Childcare Payments Bill

Mark Durkan Excerpts

Monday 14th July 2014 Commons Chamber

[Catherine McKinnell]

I was referring to the Government’s original timetable that they are already behind on, but I appreciate that it is intended this offer will be implemented in autumn 2015, as she says. We hope that that will be the case. However I do have a number of questions about the implementation. Unfortunately, Ministers have repeatedly refused to set out the specifics of who will be better off and by how much, or whether people will be better off as a result of these measures. I have tabled a series of written parliamentary questions to try to gain clarity on those points, but disappointingly, although not surprisingly, the answers from the Financial Secretary have not been helpful in the slightest. In many cases, the right hon. Lady has simply failed to answer the questions. It would appear from her responses that the Department is simply not aware of what proportion of families paying for child care will benefit from the Bill, how it will benefit different income groups proportionally, and what the average top-up will be per child once the scheme is up and running. It is hard to believe that the Treasury is not in possession of such data. Surely it is fundamental to understanding what the Bill’s impact might be on the Exchequer, and on children and families.

The only indication that we have about how the Bill will impact on different income groups is from work undertaken by the Resolution Foundation, which suggests that the scheme could be skewed towards higher earnings, which might go some way to explain why the Minister has been so unforthcoming with responses to the various questions put.

[Mark Durkan (Foyle) (SDLP)]

On that very point, has my hon. Friend noted that the Family and Childcare Trust has made it clear that the 1.25 million families that will benefit from this, are only about half or slightly over half of those who are paying for child care costs, and 80% of those who will benefit under this measure are in the top 40% of the income distribution?

[Catherine McKinnell]

My hon. Friend raises an important point and puts forward compelling evidence as to why we need to question the details on this. [Interruption.] The Minister says that it is not true, but if it is not true, why is she not forthcoming with the Treasury data on this issue?

As Gavin Kelly, chief executive of the Resolution Foundation, pointed out, the Government’s decision to increase the spending cap is likely to benefit those on the highest incomes, despite the fact that it is low and middle-income families who are struggling the most with the rising costs of child care, for whom it is acting as a barrier to taking on more work. He said:

“About 80 per cent of the gains from this will flow upwards to those in the top half of the income distribution.”

Throughout the Bill’s passage in the House, we will continue to press for some clear, transparent information from Ministers so that parents can be clear about what they can and cannot expect to receive in support. At the moment, the Bill is completely devoid of any of this information.

None the less, despite a lack of answers from the Minister, there is a curious line in the Bill’s impact assessment, which states that, of those families that the Government say will gain as a result of the new scheme,

“the average additional support they will receive is £600 per year”—

£600 per year on average. That stands in complete contrast to the claims of Ministers who have implied that working parents are all in for a £2,000 child care subsidy. Indeed, the Financial Secretary’s own website, summarising her week of activities when she announced this revised child care scheme in March this year, suggested this was the case. She said:

“The new Tax-Free Childcare scheme which I am guiding through Parliament will provide 20 per cent support on childcare costs up to £10,000 per year for each child via a new simple online system. This will mean an average saving of £2,000 a year per child.”

I hope that she will set the record straight on that point, because her Department’s own impact assessment suggests a very different reality.

I would also like to take this opportunity to probe the Minister on the Government’s plans to support 85% of child care costs for all universal credit claimants. Under the Government’s original plans, only those universal credit claimants who paid income tax—the highest earning claimants—would be eligible for 85% of support. Everybody else would be covered for only 70% of costs. We welcomed these changes as they signified a reversal of the Government’s decision to cut the child care element of working tax credit from 80% to 70% in 2011, a move that we opposed because we recognised that it simply served to hit those parents who needed the support the most. But it would seem that this could be yet another example of the coalition Government giving with one hand and taking away with the other.

As Alan Milburn, chairman of the Government’s Social Mobility and Child Poverty Commission, has made absolutely clear, low-income families could still lose out despite the increase in support for those most in need. He told The Independent on Sunday:

“The Government has taken half a step forward. The announcement that 85 per cent of childcare costs will be met under universal credit from 2016 will help work pay for low-income families. This is very welcome. The sting in the tail is that this £200m expansion in childcare support will come from within the universal credit programme. This risks robbing Peter to pay Paul.”

The Minister did not provide any clarity when my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) probed earlier in relation to this, but there needs to be some upfront response. How exactly do the Government intend to pay for this increase in support?

There is another key concern. We now know that the universal credit programme is in complete disarray under the Secretary of State for Work and Pensions, and the Treasury is refusing to sign off on the programme’s business case, and there are concerns that low-income parents may now be waiting until 2017 at the earliest to receive this welcome additional support. Again, I have tabled a number of written parliamentary questions to ascertain whether this will be the case, and, again, disappointingly but perhaps not surprisingly, the Minister has failed to answer any of these questions. I put it to the Minister today: when can the 4 million low-income families who will be eligible for universal credit expect to receive support to cover 85% of their child care costs? [Interruption.] The Minister says she has said it, so will she give a cast-iron guarantee today that they will be in receipt of these payments by 2016? Will she confirm that at the Dispatch Box? No.

[Mark Durkan]

Does my hon. Friend recognise that whereas the new scheme seems to offer up to £2,000 per child, with no limit on the number of children, child care support under universal credit is capped, so anyone with more than two children is effectively losing out when compared with those who benefit from the new scheme? Would child care accounts not be a fairer way in universal credit as in this scheme?

[Catherine McKinnell]

rose—

--- Later in debate ---

[Dr Coffey]

I do not pretend to know much about Welsh schools, although my cousin goes to school in Wales and I have many relatives there. I am not necessarily aware of the provision that exists, but I know that this Government are keen to work with schools in England to increase the number of schools choosing to make provision for young children. I do not know what the Welsh Assembly Government are considering, but the Under-Secretary of State for Education, my hon. Friend the Member for South West Norfolk (Elizabeth Truss), has consistently tried to introduce reforms that will make child care provision an attractive career. We are right to press ahead with some of the childminder agencies we are introducing, not through this Bill but separately, to remove some of the administrative burdens that might be deterring people from entering that career. I hope that the hon. Gentleman will encourage such agencies to set up in his area of Arfon, bringing new employment opportunities for both men and women and making provision for working parents.

It is great news that under this Government more women are working than ever before, yet we would like to see even more women—and even more parents—going into work. This scheme is part of our long-term economic plan. We recognise that the cost of our child care is the second highest in the OECD as a percentage of family income; only Switzerland’s is higher. I think that it is fair to say that under Labour the number of childminders decreased significantly and costs went up. Before the hon. Member for Newcastle upon Tyne North springs to her feet—if she is not following the latest reshuffle news on Twitter—let me say that I recognise that that trend has continued, but it is not going on at the same level. [Interruption.] I thank the hon. Member for Manchester Central (Lucy Powell) for referring to my haircut. It was nothing to do with the events that seem to be unfolding on Twitter. I merely got a phone call from my own mother complaining that my hair was too long and, as we know, in these situations mothers know best. I am not a mother, so I have to stick with what my mother tells me.

Let me give a few of the reasons why these things matter. A couple of years ago, the Conservative Women’s Forum undertook an inquiry, in which I think you might have participated, Madam Deputy Speaker, into the executive pipeline of talent. It focused not only on the number of women on boards, but on how we encourage women to get up the executive ladder and, more importantly, on what women can do for themselves, what Government can do and what companies can do. The issue of child care was a running theme throughout the inquiry, particularly for those in junior management. Once people are at a certain level, they probably receive a salary that means they do not have to think about the issue; they can pay for a nanny and even though it might be painful, the costs are not quite so prohibitive. We consistently received evidence that the voucher system was inadequate. It did not cover enough of the cost, it was very limited or, as my hon. Friend the Member for Tiverton and Honiton (Neil Parish) mentioned earlier, it did not help people such as the self-employed. I am pleased that the Bill extends the provision to almost anyone in work and it is right that we should do that.

It is also fair to say that no one magic bullet emerged as a result of the inquiry to solve some of the challenges in the pipeline of talent or in how we tackle child care, but nevertheless the discussions before the Budget announcements on how to help with tax relief were exactly the issues being brought up by senior executives. I was glad that the subsequent announcement was made in Budget 2013.

The proposals in Budget 2013 were limited to £6,000 of child care costs, which would have meant a maximum benefit of £1,200. I was pleased that after the consultation, to which significant contributions were made, we were able to change the age limit to 12 and, as my hon. Friend the Member for South Swindon (Mr Buckland) has pointed out, to change the age limit for children with disabilities. We also increased the limit to £10,000, with a maximum of £2,000 support. That was the right thing to do, because it recognised the costs of child care. Nevertheless, it is important that we have retained the choice for parents who are in employer-supported child care schemes to stay in that system while recognising that we will close it to new entrants, so to speak. I support that because, understandably, companies have gone to some expense to set up these schemes and they are popular. We should not withdraw one thing simply for the sake of simplicity for the Government.

The hon. Lady from Northern Ireland—I have forgotten her constituency—

[Mark Durkan]

South Down.

[Dr Coffey]

Thank you. The hon. Member for South Down (Ms Ritchie) referred to the situation in which one parent was not working and asked why they would not get support with child care costs. As my hon. Friend the Member for Truro and Falmouth (Sarah Newton) has accurately pointed out, the consultation raised those points and we have extended the provision when there is a working person and somebody on carer’s allowance or employment and support allowance. When people are enjoying parental leave after having children, they should not be penalised if they have children in child care. We do not want any unintended consequences.

I am a strong supporter of the traditional family. I am sure that I am not the only person whose mother did not work initially after having me, although she did start to go back to work as a supply teacher. It is fair to say that although the Government have scarce resources, they are offering both parents the choice to get back into the workplace, as opposed to one person having to choose, for perfectly good reasons, not to return to the workplace. I therefore support the gist of what the Government are saying about restricting support to cases in which both parents are working or the other cases that have been alluded to.

I am surprised that there are no Members in the Chamber from the Scottish constituencies, because, of course, this is a United Kingdom measure, although I am delighted that we have had contributions and interventions from Members from Wales and Northern Ireland. Much has been made of the fact that National Savings & Investments will initially be providing the child care account. You may have read in the weekend press, Madam Deputy Speaker, that if the people of Scotland choose to go ahead with separation, NS&I will not be able to provide accounts to people living in Scotland, as they will effectively become foreign nationals. They might wish to consider that as another element of the question. I am sure that if somebody from the Scottish National party were here, they would leap up and say, “We will have an even better scheme and it will cost less than yours.” Nevertheless, I am sure that the good people of Scotland recognise that that is unlikely to be the case. The Minister might want to consider the issue in her regulations for this provision, but let us not prejudge the outcome of the referendum. I strongly believe that the people of Scotland will recognise that staying together is better for us all.

[Dr Coffey]

The hon. Gentleman would say that, and he has been very loyal to his nationalist friends. I recognise that.

On the timing, I am sure that my hon. Friend the Minister agrees that if we could bring in the scheme tomorrow, we would do so. However, we do not want to repeat—[Interruption.] Does the hon. Member for Manchester Central want to intervene? I think she said that we have been in power for four years, and I recognise that we are bringing this into play rather late in our parliamentary term, but she will know some of the challenges of government from her previous experience. Nevertheless, I would rather we got this right than end up with the fiasco we had over tax credits, which were brought in in quite a rush, with all the accompanying problems. The hon. Member for Manchester Central might be slightly bemused by that, but overpayment of tax credits and trying to reconcile figures and help people out with that is one of the biggest issues in my constituency casework. She will, I think, recognise some of the challenges of bringing in a new system.

The Bill rightly provides that the connections between the different agencies will be updated quarterly. We are not going to get into penalties and going back and forth, but provision is made for recovery. It is important that parents recognise that they should anticipate the potential impact if their conditions change. To be frank, I think the biggest change will occur when people move from one salary bracket to another, or decide to stop claiming universal credit and simply to claim this instead. At least the hurdle or cliff edge when people have to change is fairly black and white.

[Mark Durkan]

Would the hon. Lady like to see a strong information and advice offer built into the scheme, so that people who are having to decide how to navigate between universal credit and the scheme will get advice and without-prejudice, better-off calculations?

[Dr Coffey]

My expectation is that that would happen naturally. I do not want to overplay it, but I think it would be a natural consequence when people say, “I’m coming off universal credit to get this.” It will be a straightforward calculation, which should be readily understandable.

--- Later in debate ---

[Chloe Smith]

My hon. Friend puts it extremely well, and perhaps makes my next point for me, which is that the previous Government failed to deal with the problem of child care costs, and it is the present Government, in particular the Minister for Women, my right hon. Friend the Member for Loughborough (Nicky Morgan), who are doing so.

The Under-Secretary of State for Education, my hon. Friend the Member for South West Norfolk (Elizabeth Truss), who is responsible for child care, has rightly said in the past that a changing economy means that parents need affordable and available child care more than ever, and a changing world means that children need a rigorous, rounded education more than ever. We have before us an opportunity to do both things at once. The context is the tax and benefit changes that came into being this financial year. The biggest reforms in a generation, they will create more jobs—indeed, they have already done so—and they are getting more people off welfare and into work. Child care follows from that, so let us see it in perspective. It is only by sticking to those kind of economic actions—a long-term economic plan, in fact—that we will build a more resilient economy and a more financially secure future for hard-working people and their families.

The cost of living cannot be seen in isolation. The British people cannot be flannelled with phony figures. There can be no economic or household security without the honesty and courage to control the public finances. Labour’s old way has failed—Labour Members would argue with that, if they were here to do so. More public spending led to more welfare bills and more government jobs that the country could not afford. They propose in this debate to use a levy they have already spent 10 times over. Why can they not afford parents the respect of some honesty? This Government, on the other hand, are backing businesses by cutting their taxes, so they can create jobs; cutting tax for individuals, so that their job pays; and controlling welfare, so that getting a job pays more. Universal credit is of course crucial and will be one of the most important reforms this Government make. By replacing working tax credit, it should help my female constituent who wrote to me last week to say:

“When I did work we were over the threshold for working tax credits by around £300 yet I would have to pay £12,000 in childcare cost to continue working.”

Let us look at some other current figures. I am drawing now on the Mumdex—the helpful piece of work that Asda does every month. The latest report shows a rise in spending power for the eighth consecutive month, leaving families £4 a month better off than last year. The main cause is a slowdown in essential item inflation, particularly food, clothes and mortgage interest payments—another sign of a sounder economy. Petrol costs fell again, which eased the pressure on household finances—indeed, under this Government, fuel duty is now more than 13p a litre lower than it would have been without our action, so that the average family saves £7 every time they fill up the tank.

Such results in family finances can only come about with control of the public finances, which has entailed serious decisions by the Government about what to spend hard-earned taxes on. Voters have serious decisions to make as well, as the Conservatives appreciate. As a previous Conservative election poster said,

“Don’t just hope for a better life. Vote for one.”

I am delighted that the Chancellor has put public money towards the tax-free child care scheme that we are discussing. It stands to ease costs for families even more, and here are five good reasons why I support it. First, it will be bigger and faster than first outlined, opening sooner and benefiting in its first year 1.9 million working families with children under 12. That is good progress already in the work that has to be done to bring the scheme forward. Secondly, it will be simple, flexible and easily accessible online. Thirdly, for the first time self-employed parents and those working for the great majority of employers who do not offer the existing employer-supported child care scheme will be able to take part.

Fourthly, the scheme will also help those working part time and on the minimum wage because of the low minimum earnings threshold of £50 a week. Fifthly, as my hon. Friend the Member for South Swindon (Mr Buckland) said, it offers more help for parents of disabled children by recognising that assistance ought to continue until the child is aged 17, rather than 12. I know from experience in my constituency how welcome that will be.

This all means that all working families where the parents earn at least £50 a week will have access to Government support for child care costs unless one of the parents earns more than £150,000 or receives support from tax credits, universal credit or ESC. All told, this gives families greater stability and more flexibility to make their own choices about their family picture. A male constituent told me:

“I’m now on £10K a year, at 39 years of age. My wife, an amazing mother, has to stay at home to look after two of our children, as we cannot afford the child care or would be worse off if my wife went to work.”

The personal allowance will rise in April next year to £10,500. My constituent then may be one of the 400 people in Norwich North who will be taken out of tax entirely by the actions of this Government. He will certainly be one of the more than 38,000 people in my constituency who will benefit from our tax changes. Universal credit will address the abhorrent benefits trap, which is reflected in the quote that I just gave. My constituent and his wife may also benefit from the scheme before us today. I welcome the targeted provision of taxpayer-funded child care for families on the lowest incomes.

[Mark Durkan]

On universal credit, does the hon. Lady recognise that there is a disparity, in that child care support under universal credit will not be paid through the sort of child care accounts that are available under this scheme; they will be only for costs that are already paid out, unlike under this scheme.

[Chloe Smith]

I do recognise that difference, and I am confident that the Minister will look at that carefully. I wonder whether we might deal with it in Committee, and whether Labour Members will be there to do so, as they are absent from the Chamber today. I recognise the point that the hon. Gentleman makes. I do not have the answer, but I am confident that the Minister is working on it.

The new provision, however it is implemented, will be targeted. It is important to add it to the provision that this Government have extended for families on the lowest incomes, beginning with all three and four-year-olds receiving 15 hours a week of free child care, and going on to target this offer to the 240,000 poorest two-year-olds. If that is how the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) defines doing nothing in our years in power, I cannot wait, and I am quivering in my boots, to see what she will do when she marshals some Back Benchers to help her into government.

Let me turn to a couple of points about the quality of child care that we all wish to see as we put the Bill through. I want more great child care to be available and to offer parents more choice and flexibility. I would also like it to be easier for new providers to enter the market and for good existing providers to expand, with consequent benefits for affordability and quality. The Under-Secretary of State for Education, my hon. Friend the Member for South West Norfolk, has said that we know that other countries, such as France and Germany, have excellent systems for comparable amounts of Government spending, while also paying staff good salaries and keeping parents’ costs affordable. I hope my hon. Friend the Economic Secretary to the Treasury will reassure us that the implementation of the child care payments scheme will be simple and cost-effective, will work with other Government systems such as universal credit, and will give parents the confidence that they need and deserve in affordable, achievable, good quality child care in this country.