Priti Patel: I want to put on the record that I intend to make two changes to the draft regulations before they are made, prompted by comments and feedback from stakeholders. I am incredibly grateful to all those who have fed back to us.
The first change is with regard to support for the self-employed. I would like to widen the scope of eligibility rules as they apply to self-employed parents. Doing so will ensure that individuals can qualify for the support when their income fluctuates—something we heard about in a previous evidence session.
The second area affected is support for those about to start employment. The draft regulations will allow someone to be eligible for support if they are due to start a job within seven days of registering. That might leave some parents unable to use the scheme as they start a new job. I am therefore proposing to change the draft regulations so that a parent can now qualify for the scheme where they are due to start a job within a 14-day period.
I have written separately to members of the Committee providing further information on and details of those changes. I would also like to add that we will be exploring whether there is scope for further changes to regulations as they are brought into force.
Finally, I recognise that parents will need clear and simple guidance to understand what the scheme means for them. They need that guidance as quickly as possible, but to get it right it also needs to be tested. I am pleased to announce today that the first tranche of draft guidance has been published, well ahead of the introduction of the scheme.
May I put on the record our thanks to the Minister for outlining those changes and for being in listening mode and reflecting some of the concerns that have come out from the evidence sessions? It is incredibly reassuring to see such a swift response to some of the concerns that have been put forward. I hope that that bodes well for the future, given the ongoing concerns that are being raised.
We all welcome the additional child care support, so it is vital that the Government get the scheme as right as possible for as many people as possible. We therefore very much welcome the approach that the Minister is taking, in conjunction with HMRC, to respond to some of the issues.
I want to touch on a few other concerns from the evidence sessions that have not yet been addressed—in particular, the concerns about the time frames that we are working towards and the delivery of tax-free child care within those time frames. The Government have set out the initial time frame as being autumn 2015. One issue is that that is a little bit vague. We have also heard concerns about the legal challenges that are under way and might contribute to a potential delay. That situation is causing a lot of concern to all stakeholders who are potentially affected. Could either the Minister or the officials dealing with the issue respond to those concerns?
Priti Patel: Thank you for that. It is a fair and valid concern that both the officials and I will reflect on. It is fair to say with regard to the legal challenge and the proceedings taking place that the Government disagree with the substantive claims and are disappointed with the course of action that has been taken. That said—I hope that we will explain this more during the session—we are fully committed to developing and delivering the support as soon as we possibly can.
We will happily explain the mechanisms and the detail of the work taking place today from both the HMRC and NS&I points of view. There is also an ongoing dialogue with our stakeholders. As far as we are concerned, there are two key points. We want to get the issue absolutely right, because it is about providing much-needed and welcome support to hard-working parents. At the same time, we are fully committed to it, and it is deeply disappointing that we have this legal challenge right now.
Suzanne Newton: As the Minister said, we are working closely with NS&I and taking the work as far forward as we can given the challenge that we have from the Childcare Voucher Providers Association and others. We are working closely with them, but it is about working not only with NS&I, but also with colleagues from the Government Digital Service to deliver interactive online tools and guidance and with our own IT colleagues.
I recently set up a stakeholder forum, through which we are bringing in many of the stakeholders from whom you have heard over the past few days. We meet each month to discuss the detail of the scheme and how it will work in practice for parents.
Priti Patel: As you would expect me to say, we are absolutely keen to get this up and running on time and are committed to that. We are still working to the original timetable in the sense that the work that we are doing, certainly from an HMRC point of view, is completely on track. Now, we are obviously subject to legal proceedings and the timetable that that dictates, about which there is no certainty. We cannot even comment on the proceedings.
There is nothing stopping us on this side from continuing with the work and the development of the key tools and communications. I have already had the privilege of a walkthrough of the online tools, mechanisms and schematics. We are absolutely working to get the nuts and bolts in place right now. The NS&I piece is very much about the banking infrastructure and architecture. Let us not forget that, because it is a sister agency of Government, it has that know-how, insight and knowledge, as you heard from Jane Platt earlier this week. It has the ability. For us, it is about getting rid of the challenge and then carrying on.
On the proposed process whereby parents would need to validate their claims every three months, NS&I was unwilling to comment on whether it felt that that was necessary. I would be interested to hear how it would work in practice. Will it be in conjunction with the real-time information system? Will it be real-time information? If so, is it absolutely necessary?
Suzanne Newton: We will require parents to do a light-touch reconfirmation each quarter. It will be a prospective look that actually asks them how much they expect to earn in the coming period. The RTI programme that I worked on in the past is obviously backward-looking. We will check what is provided against our RTI data sources, but we do not have some of the other eligibility things, so we would not necessarily be able to check self-employment or some of the child eligibility criteria in real time, for example.
We will make the quarterly reconfirmation as light-touch as we can—hopefully just a few clicks. We will do most of the checking while parents are online. If they have three children, they will reconfirm all three in one go. The system is there to ensure that the right parents get the right money.
Minister, hopefully you recall that at the witness session on Tuesday morning I made an observation to the chief executive of National Savings & Investments that there is probably not an MP in the House who has not had constituents contact him or her because they have had a benefit of one sort or another terminated or suspended, and the first they knew about it was when there was no money there to pay the bills. Jane Platt said that it was a very good point and she would take it away to see what could be done. My question to you, Minister, is: will you also look at a failsafe system, so that if somebody’s payment is suspended or terminated, that information is simultaneously conveyed to the person or parents, so that they can take whatever action is required to deal with the situation they find themselves in?
Priti Patel: That is a really good point. I came to this when the Bill had already been drafted but, in terms of the development of systems, we have been incredibly conscientious about ensuring that lessons have been learnt from previous systems and the challenges, technical failures and lack of information. We see that now in our work with HMRC, which obviously has a great deal of experience in Government systems, and with NS&I, which is much more of that consumer piece for the end user and how we can connect to ensure that it is seamless, so that people are not falling through in any way. NS&I is in a position where it is very much a delivery provider; it is a banking architect and performs on the payment side. It is incumbent on us to ensure this is integrated and that there are no gaps, and that is where all the trialling and testing is now taking place from our side.
I echo Catherine McKinnell’s comments: it is very refreshing to see a Minister not just in listening but in responding mode. I know that you have only just taken up the role, so I congratulate you on being able to do that so quickly. I want to press you on a few of the points we have heard during the oral evidence. The first is on price inflation and the concerns that, without any mechanisms alongside such an increase of funding into the system, we might see hard-pressed providers—80% of the market is private providers who are very hard pressed at the moment—starting to increase their prices a little, because they know parents have money in their pocket. What can we do to alleviate that?
Priti Patel: You will not be surprised to hear that I have several thoughts on that. We are not talking about a system of price control; we should be absolutely clear about that. We have to look at the issue of child care provision from the supply side, within the wider context of not just tax-free child care but some of the other measures that the Government have in place. It is about the provision of more child care places full stop and getting more people—childminders and nannies, for example—eligible and registered, so that they are part of the wider matrix in provision. I know that some Committees—the Regulatory Reform Committee, for example—are looking at other measures on the regulatory regime for nurseries and increasing supply there. The Department for Education is working on this as well, so there is more funding there in terms of provision.
We also have to look at what schools are doing, because they have a tremendous role to play. Notwithstanding what I now do in a ministerial capacity, I have been to quite a few nurseries in my constituency—new nurseries that are linked to community groups, the private sector and schools. It is about how the system becomes more integrated. The point is that funding through tax-free child care is only one aspect; we have to look at the core purpose of all this, and surely that purpose is delivering good and better outcomes in the early years. We want good providers that can do that. Obviously, Ofsted has a role to play, as does the wider child care system.
I agree with what you say; I think that the challenge is that places are going down. Even with additional funding, such as the two-year-old offer and so on, it is becoming a greater challenge, but I guess that that is something you will have to consider with Department for Education colleagues.
My second, related, point is about the progressive nature of the support for families. We have just heard what I thought was quite an important fact from the Resolution Foundation: 80% of the new money will go to the top 40% of earners. Do you feel comfortable with the progressive nature of it, or will you look at that? Linked to that, critically, is the impact on maternal employment rates. Given that the extra money will go to top earners, what work has been done to analyse whether the measures will have the impact, which I know you and I both desire, of increasing maternal employment rates?
Priti Patel: The core purpose of the Bill is obviously to provide support to working families with child care costs. I do not think we should just look at projections—I hear what you say about research and what the Resolution Foundation has said, but we cannot just look at it in terms of one particular part of the population. We are still providing funding through universal credit—the amount that families can claim for child care costs has gone up, as you know, to 85%—and through the tax credit system too.
It is very much a case of ensuring that we have a clear link between affordable child care and employment and finding ways to support parents making that transition. It is about opportunity. Having affordable child care and access to financial support for child care provision will rightly enable families and parents—mums and dads—to go into the labour market.
We are keen to, and we plan to, evaluate tax-free child care as part of the standard two-year post-implementation review. From the evidence collected, we will seek to set out what the benefits are in terms of the delivery of the scheme, and what the key indicators are. Obviously, we want to support people going back into work. For us, that is not just through tax-free child care; it is through universal credit and other mechanisms provided by Government.
Would you consider looking at the kind of modelling that Kitty Stewart was talking about, in terms of a lower cap and a higher subsidy—perhaps not now, but in future—if you felt that it would have more of an impact on people’s decisions whether to go back to work or work more hours?
Priti Patel: NS&I is an interesting organisation. As I mentioned earlier, it is effectively a sister agency to the Treasury. It is fair to say that it has an established track record. It can deliver as a single provider and it has a banking infrastructure that is extraordinary—it supports 25 million customers across a product range that is pretty unique to its own delivery. When Jane Platt came here on Tuesday, she spoke about premium bonds and how they were able to convert the uplift in allowances around premium bonds very quickly, so it has a very strong record. It also has an excellent customer service record. The team here have had a lot of feedback, and we have been engaging with parents on NS&I’s reputation and track record, and we have also had a lot of dialogue with parents and stakeholders about how they feel about engaging with NS&I. Do you have any more to add to that, Suzanne?
Suzanne Newton: I will add to it briefly. One of the big selling points of NS&I was around it being a trusted brand, along with the fact that parents’ funds are secure—all the money in NS&I is backed by a Government guarantee, which was a big selling feature with the parents we spoke to. Jane spoke the other day about the speed at which they can deliver. We are building on existing banking infrastructure. Yes, there will be some changes to accommodate the rules and regulations around TFC, but we are building on something that is already there—a big, established banking infrastructure. We are also going to be using NS&I for many of the front-line operations, such as their contact centres, their call-handling capability, their secure messaging and their text facilities. We have had really positive feedback from parents in the early days of testing some of the screens—they like the simplicity that NS&I brings to the presentation of the information.
Suzanne Newton: We are in ongoing discussions with NS&I about the brand. We are clear that we would like a TFC brand so that parents understand what tax-free child care is. Conversations are ongoing about whether an NS&I, HMRC or Government brand would dilute a TFC brand. We are still having those conversations.
Priti Patel: I think this comes back to something we have just touched on: it is all about information and communication. Everyone who has given evidence has said that they do not know what the communication is going to be like, which is true because we have not been out there speaking about this publicly. On our thinking and how we have gone about developing much of this from a system point of view, and also looking at how we will engage parents, we have very much been engaging with parents, as well as some of the stakeholders who have given evidence this week, to discuss with them the transitional elements and how we will engage with parents.
It is worth pointing out that many of the stakeholders who have given evidence to the Committee, as well as stakeholder groups with which we have been involved, have a role to play themselves in signposting and sharing information, whether they are schools, children’s centres or citizens advice bureaux. We are very clear that once you register online, the signposting, the steps and actions that must be taken and the routes that you can go down are all very simple.
A couple of suggestions have been made, although people have mainly said, “This is a problem,” but have not suggested solutions. I recognise that, as the Minister said, communication will be part of the solution, but the evidence we have heard suggests that it is a bit bigger than a communication challenge. A couple of positive suggestions came forward: one was that people on universal credit should be able to open accounts while they are still on universal credit in order to allow them to transfer more easily; another was that people on maternity leave should be allowed to open accounts. Those were two practical suggestions; what are your views on them?
Suzanne Newton: We are working very closely on this with our colleagues at the DWP. Our conversations have led us to believe that extending accounts to people already on universal credit would be quite a big change for universal credit and outside the scope of the Bill; it would be part of the wider welfare reform agenda.
May I clarify the position on women on maternity leave? If somebody already has a child in child care and then goes off to have a second baby, while they are on paid or unpaid statutory maternity leave they can claim TFC for the child that they already have, but they cannot claim it for the baby because they are on maternity leave for it. They can continue to claim TFC for the child they already have to retain that place or leave him or her in child care while they are looking after the baby.
May I first welcome the points you put in your letter about support for parents of disabled children? I think that is very encouraging and I am just marking my interest as we go through the Committee as to what proposals you bring back there. How would you like employers to interact in this new system?
Priti Patel: It is quite interesting because we have heard from various groups and organisations that have come to the Committee talking about the employer role and potential disengagement from employers as well. I have to say that, unsurprisingly, I disagree. If you are a good employer you are going to want to make it as easy as possible to provide the right kind of working hours and to promote child care benefits to your employee base. It is quite interesting because we have spent quite a bit of time discussing this area with stakeholders as well—organisations ranging from children’s centres to the Federation of Small Businesses—and they all maintain that employers and businesses have a role to play here. It is about, as I think was suggested earlier, promoting what the Government are doing and the tax-free child care scheme through the normal avenues of employee communications, while at the same time doing what good employers do already, which is promote their parental leave and flexible working schemes as part of that broader package. Having schemes such as that in place is the only way that companies employ the best people.
I just want to go back to NS&I. You mentioned disappointment about the current legal issues, but can you explain why the proposal to allocate the contract to NS&I was not included in the first consultation process? That seems to have given rise to the legal challenge that we are now facing.
Suzanne Newton: I think it is fair to say that when we did the first consultation, we were very much looking at the design of the scheme and how we would go about it. Relatively late in that consultation process, NS&I, as one of our sister organisations, approached us as a viable provider of these accounts. We realised quite quickly that we needed to consult further on that and that is why we had the second consultation; to establish whether, not just NS&I, but HMRC ourselves could do it in-house, or whether we could go out to the market.
On the discussions that you mentioned you have been having with NS&I and the information that is going to be provided for parents and stakeholders, the overwhelming message from the evidence that we have been taking in these sessions is that people do not feel very well informed at the moment. They do not feel very well consulted or that they understand how the system is going to work. NS&I mentioned that it has an awful lot of experience in dealing with these things. Do you have any comments on your inability to engage with NS&I at that level and whether that is ultimately hampering the process itself?
Suzanne Newton: In terms of engaging with the stakeholders, we are still a little way out. As I mentioned earlier, we have just set up a monthly stakeholder forum. We had a really good session with those people on our draft regulations last month, and some of the changes you have seen today have been in response to that. We have another session with them coming up very shortly on the draft guidance, so we are starting to engage with that stakeholder group much more. We will be starting to put communications out, probably from the spring. There is an ideal point to start pushing this out to parents and child care providers more widely. We will be looking to use everybody, really. If NS&I can help us with it, if employers can and if some of the representative bodies can, we will be really keen to engage with them, in whatever way, to do that.
Minister, thank you for your initial announcement about the self-employed. It is excellent that that has been added in. I am referring to the issue of income fluctuation and the support for self-employed people.
I want to ask about two of the concerns that have been raised in our witness sessions. To some extent, this leads on from Lucy’s question. Some of the concern was about getting more women into work, and the other bit was that those on low incomes will miss out. Naturally, I want to ensure that we get more women into work and that we are supporting those on low incomes. Do you feel confident that what is proposed is enough to support families on low incomes—the different benefits that are allowed as well as what we are talking about in this case?
Priti Patel: It is a good point. As I explained earlier, everything that we are doing around not just tax-free child care but the wider child care offer is crucial to getting more women into work, and certainly more women on lower incomes into work as well. It should not be overlooked. Regardless of what people may think about other systems, we have the tax credits system, which provides support, but we have the universal credit system, too. The provision for child care in that is high; it is significant and has been increased. Again, it is all about individuals, and creating the opportunity for them by providing the financial support for child care provision. We very much hope that they take up that opportunity to get back into the labour market, at whatever level. As I said earlier, with young children in particular, it is not necessarily about keeping them at home. It is about other options through early years education, and through using the child care system and the nursery system to enhance and bring better skills to children at that early age. That is in addition to helping mothers, in particular, get back to work.
What mechanisms will you use to communicate some of this? Yes, you want the right system, a simple system and something that is communicated well, so that families can access it. What sort of plan is in place to ensure that that communication is effective?
Priti Patel: We have only touched on this. We are adamant that we are going to use every single communications channel available to us. Obviously, there is the Government Digital Service; that network is already there. But it is about more than that. For example, we will very much be using schools where they have early years child care provision. We will be using children’s centres as well. I have been to quite a few centres recently. I went to a really good one in Newham on Friday morning run by 4Children. It has become a one-stop shop—an integrated service. You do not just leave your children there so that they get child care. There are also training opportunities there for mums, and it is connected with employment opportunities through Jobcentre Plus. There are many avenues out there, and we intend to tap into every single signposting opportunity that is available, and to utilise the stakeholders—many of the stakeholders that we have been working with and many of the stakeholders that have been here giving evidence this week.
Maybe we should not get into a discussion about Sure Start centres, because we might lose some of the spirit of the Committee so far.
Can I probe a bit further the point about the interaction of universal credit with tax-free child care? I understand that your hands are slightly tied because universal credit is on the DWP side, but can I ask whether you have considered, and if not whether you will consider, all the different scenarios? Of course, one aspect of this is someone moving up the pay scale, going from universal credit and into tax-free child care. But as we heard from much of the oral evidence, it will more commonly be people who are borderline and who are moving between the two systems because of changes to circumstances or pay or because they are having an extra child. It seems that there are quite a lot of penalties in the Bill that people may incur unintentionally. If they accidentally open a child care account thinking that that is something to which they are also entitled, they will automatically lose their universal credit. If they change scheme more twice in a year, they then cannot change for another four years. Could you either reassure me that you have thought about all those different things or have another look to ensure that we are not unfairly penalising families for what would otherwise be perfectly reasonable changes to their life?
Suzanne Newton: If I can pick up the point about moving between the two, we are developing with Government Digital Service colleagues a really easy to use online calculator. People can enter their personal circumstances to try to see which of the schemes would be best for them. That will be not just for TFC but for UC, ESC and other things. That will give them a good feel for which is best for them. If they decide that it is TFC, they will have to stop their UC claim before they claim for tax-free child care. If they are in tax-free child care and there is a change of circumstance, they can immediately move back to UC and the tax-free child care will continue up until the end of that quarterly reconfirmation. There will be a period when they get both, and at the end of that period they will need to stop their tax-free child care and carry on with UC. If there is a valid change of circumstance, such as having a baby or losing their job, that is absolutely fine. The two rule does not apply. The two rule applies only when they just choose to flick in and out without a change of circumstance.
This has already been raised by Lucy Powell and others, but one of the key debates that we have had today and in previous oral evidence sessions has been about how much impact the scheme will have, how much bang you get for the buck, how many more women will get back into work and at what level of income distribution there will be a benefit. The evidence that we have heard is quite conflicting, with Mumsnet saying one thing and later witnesses saying another. It seems like there is not much sophisticated evidence about the impact of the child care subsidy on maternal return to work. This an important area of policy, so what could your Department do to improve that, maybe not on this occasion but going forward, so that we can have some proper evidence to monitor the success of the scheme?
Priti Patel: That is a really good point, because everyone will have different views based on scenarios, conversations and discussions. We have created a tax-free child care impact assessment, which includes evidence showing that subsidies like this have a positive impact, particularly on the individuals we are trying to help here—those entering the workplace who are increasing their working hours.
However, there is no automatic answer, because the scheme is new and is not yet up and running, which comes back to my earlier point. We are planning an evaluation, which we obviously have to do as it is the right thing to do, to set out the benefits of the scheme, what it has delivered and how it has delivered. It is a fact of life that survey data from all stakeholders, certainly those who have come to the Committee, to whom I have spoken and with whom officials have been in touch, shows that more than half of mothers who are not in paid work would dearly love to be could they get access to child care and were they able to pay for it. It is a clearly a positive measure in the right direction, but we will have to assess it in the right way once the scheme is up and running.
Suzanne Newton: We will have what we are calling a memorandum of understanding between the two Departments, which will set out the service standards that we are expecting NS&I to provide in terms of the availability of its website, the service that we expect through its contact centres and other things. We will monitor progress against that. I know there was mention of a code of conduct. That is one of the things that I would really like to explore with stakeholders over the coming months. We will share with them the service standards that we are going to be suggesting, and then we will pick that up as part of our ongoing conversation.
Priti Patel: I think it is fair to say that we are very mindful of that. As I have touched on already, we are desperately learning from previous systems. Reputationally, this matters—it really does matter, because this is about parents and children at the end of the day, and about putting the needs of children first, as well as supporting parents. We are very much open to suggestions and, obviously, it is just part of that wider ongoing dialogue that we have with our stakeholders, too.
But you have an answer to that question. You are just unable to share it, so at the point when you are able to share it, you will share it with members of the Committee.
“members of the armed forces who have been posted overseas…to be treated as being in the UK.”
I really am pleased about that, but I want to pursue it a bit further. I am sure, Minister, that you would wish HM Treasury to be practising—not just signing up to, but actually fulfilling—the armed forces covenant. With that in mind, could I ask you and your officials to see how it would be possible to engage the Ministry of Defence to ensure that military personnel can be brought into this scheme more knowingly? My experience is that quite often, Army families miss out because they are not aware, and by the very turbulence of Army life, moving here and there, things can be missed or lost. I make the request that somehow there can be dovetailing with the Ministry of Defence.
One more question: can you give me an assurance that the Bill will not be used, either positively or negatively, by the Child Support Agency to affect in any shape or form the way in which maintenance payments are determined?
That was a question mark that arose in my mind as you were talking about the calculator and families being able to input lots of data—how confident they would feel that that data would not be misused, so I share that concern.
I also want to follow on from the question that Nic put to you about how important it is to you that this is a successful scheme—that it does not carry any risk. Obviously, NS&I has been quite open and up-front about the fact that Atos runs its back-office operation, and although it has the NS&I brand on it, it very much will, I think, have the Atos brand with it as well. In some of the schemes that it has run for the DWP, that has been nothing short of toxic for quite a lot of people who have not enjoyed its services. What precautions are you taking to make sure that that does not befall this scheme as well?
Priti Patel: It is fair to say, as Jane Platt highlighted, that a very thorough, vigorous procurement process took place for Atos. It has standards and key performance indicators, and is part of a memorandum of understanding, so we treat it very much as a professional organisation, there to be part of the service delivery. I fully concur with your suggestions and your reference to its delivery elsewhere in Government, but at the same time, Atos is delivering many other schemes perfectly well. On that basis, I do not think that we should second-guess or start to undermine its work at this stage. I would definitely say that NS&I has gone through the right kind of process. It was very transparent and it is confident on the delivery level. For us, it is very much not Atos in isolation. It is NS&I working in conjunction with HMRC to get this scheme up and running and delivered in the right and best possible way for parents.
As there are Members who still wish to be called, I will use my discretion under Standing Order No. 83C(11) to extend the sitting by no more than 15 minutes, which will give Mr Flello the opportunity to put his question to the Minister and have an adequate response.
I am very grateful, Mrs Main. I hope that the question and the response do not take 15 minutes. Can I urge the Minister to go back to those KPIs for Atos? I am worried that the same standards, the same procurement process and the same type of questions have been used for the likes of Capita. I have constituents who have been waiting for almost a year to get a proper result out of Capita. I urge the Minister to go back and have another look at the Atos procurement to be absolutely certain that we do not have the same sort of debacle as we had with Capita and Atos in other circumstances.
That is very helpful. Thank you, Mrs Main, for the slightly extended time. Again, I ask this in the spirit of making sure that this is a successful scheme that works for those who very much need it. Quite a few concerns have been expressed, and there have been reports in the press, about the RTI system causing chaos for some taxpayers. There have obviously been teething problems with the system. Will there be interaction between the new scheme and RTI? If so, what steps are you taking to ensure that these teething problems do not spill over into this child care payment system?
Suzanne Newton: RTI will be one of the data sources that we check against when somebody comes in to claim TFC. The important thing to remember is that we are not looking for an exact amount. We are making sure that they are over the minimum of about £52 a week and below the upper threshold. So if the amount is slightly out, that is not a concern to us. In terms of the issues with RTI, I do not have the brief on it but having been involved with it, I understand there are a number of issues on both the employer side and how we are processing that data. Clearly that is something that we can pick up separately.