Thank you, Mr Deputy Speaker, for granting this debate on the important subject of future child care policy. As a pregnant mum, I am only sorry that this debate has ended up at the slightly non-family-friendly time of 9.32 pm, but that should not take away from the importance of the issue and the child care crisis facing many families in my constituency and across Britain today. I wanted to bring this matter to the Floor of the House since the Government have made several important announcements on this issue that they have yet to bring to the House.
Why is debate so important now? First, families are being hit by a triple whammy of the Government’s making: rising costs of child care; reduction in financial support; and for many, a financial disincentive to work. I will say more about those issues shortly.
Secondly, not only were the Government’s recent announcements on changes to child care regulation—a loosening of ratios between carers and children, and a greater requirement for qualifications—not brought to the House for debate, they have been widely derided by parents and providers and are confused and dangerous. What is more, there is little evidence that those proposals will have any impact on costs whatsoever.
Thirdly, for many weeks now we have read in the papers and heard from Ministers—not least in the mid-term relaunch of the coalition by the Prime Minister and Deputy Prime Minister—about a new package of financial support for parents to help to meet the costs of child care, yet these proposals raise many questions. I would like to put them to the Minister this evening.
Finally, I would like to begin a broader debate—it is an important one for this House to have—about what the shape of future child care policy should be. It is vital to the economic future of the country that we enable as many women as possible—and, in some cases, men—to return to work at the level and pay they were receiving before having children. Not only would that pay for itself, but there would be wider social benefits to society from more early years development.
First, let me address the crisis currently facing the majority of families—a crisis of this Government’s own making. It is a triple whammy. Families with small children are seeing the costs of child care soar. Recent reports suggest that fees have gone up by 6% in the last year. Costs are set to increase further with the severe reduction in available places owing to this Government’s slashing of funding. Some 401 Sure Start centres have closed since the Government came to office, despite the Prime Minister’s pledge to “back Sure Start” during the election. Many more, such as those in my constituency, have ceased to offer any day-care provision at all. In addition, cuts to local authorities’ early years budgets have meant school nursery places falling. The choice for families has dropped greatly and, with the shortage of supply, costs are going up and up. On top of that, the Government are slashing financial support for most families, especially those on low or middle incomes. For those on the lowest incomes, the maximum allowance of child care costs that can be claimed through tax credits has been reduced from 80% to 70%.
I thank the hon. Lady for bringing this important issue to the House. Not everyone can call on grandparents, uncles, aunts or other family members to provide care—that is true right across the United Kingdom, including in my constituency of Strangford—hence the importance of the child care systems that are already in place. Does that not underline the point that an extra tax allowance should be available for those who are working, to enable them to take full advantage of child care services?
I thank the hon. Gentleman for that. It is a good point that many people rely on paid child care, not the support of their families, which is why this evening’s debate is so important.
The allowance of child care costs that can be claimed through tax credits has been reduced from 80% to 70%, losing a family with two children £30 a week or £1,560 a year. With the introduction of universal credit in April, things are set to get even worse for the lowest-paid families. A recent report by the Children’s Society, “The Parent Trap”, found that the lowest-income working families will have to pay up to seven and half times as much towards their child care costs under universal credit, leaving many unable to continue working. Over the coming years, the 1% uprating of tax credits and maternity pay will leave all recipients worse off in real terms. Many middle-income families have seen tax credits cut completely or their child benefit cut.
The third element of the triple whammy for families is that the crisis is creating disincentives either to work or to work more. Moreover, the introduction of universal credit builds in even greater disincentives, especially for lone parents. A recent report by the Resolution Foundation, “Counting the Costs of Childcare”, found that for lower to middle-income families, the extra income generated by a second earner is almost entirely lost on child care costs, leaving lower or middle-income-earning households no better off in work than out of work. That just cannot be right. With the introduction of universal credit, Barnardo’s has calculated that a lone parent family—with two pre-school children—working 16 hours a week would be zero pounds—yes, zero pounds—better off if they increased their hours to full time. This is a perverse situation that needs looking at urgently. This is a real crisis for many families—who in turn are opting to work fewer hours or not work at all, which in turn is costing our economy and costing the taxpayer—and it is a crisis of this Government’s making.
One of the Government’s flagship policies to address the triple whammy was announced a couple of weeks ago, yet the Minister’s plans to loosen the ratios of childminders to children—to 1:4 for under-twos and 1:6 for over-twos—have been met with anger and derision by parents and providers. What is more, there is little or no evidence that these plans will have any impact on costs at all, yet there is evidence—especially from France, which the Minister is so keen to look to—of quality being compromised. Parents are overwhelmingly against these proposals. A recent survey by Mumsnet found that 94% are happy with the current arrangements. I have been contacted by many anxious parents. If parents are not happy with the quality and care options they have, they are more likely to opt to stay at home and look after the children themselves.
Providers are also united in their opposition to these proposals. Some 94% of respondents to a Pre-school Learning Alliance survey of members said that the quality of care would be compromised if ratios were relaxed in this way. I have been contacted by many working in the sector. Their comments are damning. Neil Leitch from the Pre-school Learning Alliance said:
“We are absolutely appalled by this fixation to alter ratios...This is a recipe for disaster.”
June O’Sullivan, chief executive of the London Early Years Foundation, one of London’s highest rated providers and providers of the excellent and well-used nursery we have here at the House of Commons, said:
“It beggars belief that a minister can wreak havoc on a sector that has explained the negative consequences of her actions....France is now the country with the highest sickness level in Early Years in Europe.”
Kids Academy, which operates in the north-west, contacted me to say:
“We oppose these changes and believe they are fundamentally wrong.”
Even the Minister’s own child care adviser, Professor Helen Penn, has described the plans as “grotesque”.
As reported in The Independent recently, a report commissioned by the Minister’s Department, but which has yet to be published, is believed to conclude that these plans will lead to a “deterioration” in the quality of care and will not reduce the costs to parents. Perhaps the Minister will take this opportunity to tell the House if and when she will publish this important report that she commissioned. The evidence from France is sketchy too, with many believing that quality has been compromised.
As the Minister failed to come to House at the time to debate the proposals, I hope that she will take the opportunity this evening to answer a few questions. Which stakeholders, parents and providers has she found to support these changes? What evidence does she have that they will do anything to reduce child care costs? Will she publish the evidence that she has received on quality and costs?
I turn now to the issue of additional financial support, on which the Government have provided a running commentary in the newspapers. Perhaps in recognition of the effect of the Government’s own policies on places and funding as well as their severe cuts to tax credits and family support, they have been briefing for some time now about a new package of financial support. However, on the face of what they are proposing it appears that not everyone will benefit, and how it will be delivered remains a mystery.
We are led to believe that the Government, if they can agree among themselves, are to offer a tax break of up to £2,000 a year per child to each household. This would be paid for by scrapping the child care voucher scheme and only
“a bit of extra money”.
By my reckoning, many families who currently benefit from the voucher scheme, especially dual-earning couples who currently get nearly £3,000 a year of tax break each, would be worse off under this proposal. Can the Minister today guarantee that no family in receipt of child care vouchers would be worse off under her new proposals?
Will the Minister explain how the tax-break scheme will work? Many people in the sector, and leading experts, think that there are only three different options for how it can work—through the employer, which places an extra burden on them; via self-assessment; or through providers, who would need to claim it back and then supposedly pass it on to parents. So which of these unappealing options does she favour? Will she say more about when these long-awaited proposals will be brought forward?
I am conscious that it is getting very late, but I would finally like to set out what I would like to see as the scope and framework for future child care policy, as I believe the scale of the crisis we face—and its impact on the economy—requires more radical thinking. The Government’s proposals are just tweaking at the edges. Before we even get into this debate, it would be useful if the Minister clarified what the current Government spend is on child care and child care support. I have heard her use different figures, ranging from £5 billion a year to £7 billion. Which is it? How is she calculating it? The OECD figures that she is fond of quoting, indicating we spend more than most, do not compare like with like, as children start school younger here than in many other European countries, a cost that is included.
Starting with what we currently spend on child care, we then need to look at how much the economy would benefit from more women returning to work immediately following maternity leave. All the evidence shows us that women—I am afraid it is still women—who take a break from work and their careers suffer a pay gap for the rest of their lives, very rarely returning to the level, hours and pay they were on previously. In many cases, they work part time on low pay for years after having children and do not return to their previous job.
So, we not only need to eradicate the disincentives to work, as outlined earlier, but we need to make the case to the Treasury of the long-term added value to the Exchequer of the tax revenue from women returning to their existing jobs. The recent Institute for Public Policy Research report “Making the case for universal childcare” argues that point extremely well. It argues that over a four-year period, there would be net return to the Exchequer of over £20,000 per parent from a returning mother, even when 25 hours a week of free child care is provided over that same four-year period.
Once this case is made, I believe we should look at investing up front the extra tax generated from parents earning more and working more, through more radical child care support. In my view, that should be focused on the points at which parents make decisions about how and when to return to work, especially when their maternity leave comes to end or when they have had their second child. These are critical moments of choice, but too often child care policy is centred on older children; by then, the parent might either have chosen to return to work or already have managed to struggle along with the extra support—however welcome it is when it comes. We need a parent-centred child care policy.
Critical to this parent-centred approach is parental leave and flexible working. I welcome the Government’s bringing forward proposals for parental leave to be shared between both parents—as Labour would have done. This is an important component to changing the nature and culture of workplace attitudes to having children, and I believe it will enable more parents to stay in the work force.
I know I have raised a number of big issues in this evening’s debate, and that we can only scratch the surface in half an hour. I hope, however, that this will help to develop some of the issues on the table.
I congratulate Lucy Powell on raising this important topic and I congratulate her, too, on being a working parent in the House of Commons. It is important to have wide representation, so it is great to see more working mothers and more working fathers in the House. I am delighted to reflect on the fact that the hon. Lady’s future children might benefit from our developing policies on this issue.
My aim as Minister with responsibility for child care is to try to make life easier and better for working parents and their children. Every parent who goes out to work wants to have confidence that their child is receiving the best possible early education and child care. I think we can achieve that—and achieve it by using the existing system and resources as well as, hopefully, future resources in due course.
Sadly, that is not the case for parents at the moment, as there are issues about availability, cost and quality, which is variable. There was a recent worrying report from Policy Exchange, which suggested that quality is lower in deprived areas, where we need it to be of the highest quality. One thing we have done in the new two-year-old programme we are launching, which will benefit 260,000 two-year-olds by 2014, is to state that those two-year-olds should go to good and outstanding providers. I think that is an important measure.
The hon. Lady mentioned the cost to parents, and she is absolutely right that our parents face some of the highest costs in Europe—on average, 27% of income is being spent on child care. I have met many parents who are struggling with the financial burdens they face.
As for Government spending, there is a debate about the OECD figures, and it is often difficult to get to the bottom of these international comparisons. The evidence suggests, however, that although we do not spend as much as the Nordic countries, we do spend as much as countries such as France and Germany. Yet, despite the high parental input and the high Government input, we have people on the front line in child care who are earning an average of £6.60 an hour. That is simply not good enough for the important job being done by those charged with bringing up and educating the next generation.
All the evidence about brain development now suggests that the quality of staff is of paramount importance. Qualifications are also important, as is demonstrated by the study carried out by the Effective Provision of Pre-School Education team, and also by the OECD’s recent “Starting Strong” report. The Department’s first report, “More great childcare”, focuses on the need to improve quality and qualifications. We are working on the cost issue, and will have something to say about it in due course, but unfortunately I cannot say anything at present.
There are currently more than 400 child care qualifications, and parents and people in the child care industry do not know what they mean. We are creating a single qualification at level 3, called the early years educator. People entering that course will need to have C grades in GCSE English and maths, which I consider very important. We are also creating the early years teacher programme, which will confer teacher status. Recruits to that programme will pass the same tests as teachers have to pass on entry.
As the hon. Lady said, we are giving high-quality providers more flexibility, but only when they invest in high-quality staff, and only if they want to use that flexibility. There is nothing compulsory involved; we are merely giving additional flexibility to providers who meet high-quality requirements. That is, I think, an incentive for providers to upskill their work forces, and it gives them headroom in which to do so.
As we have established, many staff are paid barely more than the minimum wage. We want to emulate high-quality countries where pay is much higher. The Nordic countries tend to pay their staff more than £20,000 a year, while France and Germany pay between £16,000 and £18,000. Here in England, we pay £13,000. All those other countries pay considerably more to their early education staff, and all of them have larger allowances in terms of ratios than we do. Indeed, Scotland and Ireland have higher ratios than we do. At present we have the lowest ratios in Europe, and I do not think that that gives providers enough headroom to hire high-quality staff. As I have said, however, it is for providers to make the decision, and we will only allow them to do so if they invest in high-quality staff.
The hon. Lady asked me who supported these changes. One supporter, I believe, is the shadow Education Secretary, Stephen Twigg. He has suggested that we should adopt the Danish or the Swedish model. Neither Denmark nor Sweden sets mandatory ratios at national level. They believe in paying people well, and in employing high-quality professionals who make judgments at local level. That is the kind of system that I want to see. I want to see a more diverse system, in which we trust professionals to make those local judgments. Two-year-olds or three-year-olds may be at different stages of development, and may have different needs. I think that we should allow nursery staff who are properly qualified and trained to make the judgments about the best support that is available to those children.
I am sorry, but I have a limited amount of time, and I want to press on.
The hon. Lady asked me who else supported the changes. They are supported by Sir Michael Wilshaw of Ofsted, and by Andreas Schleicher of the OECD, who produced an important report called “Starting Strong” about the impact of improved qualifications on the attainment of children. Providing a teacher in an early years setting and providing high-quality staff can have a massive effect. A number of leading providers in the child care industry also support our proposals. I admit that not everyone is supportive. I can only say that we are giving people the opportunity to offer more places, it is not compulsory, and it is certainly not something that we will allow providers who do not invest in high quality to do.
We are also simplifying the system to make much more funding reach the front line. That is another important part of the proposals. Under the present system, local authorities and Ofsted are both responsible for quality, and quality assurance in different areas is at different levels. We are investing in Ofted and in more front-line inspectors from Her Majesty’s inspectorate to ensure that inspections are of genuinely high quality and focus on what is important. We have just changed the Ofsted framework so that it is much more focused on outcomes and the quality of engagement with children. There will be more emphasis on qualifications and the outcomes for the children.
All parties agree that the current system is not working. There are issues with the availability of child care. We want there to be more childminder agencies to help us provide more child care. Over the last 20 years the number of childminders has halved. They are a vital source of flexible child care for parents who do not work normal hours—MPs are one such group. We want childminders to be more widely accessible. Childminder agencies will be required to provide training, and they will be regulated and inspected by Ofsted. They can be set up in schools or nurseries. There will be great opportunities to expand the number of childminders and the amount of care available.
We will also allow good nurseries who hire high-quality staff to have more flexibility and to expand, again helping parents with availability. If a provider—a childminder or a nursery—shows that they are good quality according to Ofsted, they will be able to offer Government-funded places. There will no longer be a separate gatekeeper role for local authorities, which will also help us to expand the amount of child care available.
We need to go through a culture change in this country. Child care has been a low-wage, low-status profession. That is wrong, as it is an important profession in which lots of dedicated people work. Unfortunately, they are not rewarded sufficiently. We must look at what other countries do well in terms of remuneration and training. We are currently devising our early years educator qualification, and we are looking at the best practice in other countries and how we might adopt it.
The hon. Lady asked about funding proposals. I will consider the points she made about how we might improve the funding system. We must make sure we get the best value for money from the £5 billion we currently spend. The hon. Lady asked about the various different figures. They vary because the child care element of the working tax credit is a proportion of the spend that parents have. That must be tracked and estimated and it is not always the same from year to year because the budget is not fixed; it is a reimbursement of what parents pay. Therefore, there are various difficulties in calculating the total amount we spend and there are variable estimates. We do know, however, that we spend a lot through the system.
Interestingly, former children Minister Baroness Hughes of Stretford admitted that the funding had not been set up in an ideal way, as there are three separate funding streams that all feed into nurseries in different ways. She said that not enough of it goes through to the front line. We are looking at ways of fixing that. It is a complicated system, so it takes a while to do that, but I am working on it now. I would be very happy to continue this discussion with the hon. Lady after this debate.
Question put and agreed to.