delivering both objectives, but that will require quality and funding.

As I have said, Labour supports this Bill, but there are a number of challenges with the Government’s plans and it is only right to scrutinise them. First, the childcare policy must be considered in the context of the totality of childcare support, which is complex, and overall support has fallen for families while costs have gone up. Any measures such as those in the Bill should be robustly analysed for their impact on the market in which they operate, including the impact on price, places and quality. Given those tests, many questions remain.

Put simply, high-quality affordable childcare is not cheap, and attempts by the Government to cut corners will ultimately fail. At the heart of the Bill is a serious funding gap, and today’s announcements go only some way towards answering that. The other place voted to amend the Bill on three separate occasions, mainly on procedural grounds because the Bill lacks substance and clarity on funding. When Ministers first announced the free offer, they said that it would cost £350 million. That figure was pie in the sky by the Government’s admission, and the figure was recently revised to £640 million. The IPPR has identified a £1 billion funding gap in the Government’s plans, even on the basis of the current hourly rate. We welcome today’s announcement, which seems to show that the Government understand there is a funding shortfall, but we must investigate that issue further as the Bill proceeds. As we have heard, that hourly rate still remains below the true cost of childcare.

Reducing the numbers of those entitled to extra support to provide funds for the offer for three and four-year-olds is a switch-spend, not new money, and it still leaves a funding shortfall. Families where one parent works between eight and 15 hours a week—those are often among the poorest families—will rightly be disappointed that they are no longer eligible for that extra support. The Secretary of State is right to reduce entitlement at the top end of the salary scale to £100,000 per parent—something we strongly argued for—but will she clarify how that funding will be allocated? The danger is that the Government’s failure adequately to fund the free offer could have far-reaching implications on the childcare market.

[Lucy Frazer (South East Cambridgeshire) (Con)]

I am a little confused. There has been a review, which the hon. Lady will not yet have had an opportunity to see. The Chancellor has announced, as the Secretary of State said, that there will not be a cap, so the figures that the hon. Lady identifies must necessarily be out of date because they do not take into the account the review, which she rightly says—I do not criticise her for this—that she has not yet seen, and they do not mention the cap that she refers to.

[Lucy Powell]

With respect, neither has the hon. and learned Lady seen the review, and she misunderstands the nature of the market. The hourly rate that is paid to nurseries via local authorities is not a cap on the cost of the childcare but a cap on the amount that the nursery can claim. The true cost of the childcare, as we have heard, is significantly more. In places like Islington, the true cost of the childcare provided can often be as high as £9 an hour. In the case of nurseries in my constituency, it can be considerably higher than the hourly rate, which I understand has gone up by 30p. Therefore, the private providers cross-subsidise from the free offer that they make to parents, with paying hours that other parents pay for. The hon. and learned Lady may well look puzzled. I know a considerable amount about this topic, having been the shadow childcare spokesperson for two years, so she can have a debate with me if she likes.

I do not need to see what has been put in the Library to know that there are major problems with the childcare market, even if the hourly rate is increased by 30p, and even if the early years pupil premium is used to cross-subsidise, taking money from elsewhere.

--- Later in debate ---

[Lucy Frazer (South East Cambridgeshire) (Con)]

This legislation is extremely welcome. One of the greatest barriers to re-entry into the workplace is childcare. Many parents, often women, find the financial burden of childcare prohibitive and do not return to work, because in the short term it simply is not financially viable. Their whole salary is eaten up by childcare costs. According to a recent report by the Fawcett Society, childcare responsibilities remain a significant limiting factor in women’s participation in the workplace. That is also self-evident from the figures. Childcare costs in the UK are the highest in the EU, with families here paying over 25% of their income on childcare, compared with an OECD average of 11.8%.

This legislation is not simply about short-term financial gain, however. It is also about long-term prospects. If women have the option to return to work, career progression is easier. It is about ensuring equality, because women who take long-term breaks are more likely to remain on low pay. Now that women have an opportunity to continue in their roles, promotion will be easier and the gender pay gap will be reduced. Of course, not every parent will want to return to work when their children are young, but this legislation is enabling and empowering for those who do. The Bill offers freedom and choice, and for that reason it must not only be welcomed but applauded.

The Childcare Bill ought to be not only about parents but about children. It emanates from the Department for Education and comes under its budget, so it must ensure that the needs of the child are at its core. The Bill enables all children of three and four to access early-years education, providing an opportunity to ensure that all children, whatever their background, get the same educational opportunity in life. It provides an opportunity to change life chances and to create a fairer society. We all know that by the age of five children from low income households are over a year behind in vocabulary, compared with children from high income households. The attainment gap for children on free school meals increases as they progress through school. In early years, the differential in performance is about 20%. As their schooling progresses, it widens such that by GCSE it can be as large as 30%. Unless we address disparities in education in the early years, these children will always be behind. The Bill will enable us to fill the gap.

[Carol Monaghan]

Surely the hon. Lady would agree that the very children she is talking about, who really need help to narrow the attainment gap, need additional early years education? The Bill will ensure the gap remains as it is.

[Lucy Frazer]

The Bill will enable two, three and four-year-olds to have the schooling they need. I welcome the Chancellor’s announcement that there will be a £1 billion increase in education spending, but I ask the Secretary of State not to lose this great opportunity to ensure that disadvantaged children get the best start in life.

In undertaking the pilots and the review next year, I ask the Secretary of State to take into account the points made to me by nursery providers in my constituency: to recognise the differences in nursery provision throughout the country and the scalability or otherwise of nurseries; to consider that rural and urban provision may be different; to recognise the different living costs of staff around the country, which may be high in Cambridgeshire; and to provide a rate that will enable providers to provide good quality and consistent education and care. If that is achieved, the Bill could be instrumental in our children’s futures, providing the best outcome for the next generation.