Childcare Vouchers

Steve McCabe Excerpts

Monday 15th January 2018 Westminster Hall

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

It is always a pleasure to serve under your chairmanship, Mr Bailey. I congratulate my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) on the comprehensive case she made in support of the petition, which is essentially about allowing parents to continue to join the employer-supported childcare scheme after April this year. As we have heard in all the contributions so far, that is basically because the existing scheme is more generous to those on lower and modest incomes than the changes that the Government propose. I will not go through all the figures again, but clearly a basic rate taxpayer in a family with one parent working does reasonably well under the childcare vouchers scheme, but not at all well under TFC. If both parents are working and paying the rate and have average childcare costs, they can expect about £1,800 under childcare vouchers, but less than half that under the new arrangements.

Another important point that has been made today is that the scheme seems to be skewed towards London and the south-east. It is a bit difficult to make sense of that, given the Prime Minister’s expressed desire to create a fairer and more just society, and the Government’s oft-repeated claims that they want to narrow regional disparities. I am not quite sure in the design stage how the Government thought they were helping by creating a scheme that would be less generous to those struggling to get by and trying to do the right thing, and why they thought it was important to skew childcare support towards those living in London and the south-east rather than in the rest of the country.

My hon. Friend the Member for Newcastle upon Tyne North said that 50,000 employers offer childcare voucher schemes, according to a Library briefing paper. I saw in another briefing that it was about 60,000. The correct figure may be somewhere in the middle—I do not know—but I think the reality is that about two thirds of employees in this country are working for businesses that offer the existing scheme. That is the important point; it is a relatively well-established scheme. It has shortcomings, as my hon. Friend and the hon. Member for Belfast South (Emma Little Pengelly) pointed out, but in essence it is a well-supported scheme.

Employers, particularly some smaller businesses, are interested in the scheme because they argue that it has benefits for them, particularly when there are labour or skills shortages. It is a recruitment and retention tool for many of the very businesses that the Government are trying to encourage with things such as the northern powerhouse and the midlands engine—in other words, businesses outside London. Employers say that it is very easy to administer. A survey conducted by the Childcare Voucher Providers Association reported that 77% of employers said that it takes them less than 30 minutes per month to administer the scheme, so it does not exactly sound massively onerous.

In contrast, we have heard that there are problems with the policy and the technical design of the new scheme. As many hon. Members said, the Department for Education’s figures show that many families are going to be worse off under the new scheme than under the existing one. To obtain the full £2,000—the Government may not have advertised that figure widely, but it is a strapline that they have been happy to be associated with, and it is the benefit that most people will have seen to date—a family needs to be spending about £10,000 per year on childcare. Very few people on low and modest incomes are in a position to spend that sort of money, so it is obvious how skewed the scheme is.

My hon. Friend the Member for Stockton North (Alex Cunningham) made an important point about the difference in availability depending on age. As someone who spends a lot of time listening to parents and other members of the community talking about the care that needs to be taken with teenagers to ensure they do not go off the rails and that they do the things we expect of them, I am not sure how the judgment could have arisen that it is all right to provide childcare support up to the age of 11, but that after that it does not matter. My hon. Friend put that issue to the Minister, and I hope the Minister will give some kind of an explanation for that rationale, because it does not just affect this policy, but has much wider implications if it is a reflection of current Government thinking.

On the technical front, I cannot quite get my head around the figures I have seen, so I wonder whether the Minister can explain them. I am not saying that I have got them all right. The Government initially told us that about 1 million people would register and benefit from the scheme but, as my hon. Friend the Member for Newcastle upon Tyne North said, it was announced this morning that about 170,000 are registered. It does not take a genius to work out that there is a bit of a gap there, and I cannot see it being made up in the next couple of months. In addition, I understand that only about 30,000 of those who have registered can expect to receive a payment this year. That implies that the system is in a bit of difficulty. The Government have had some problems with the introduction of other schemes and programmes, and I would hate to see them go down a road that leads to another problem. Certainly, Lord Bates has indicated that he thinks that there are problems that could go on for some time.

When I was reading up on the scheme, I noticed that Atos—like Carillion, it is one of these parastatal organisations, and of course it provided such an outstanding service in relation to work capability assessments—is building what is being called the Childcare Choices platform. As we have heard, there are problems with that website. There are reports of the release of sensitive personal information, which will not do much for people’s confidence in the system, and of system crashes. My hon. Friend gave a startling account of one person’s difficulties with trying to access the system. That is not the way to build confidence and give people assurance.

There also seems to be some confusion relating to communication, which is reminiscent of the Government’s problems with universal credit and their communication difficulties with the WASPI women—Women Against State Pension Inequality—as they have become known. It seems that Her Majesty’s Revenue and Customs has been writing to parents to tell them that they must leave the childcare vouchers scheme in order to access the Government’s promised 30 hours of free childcare. Parents have left the scheme, only to discover that that is not actually the case, but once they have done so on the basis of that inaccurate information, they are not able to rejoin it. Can the Minister shed any light on what has happened here? Is there an investigation ongoing? How will the Government offer redress in those circumstances?

Can the Minister give us any hard information about the number of self-employed parents who will receive TFC this year and in future years? The Government argued that one of the major benefits of the new scheme is that it is more effective to introduce an entirely new scheme than to adjust childcare vouchers to accommodate the self-employed. At the moment, we have no idea whether it is having any impact at all, so it would be useful to know that.

The point is, as other hon. Members said, that we are still in the roll-out phase. HMRC has not even published the final guidance, although I understood that the whole thing was meant to be live by April, and the legislation to close the existing voucher scheme has not yet been brought before the House. There is plenty of scope to make changes, if Ministers wanted to do so, without causing massive difficulty and without anyone losing face. The intention, as I understand it, is to grandfather the existing scheme for those currently in receipt of childcare vouchers, so it is obvious that there will be a need to retain this apparatus for some time, although interestingly those currently in receipt automatically lose their rights if they happen to change job. Again, that sounds rather punitive—I am not sure that is the intention.

Would it not make sense to let the existing voucher scheme operate alongside the new TFC scheme? Would it not make sense to give people a choice? There was once a time when the Conservative party was in favour of choice—in fact, the Minister is supposed to be in favour of choice. At the very least, would it not make sense to have a longer phasing-out period so that the problems that everyone has identified can be addressed, and so we do not do away with something that is working well for parents up and down the country and replace it with a scheme that will only cause problems that the Government are already aware of?

--- Later in debate ---

[John Glen]

As a former policy person, I acknowledge the detail of the hon. Lady’s analysis, and that there is more work to be done. I shall take that back to the Treasury as we try to address all dimensions of the productivity challenge.

The Government think it is right that we replace childcare vouchers with tax-free childcare from April 2018. However, I would like to reassure any parent who is currently receiving vouchers but is not eligible for tax-free childcare that there will be no automatic withdrawal of the voucher scheme. If they currently receive vouchers and their employer continues to provide them, they can continue to receive vouchers as long as they stay with that employer.

[Steve McCabe]

I acknowledge what the Minister says, but what will he do about parents who may change their employer? Presumably those parents will be discriminated against.

[John Glen]

I think they will be eligible for the tax-free childcare scheme.

Again, I thank all those who signed the petition, and all hon. Members who spoke this afternoon. As I have set out, tax-free childcare will help more households, and is better targeted and simpler, than childcare vouchers. HMRC has done extensive work to ensure that the childcare system is ready for full roll-out. It is therefore right that we continue with the reform as planned, to the benefit of millions of households around the country.