Schedule 13 - Childcare and childcare vouchers
Finance Bill (except clauses 4, 5, 20, 28, 57 to 77, 86, 111 and 282 to 289, and schedules 1, 3, 11, 12, 21 and 37 to 39)
4:00 pm
Mr Mark Prisk (Shadow Minister, Economic Affairs; Hertford and Stortford, Conservative)
I formally welcome you to the Chair, Mr. McWilliam.
The schedule is the result of a review by the Government of the way in which the tax system can affect the provision of employer-assisted child care. According to the Government's original documentation, the aim of the review was to
''widen the current workplace nurseries tax exemption, simplifying the requirements that employers need to meet to qualify for the exemption and offering a better incentive for employers to support a wider range of good quality childcare provision.''
That same document correctly concludes that, therefore, the
''requirement for the employer to have management responsibility of the childcare facility would be removed.''
That is a clear statement of intention by the Government.
Those are worthy aims. Unfortunately I am not clear, nor are most experts, that the schedule will achieve those aims. In particular, the employer's responsibilities for management and funding will be retained, not removed, unless the costs are under the new £50-a-week ceiling.
The Daycare Trust estimates that average child care costs are around £128 per child per week. Most provision for most parents will reach the £50 cap and will not be eligible. In a representation to the Committee, the Chartered Institute of Taxation says of that aspect of the provision:
''This is very disappointing. The new provisions will do nothing to increase workplace nursery provision. Employers can now choose between the existing burdensome workplace nursery rules (which require significant involvement in financing and management) and new rules which are subject to the £50 cap. Neither is attractive.''
That feature of the schedule, the original aims of which were entirely worthy, is a real letdown. I am sure that all Committee members recognise the advantage of good child care provision in the workplace. Given the understandably proud boasts of the Government about the review, many, in particular working families who were trying to make best use of the provision at work, feel let down. I hope that the Paymaster General will confirm the actual amounts of money that are involved. By all accounts, the figures involved are small—at most, according to the Red Book, £20 million in the first full year.
The second disappointment of the schedule is that it does not include the self-employed. Why have they been omitted? I cannot believe that we cannot find some means of assisting working parents who happen to be self-employed, yet there is no provision in the schedule. After IR35, section 660A and the latest turn around in clause 28 for the self-employed, I am sure that the Paymaster General will understand that many self-employed people will feel let down by the omission. Conversations and reviews continue. Is the Revenue preparing separate provisions that would
inform the debate? The Opposition would look favourably on any Government proposals to help self-employed parents, so perhaps she can enlighten us on the issue.
Without such provision for the self-employed—for unincorporated enterprises—the schedule could give firms a further incentive to incorporate. That would run entirely counter to the spirit and the letter of clause 28, which deals with the difficulty into which the Government got themselves over incorporated and unincorporated firms. There is a danger that some small enterprises will look at the provisions and say, ''If we attract working parents into our enterprise and we remain unincorporated, we'll be at a significant disadvantage to incorporated businesses.'' So there is a genuine problem, and I hope that the Paymaster General can respond positively. If the self-employed were considered as part of a wider review, that would send a positive message—incorporation should, as the Government have said, and we have always felt, be for business rather than tax reasons. I hope that she will understand and respond.
Essentially, schedule 13 has two aspects. First, it revises section 318 of the Income Tax (Earnings and Pensions) Act 2003, which deals with the rules and management of company creches. Secondly, it deals with the introduction of the £50 exemption for child care vouchers, under which there would be no tax or national insurance liability.
Earlier, I mentioned the disappointment at the retention of employers' management and funding responsibilities over the £50 limit, but that was clearly not the intention at the beginning of the consultations. The words that I quoted at the start made it clear that the Government wanted to remove those responsibilities, so why the change? That is the question to which I seek an answer.
The change will impose a new administrative burden. Let me briefly enlighten the Committee as to how that will work in practice. We are talking about a weekly limit, so employers will have to track child care provision weekly. If one is in a market sector in which there is a reasonably high turnover of staff and one finds that staffing levels have dropped or increased, one's ability to stick to the limit of £50 per week per parent—it is not per child—could suddenly change, and the danger is that one could go over the threshold. For a couple of months or, indeed, only six weeks in the year, businesses may find that they have exceeded the weekly limit, so tax and national insurance would apply. Of course, the sums involved may be small, but the Government have rightly and continually said that any tax and national insurance liability should be identified by the business. Given that the limit is not annual or quarterly, but weekly, there could be quite an administrative burden.