Childcare Bill [Lords]

Lucy Powell Excerpts

Wednesday 25th November 2015 Commons Chamber

[Lucy Powell (Manchester Central) (Lab/Co-op)]

I rise to support the Second Reading of this Bill. Labour has a proud record on childcare, and on enabling women to return to work. We introduced free childcare for three and four-year-olds; delivered the first and only childcare strategy across Government; created Sure Start centres, serving families in every community; expanded school nurseries; more than doubled childcare places; increased maternity leave from 12 weeks to 12 months; increased maternity pay; introduced paternity leave; introduced the right to request flexible working; and gave parents help with the cost of childcare through tax credits and vouchers. Childcare was a key part of our plans to support families and to make work pay. We welcome any investment in childcare.

I am pleased that the Government now seem to accept that supply-side funding through free entitlements is a more effective way of helping parents with the cost of childcare, controlling prices and increasing quality, something for which I have long argued. For all the Secretary of State’s trumpeting of the Government’s achievements, the record tells a different story. Financial support for childcare for most families fell in the previous Parliament. In that time, the cost of childcare rocketed by a third—up more than £1,500 since 2010. The pre-election promise of tax-free childcare remains undelivered, and early years childcare places have fallen by more than 40,000 since 2009. The offer for two year olds, while a good policy, remains under-subscribed, and Sure Start centres have gone to the wall in many areas. Even the Prime Minister disagrees with his own Government’s record on Sure Start centres in Oxfordshire.

I welcome the U-turn on tax credits from the Chancellor today. However, cuts to tax credits to date have hit families really hard. The story of the previous Parliament by this Government is one of reducing support for working families, childcare costs going up, and the gender pay gap remaining stuck for the first time in 15 years.

[Michael Tomlinson]

The hon. Lady mentioned cuts to child tax credits in the last Parliament. Does she accept that it is unfair and unjust that nine out of 10 families, even families of Members of Parliament, are eligible for child tax benefits?

[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.

[The Parliamentary Under-Secretary of State for Education (Mr Sam Gyimah)]

The cost of childcare review that was undertaken by the Department over a period of six months had 2,000 responses, including from all the sector representatives. The hourly rates that have been announced today reflect the data that were given to us by the sector, including the profit and loss accounts of providers. I would encourage the hon. Lady to look at that before criticising the rates that have been announced.

[Lucy Powell]

Of course I will look at it. Perhaps next time we are having a Second Reading debate where funding is so critical, Ministers might care to let Opposition Front Benchers have sight of such important information before we embark on it. As the Minister knows, there remain key issues about the ability of the vast majority of providers in the sector, who are private and voluntary providers, to deliver these free hours, notwithstanding the challenges that remain for schools.

[Emily Thornberry]

Reference has been made to the cost of childcare review, and we have been told that 6,000 people have put in for it. It has 184 pages. We know that it is yet to be found in the Library, because people are burrowing away there looking for it.

[Emily Thornberry]

Yes, but it is taking a certain amount of time to print it off. Therefore, we have not been able to look at it in advance of this debate, nor even during the debate. In those circumstances, my hon. Friend presumably agrees that it really is a farce having this Second Reading debate now.

[Lucy Powell]

I do of course agree with my hon. Friend, who makes a very good point. This is all regardless of the fact that this policy still has a considerable funding shortfall, even under the new hourly rates, as the Minister himself has said. When Labour announced before the last election that we were seeking to increase the number of free hours from 15 to 25, he said that that policy would cost £1.2 billion. That is far greater than the funding allocation that the Government have put forward for an additional five hours a week. There are big funding gaps that they have yet to address, regardless of the hourly rate being paid and the information that has been put in the Library.

House of Commons Library analysis has shown that there are over 44,000 fewer early years childcare places today than there were in 2009. In addition, six in 10 local authorities tell us that they do not have an adequate supply of childcare for local parents. There is a downward trend in childcare places that should cause concern. As I said, private and voluntary providers make up the vast majority of childcare places in England. If there is not adequate resource for these nurseries, they will simply not offer the 30 hours, leading to a reduction in choice for parents. I welcome the increase in the hourly rate, but questions remain about how many new places will be provided. Without an increase in supply, costs will continue to rise for parents.

Parents will also be very concerned that the quality of childcare could be damaged by the Government’s failure to adequately support their proposals. A wealth of evidence from the Education Committee and Ofsted clearly identifies strong links between outstanding provision and the best qualified staff. Poor childcare is worse than no childcare, as the Committee reported, and can be detrimental to a child’s development. I am very concerned that unless the Government have answers on adequate funding, the result will be a diminution in quality provision. Can the Secretary of State give a commitment today that, beneath the proposals and those outlined in today’s autumn statement, there are no plans to reduce quality, to increase ratios or to lower requirements for those who can offer the free entitlement? In summary, insufficient funds and poor delivery could have the opposite effect to what the Government want and lead to fewer places, poorer quality and higher cost for parents.

The Government have ample time to address those concerns before their policy is due to be introduced in autumn 2017. We want to work with Ministers to ensure that their plans are credible and affordable and meet the tests we have set out. Part of the problem is that the Government have no clear strategy for childcare. I hope the Education Secretary will reflect on that and come back to this House in due course with an overarching childcare strategy. [Interruption.] Would the Under-Secretary of State for Education, the hon. Member for East Surrey (Mr Gyimah) like to intervene?

[Mr Gyimah]

indicated dissent.

[Lucy Powell]

I would be happy if the hon. Gentleman had a childcare strategy; this is a very complex market that could do with a proper strategy.

We will continue to support the progress of this Bill through Parliament, but it is the Secretary of State’s responsibility to satisfy this House and the other place—and, indeed, parents—that the plan for childcare is deliverable, sustainable and affordable. To make the policy work, she must set out her funding plans and reassure us throughout the passage of the Bill. Other questions also remain unanswered. For example, who will be liable to prove that parents are working and are on sufficient hours, and how will disabled children be supported by the Bill?

I want this policy to work. I want it to be a success, to have real meaning for parents and to ensure that children are supported to achieve a great start in life. I look forward to working on it with the Education Secretary, and I recommend that we support the Bill this evening.

--- Later in debate ---

[Emily Thornberry]

I would be interested to know whether the Minister regrets producing the document entitled “Cost of delivering the early education entitlement” halfway through the debate rather than earlier, if it was produced some time ago. He knows that one problem throughout the passage of the Bill in the Lords was that people criticised the fact that it was a cut-and-paste job from the Tory party manifesto put in a four-page Bill and that it has had no detail. The reason the Government have been getting into trouble is that everyone has been saying, “Where is the detail? Where is the plan? How much money are we getting?” And when the Bill finally reaches this place, keen people like me get a copy of half of this document halfway through the debate.

[Lucy Powell]

My hon. Friend is making some excellent points and scrutinising the Minister extremely well. She makes a good point about the true cost of childcare and how many private, voluntary or independent nurseries cross-subsidise to deliver the free offer. Is she aware that in parts of London in particular, and in other more expensive cities, many providers do not even offer the free entitlement because there is not a good enough business case for them to do that, and so families in Islington are probably missing out altogether?

[Emily Thornberry]

I think that that is right, and there was a hint of that, I think, from the hon. and learned Member for South East Cambridgeshire (Lucy Frazer) when she was talking about the importance of the rate that is being paid in order to ensure that there is childcare provided in her area. Although Cambridge is not as expensive as Islington, I imagine that it is another area where childcare is likely to be provided at a fairly high rate, and is likely to be very expensive.

Having looked at the Blue Book, I have another question. As I understand it, to pay for these additional hours of childcare, the Government will not provide free childcare for parents whose income is more than £100,000—I do not think that there is any problem with that—but the other part is—[Interruption.] I am sorry, but I am asking the Minister a question. I can say it again. The other part of the condition is

“and a minimum weekly income level per parent equivalent to 16 hours (worked at the national living wage)”.

Does that mean that my single parents on the Market estate, who are currently working nine hours, will not get free childcare, and that in order to get free childcare they will need to work not only 16 hours but—because they are all on the minimum wage—16 hours at the equivalent of the national living wage, which presumably means that they will have to work something like 24 hours?

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Education (Mr Sam Gyimah)]

Today is an exciting day for the childcare sector. At a time of austerity when we still have to work hard to balance the books, the Government have made a strategic decision to invest more in early years and childcare. As my right hon. Friend the Secretary of State said, by 2019-20, £1 billion will be invested in the manifesto pledge of free childcare for the three and four-years-olds of working parents.

The hon. Member for Islington South and Finsbury (Emily Thornberry) said that it looked like we had cut and pasted the Bill from our manifesto. I am pleased that people think we are delivering what we said in our manifesto.

The shadow Secretary of State started her speech by talking about Labour’s legacy. She mentioned Sure Start and maternity leave. As she spoke, it occurred to me that the Labour party is still living in the past when it comes to childcare. At one point, there was only one Back Bencher on the Opposition Benches. There clearly is not as much interest in the future of childcare on that side of the House.

Given that the shadow Secretary of State dwelt on Labour’s legacy, let me tell her what our legacy is in this area. In the last Parliament, we invested £20 billion in childcare. We increased the free entitlement for three and four-year-olds from 12.5 hours to 15 hours. We introduced 15 hours of free childcare for disadvantaged two-year-olds. We introduced the early-years pupil premium for the most disadvantaged three and four-year-olds to ensure that they do not start school behind. This Bill builds on a strong track record of success.

The extremely generous funding that the Chancellor announced for the sector today is, for the first time, built on detailed analysis. This is the first time that any Government have undertaken an analysis of the cost of providing childcare. It is important to distinguish between the cost of providing childcare for providers and the cost of childcare for parents. We looked at 2,000 responses, looked at the accounts, analysed the true cost of providing childcare and came up with a couple of rates—£4.88 for three and four-year-olds and £5.39 for two-year-olds—that are fair for the taxpayer and sustainable for the sector.

Some Members have asked whether the first 15 hours of provision will be different from the second 15 hours. We will pay the same rate for each, so there is no dumbing-down of the policy, as some researcher who was quoted in the debate has said. Nor are we changing staff to child ratios again, as some reports have said we will have to do to deliver the policy. Staff qualifications will remain the same.

[Lucy Powell]

Aside from the hourly rate, the bigger question that the Minister has been asked today is about the overall package of funding for the offer, which by any calculation falls well short of previous predictions. The key variable is the number of families who will access the offer. On the basis of the original calculation of a cost of about £1.5 billion, about 650,000 families would have been accessing it. However, the costings that the Government have outlined today suggest that they now believe fewer than 250,000 families will access it.

[Mr Gyimah]

indicated dissent.

[Lucy Powell]

Well, the Minister can work out the maths himself. I can help him if he likes.

[Mr Gyimah]

That point is completely irrelevant. The first 15 hours will be a universal offer. Every three and four-year-old in the country will get 15 hours of early education. The Chancellor outlined today that there will be an income cap for the second 15 hours, so that people who earn more than £100,000 do not get it. The progressives on the Conservative Benches believe that is right. We also believe that, given that the measure is a work incentive, it should encourage people to work more hours.

The overall cost has been mentioned a number of times. The Labour party’s proposed 25 hours of childcare would also have applied only to working families, and Labour did not say that it would increase the rate paid to providers, which we have done. I am on record as saying that the proposal would have cost £1.5 billion. The reason for the discrepancy between Labour’s numbers and our numbers is that we recognised that if we extended the free entitlement, there would be less demand for other Government-funded childcare programmes. Once again, Labour got its numbers wrong.

[Lucy Powell]

I actually made the costings calculation myself at the last election. The discrepancy in the figures is way bigger than the Minister has outlined. The cost per year of the Government’s additional hours proposal will be about £2,500 for each family who qualifies for it. If the Minister divides the overall budget that they have allocated for it by that number, he will find that his Department has significantly reduced the number of families that it anticipates accessing the offer from about 600,000 to about 250,000.

[Mr Gyimah]

The hon. Lady is absolutely right that fewer families will access the additional hours, particularly among the well-off. It is right that we have introduced an income cap.

My right hon. Friend the Member for Basingstoke (Mrs Miller) made some fantastic points. I particularly welcome her suggestion that Hampshire participates as one of the early implementers of the policy, which I would definitely like to consider. She rightly mentioned childminders, who are often forgotten in debates on childcare. They offer excellent childcare based in the home, and they can offer parents much needed flexibility. We will look at the burdens of bureaucracy that affect them.

My right hon. Friend also mentioned the need to make the offer as simple as possible for parents, and we will examine that in detail. It should also be simple for providers, as my right hon. Friend the Secretary of State said. We want not only to provide more money to the sector but to reform the system that underpins it. That means having a national funding formula that allows as much of that money as possible to get to the frontline. It also means examining the bureaucracy that means that a provider operating across different local authority areas has to have different contracts within different systems. We will look at that to ensure that providers can deliver as easily as possible.

The hon. Member for Glasgow North West (Carol Monaghan) made some good points about the distinction between childcare and early education. She is right to say that early education is about the child’s development, while childcare is about the parents. This policy ticks both boxes. The first 15 hours, which is the universal offer, applies to every child and is about school readiness, whereas the second 15 hours helps parents to work more hours. That said, I do not necessarily agree with her point about Scotland being a good example. Just 15% of Scottish local authorities, for example, said that they had enough childcare for working parents in 2015 compared with 23% in 2014. I do not think Scotland is the best example as regards sufficiency issues.