Childcare Bill [Lords]

Debate between Michael Tomlinson and Lucy Powell

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.