Clause 1 - Entitlement to receive money towards costs of childcare

Childcare Payments Bill – in a Public Bill Committee at 9:25 am on 21 October 2014.

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Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury) 9:25, 21 October 2014

I beg to move amendment 1, in clause 1, page 2, line 2, at end insert—

‘(4A) The Chancellor of the Exchequer shall, within three months of Royal Assent, undertake a review of the impact of top-up payments towards the costs of childcare on the level of child poverty.

(4B) The Chancellor of the Exchequer must publish the report of the review required by subsection (4A) and lay the report before the House of Commons.’

May I start by saying that it is a pleasure to serve under your chairmanship this morning, Mr Sheridan? Clause 1 provides for parents’ entitlement to top-up payments; in other words, it is the money clause that enables Her Majesty’s Revenue and Customs to make the payment to eligible parents. The public money has already been authorised by way of a money resolution back in July. Subsection (2) lists the eligibility requirements  under which those top-up payments may be made. A parent meets the eligibility criteria if they are an eligible person, they have made a valid declaration of eligibility, they have a qualifying child, they hold a child care account in respect of that individual child and they make a qualifying payment into that child care account. All of those provisions are outlined and defined in subsequent clauses that we will deal with later in the Committee’s proceedings.

There are various aspects of the Bill on which the Opposition are keen to seek much greater clarity from the Government, such as how the scheme will operate in practice, given that is a new concept and mechanism for the Government, and how it will impact on parents’ and, in particular, children’s lives. Indeed, we heard a number of concerns from a variety of witnesses over the past week that we are keen to follow up and probe the Government on to ensure that this is the best Bill it can be.

Amendment 1 calls on the Government to commit to a review of the impact of top-up payments on the level of child poverty.

Photo of David Heath David Heath Liberal Democrat, Somerton and Frome

I am just wondering, irrespective of the merits of a review, what possible purpose a review within three months could serve. It is almost impossible to get any realistic assessment of child poverty figures within that period, so the review would be completely in the dark.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I thank the hon. Gentleman for his intervention. I will come on to why we have specified that time period. We would have hoped that the Government would undertake the work before implementing the policy at all; failing that, we will push for a review as soon as possible, which the three-month period would ensure.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

Given that the Government, to their credit, remain committed to reducing child poverty, does my hon. Friend agree that they should grasp the task with both hands and get on with it?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I very much agree with my hon. Friend and thank him for his intervention.

Photo of David Heath David Heath Liberal Democrat, Somerton and Frome

The hon. Lady is being generous in giving way. The amendment would require a

“review of the impact of top-up payments” after a period during which such payments had scarcely been paid, so an assessment of child poverty would not be able to work to any consequence. Frankly, the three-month period is a nonsense, although it might be sensible to have a base-level review to refer to.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The hon. Gentleman is being helpful, and I genuinely take his comments as being so. I appreciate what he says, but the Government have an awful lot of work to do between now and implementation in order to explain to parents, stakeholders and Parliament exactly what they intend to achieve and the implications of the policy. I have expressed my disappointment at the fact that the impact on child poverty does not appear to  have been addressed. The amendment would give the Government the opportunity, between now and the review, to look at how the Bill is implemented. Baseline figures could be provided for three months from implementation on the effect on the children in our system who we know need support. All public money relating to child care should be spent carefully if no regard is given to children living in poverty.

Photo of Pat Glass Pat Glass Labour, North West Durham

Whenever I look at Government policy, I want to see not only what the Government want or say, but the triggers and means that they have put in place for making it happen. It is insufficient for the Government simply to will the ends; they must also will the means. Given what we have said this morning about the importance of child poverty and its impact on people’s lives, I hope that the Government listen carefully to what has been said by Members on both sides of the Committee about ensuring that the Bill helps to reduce child poverty.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I thank my hon. Friend for a powerful intervention that pretty much sums up the argument I hope to make in favour of amendment 1. I would be pleased were the Government able to correct me, but as far as I can see the impact assessment published alongside the Bill makes no reference to child poverty or to the effect on low-income families. The Labour Government’s Child Poverty Act 2010, which was voted through the House with cross-party support, was aimed at sustaining and building on the unprecedented progress that Labour had made in lifting a million children out of poverty.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

Can the hon. Lady explain why child poverty rose in the previous Parliament?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

It did not rise in the previous Parliament. Nevertheless, in the context of the Bill I do not think that it is particularly helpful to reflect on past child poverty trends. There is a significant challenge to meet, and the amendment has been tabled so that the Committee can reflect on what the Bill will do to meet the challenge of alleviating child poverty, which, it has been shown, will increase quite significantly under the current Government.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

Would it not be better to look at the figures on households below average incomes, which were published only in July? They show that efforts to take children out of poverty have ground to a halt under this Government. Those are up-to-date figures that are in the public domain.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

Yes, and the Act passed in 2010 committed Governments to reducing child poverty by 2020 according to the following three measures: relative poverty must be reduced to below 10% of children; absolute poverty must be reduced to below 5% of children; and combined poverty and material deprivation must fall below 5%. There was also a commitment to set a target for persistent poverty—children who have been in poverty for several years—which is currently being consulted on.

Despite that commitment, this Government’s actions appear to be far from achieving the aim of reducing the number of children in poverty. The latest figures on households below average income, which were published in July, show that the progress Labour made in lifting a million children out of poverty has ground to a halt under this Government. The headline measures for 2012-13, which are the latest available figures, show that 2.3 million children were living in relative poverty, which was unchanged in two years; that 2.6 million children were living in absolute poverty, which was up by 300,000 since 2010; and that 1.8 million children were living in relative poverty and material deprivation, which was up by 200,000 on the previous year. If we look at the number of children living in poverty after housing costs, which the Institute for Fiscal Studies suggests is useful given that rents are a huge part of the cost of living crisis and affect low-income families in particular, we see that the number of children living in absolute poverty stood at 4.1 million, which was a staggering half a million more children than in 2009-10.

Equally worrying is the increase in the number of children who live in what is described as material deprivation. Further analysis of the HBAI statistics shows that, compared with 2010, 300,000 more children are in families who cannot afford to keep their house warm; 400,000 more children are in families who cannot afford to make savings of £10 a month; and 500,000 more children are in families who cannot afford to replace broken electrical goods, which brings the total to 3.6 million children.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

My hon. Friend is outlining clearly and with real statistics the extent of poverty among children in our society and the different factors that affect them. The fact that the Government’s own poverty adviser, Alan Milburn, has labelled their child poverty strategy for the next three years as “a missed opportunity,” a “farce” and “particularly lamentable” suggests that it falls far short of what is needed. That is all the more reason why it is important that we get extra provisions in the Bill to help address poverty.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I thank my hon. Friend. I will go on to set out some of the comments that the Government’s Social Mobility and Child Poverty Commission made in its report that relate specifically to child care. We feel that the Government are missing an opportunity to make some headway and progress on child poverty, because we seem to be going backwards at the moment.

It is incredibly worrying that, while coalition Ministers seem to be squabbling over the definition of child poverty, the forecasts by the Institute for Fiscal Studies indicate that it will increase substantially by 2020. The Government seem to be way off course to meet their commitments. According to the IFS’s most recent projections, compared with when Labour left office, there will be 400,000 more children living in relative poverty by the end of this Parliament and 900,000 more by 2020. The projections are even more stark on absolute poverty—almost 1.5 million more children will be living in absolute poverty by 2020.

We must bear in mind that those forecasts were made before the Chancellor announced this child care plan. If they are still in government in May, the Government  plan to cut tax credits for millions more working people for a further two years; that is one of the few concrete tax pledges that the Chancellor has made so far. Thanks to the Child Poverty Action Group, we know that, last year, when the Chancellor opted to cut tax credits and other family benefits in real terms, the Government’s own estimate suggested that it would push a further 200,000 children into absolute poverty.

We know that the Treasury has the means to assess of the impact of its legislation on some of our most vulnerable families and children, because it has done that on previous tax-related policies. That is why amendment 1 calls on the Government to do that work, if they have not already, and to publish the findings within three months of Royal Assent. As the Government’s child poverty adviser, Alan Milburn, said recently:

“The government’s approach falls far short of what is needed to reduce, yet alone end child poverty in our country.”

My hon. Friend the Member for Stockton North reiterated that.

We know that a huge number of the children living in poverty live in working households. We know that the cost of living has been rising and that wages have failed to keep pace. Alan Milburn’s report, “State of the Nation 2014”, states:

“There are 600,000 more children in working households who are living in absolute poverty after housing costs than there were in 2009-10. Too many of the jobs that are being created in the economic recovery are low-income and high-insecurity. They are a dead-end not a road to social progress. There are five million low-paid workers in the UK and, despite the success of the National Minimum Wage in eradicating extreme low pay, the proportion has barely changed in two decades…More than one in four women in work are low-paid as well as one in six men. These figures help to explain why twice as many poor children are now in working families than in workless families, and why wages have become a stronger predictor of child poverty than the number of hours worked. Pay is not rewarding parents’ efforts and neither is the way the tax and benefits system operates.”

Photo of Mary Macleod Mary Macleod Conservative, Brentford and Isleworth

Does the hon. Lady not therefore welcome the work that the Government have done to take 2 million of the lowest-paid out of tax to help those families? Does she not welcome the fact that more women are in work than ever before?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

We have not opposed those things at any stage. We have sat in Committee Rooms over many months debating these issues, and one thing that we agree on is the lifting of the tax threshold for the lowest-paid. Unfortunately, the changes to the tax and benefits system far outweigh any benefit to the families we are talking about.

When we look at the tax and benefit changes since 2010, we see that families with children have been particularly hard hit. Even after the changes to the tax system that the hon. Lady mentioned, a family with children with both parents working will be £2,073 a year worse off on average. Where only one parent is working, they will be £3,720 a year worse off on average. The Government cannot hide behind the changes to the personal allowance to cover for the fact that families—including some of the poorest-paid families, who are working and struggling to meet their child care costs and living costs—are worse off under this Government.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

Does the squeeze on the living standards of families with children, which my hon. Friend describes so well, not underline the importance of ensuring that the child care payments—I welcome the Government’s commitment on them—reach those who most need them, liberating families from that squeeze?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

Indeed. The Bill could go a long way in supporting the families who we know are struggling in work and struggling to support their children. That is why amendment 1 would commit the Government to assessing the Bill’s impact on child poverty.

Will the Bill help to make up for the devastating impact of the reduced support resulting from tax and benefit changes that have already taken place in this Parliament? The Chancellor appears to be planning more changes if the coalition parties or the Conservative party win the election next May. That is precisely why, as I said in July, we believe that the independent Office for Budget Responsibility should be tasked with monitoring and reporting on the Government’s progress on child poverty. The Government’s Social Mobility and Child Poverty Commission has suggested the same thing.

The figures I outlined show that progress on tackling child poverty has ground to a halt. Child poverty is set to rise, according to independent forecasts. The OBR should therefore be able to analyse the Government’s policy decisions, and the Bill would fall within that remit of assessing the impact of a policy on child poverty. We ask the Government to have that review undertaken independently, because this issue is too important for that not to happen. In addition, that remit would make it impossible for Governments to ignore child poverty when making policy proposals and using public money that should be going to the families who need it most.

Progress in tackling child poverty has ground to a halt under this Government, and child poverty is only set to rise. I therefore hope that the Government will take our concerns on board and take the necessary action to ensure that the Bill supports all families with their child care costs, particularly families who are struggling to make ends meet and children who are falling into poverty or failing to get out of it despite their parents working all hours.

Photo of David Heath David Heath Liberal Democrat, Somerton and Frome 9:45, 21 October 2014

It is a pleasure to serve under your chairmanship this morning, Mr Sheridan.

There are two reasons for tabling an amendment. One is to stimulate a debate on a subject. The other is to actually change the wording of a Bill. I am quite happy to accept that the hon. Lady’s purpose in this instance is to stimulate a debate on child poverty. I am not remotely happy to accept that she is serious about adding to the Bill the words that she has put down on the amendment paper, because, as I will explain, the amendment would not achieve its intended purpose.

If the hon. Lady’s purpose was to ensure that we discuss child poverty, she is absolutely right. She is also right that it is relevant to the discussion about the Bill. The Government have no reason to be ashamed of their work in this area. Let us be clear about why we have child poverty in this country. First, still too many people  are out of work, although that has improved immensely over the past few years, about which I am extremely pleased. Secondly, those in work are not earning enough, which is related to the general prosperity of the nation and the wages that we can afford to pay. Thirdly, there is the issue of what the Government are taking from people, and a good point was made about the increase in the tax threshold taking people away from the poverty line by enabling them to keep more of what they earn. Finally, there are the on-costs of what the average family, and particularly families on low incomes, have to bear, which include child care costs. Therefore, if we can do something by pumping money into the system to reduce child care costs, which is exactly what the Bill will do, that is making a contribution.

The hon. Lady failed to mention that one of the reasons why child poverty has increased over recent years is that the country has been facing the biggest recession in living memory. It is hardly surprising that poverty increases during a really serious recession. Thank goodness the Government have, hopefully, dealt with the recession. The signs are certainly promising, and we must hope that that continues. That should not prevent us, however, from concentrating on child poverty as a target and from recognising that whatever Government takes office in six or seven months’ time, they will need to return to the subject again and again. It is simply not acceptable in a wealthy country that people are still living in poverty.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

My hon. Friend makes a really powerful argument and debunks much of the case that has just been made. Despite the challenges, relative poverty after housing costs was about 30% when we came to power and has fallen by about 10% to 27%, which is a real achievement.

Photo of David Heath David Heath Liberal Democrat, Somerton and Frome

I am grateful to my hon. Friend, who has figures in front of him that I do not, but I will not discuss statistics that I do not have to hand. All that I know is that whatever Government are in power they should never forget that people are living in both relative and absolute poverty and that it is our duty as a civilised society to deal with that. It is an open secret that there are frustrations about targets and about whether we can be more ambitious. Some such concerns were expressed by Alan Milburn in his report, and it was interesting how the hon. Member for Newcastle upon Tyne North glossed over the criticisms of her party in that report. I do not think that any of us came out of that report unscathed. Its basis was that we could all do more and I agree with that, and I would like to see that happen.

The hon. Member for Newcastle upon Tyne North is making an important point. I do not want us not to be looking at the context of child poverty when the Bill is reviewed, as it inevitably will be, over the years. However, her amendment, as I think she will acknowledge, is nonsense. It is not possible to make an assessment of the Bill’s impact on child poverty within three months of its implementation. That does not allow time for the impact to be demonstrated in figures.

If the hon. Lady was trying to say that we should have a baseline, she should have said that. That, however, is not what the amendment proposes, which is that the review should be

“of the impact of top-up payments towards the costs of childcare on the level of child poverty” and all of that should be done within three months of Royal Assent. That is fine as a talking point on which to hang a debate, but, once we have had that discussion, I hope that she will have the good sense to withdraw the amendment so that we can move on to discuss serious amendments.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I thank the hon. Gentleman for his contribution. We have had time to air some of these issues and express our concern that child poverty did not seem to be a factor in the Government’s thinking when they came up with the Bill. We heard in oral evidence last week that 80% of the Bill’s benefit goes to households with earnings in the top 40%. When the Government put money into the system, they need to take seriously who it is going to, who is suffering from the costs of child care, the barriers to work and the difficulties in terms of household incomes that have resulted in increases in child poverty.

I have taken on board the hon. Gentleman’s comments and I hope that the Minister will do that, too. There is cross-party desire to challenge child poverty; it is just unfortunate that most of the Government’s measures since 2010 seem to have been taking us in the opposite direction.

We have had an opportunity to air these issues and I hope that the Government will take them on board. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Lucy Powell Lucy Powell Shadow Minister (Education)

I beg to move amendment 2, in clause 1, page 2, line 2, at end insert—

‘( ) The Chancellor of the Exchequer shall, one year after this Act is passed, and every three years thereafter, review the impact of the measures in this section on the cost of childcare with particular reference to—

(a) the average cost of childcare for parents in work;

(b) the effectiveness of this section on making childcare more affordable; and

(c) the impact of supply-led measures on the cost of childcare.

( ) The Chancellor of the Exchequer must publish the report of each review and lay the report before the House of Commons.’.

May I, too, put on record how grateful I am to be serving under your chairmanship, Mr Sheridan? May I also say how privileged I am to be working on this Bill with my hon. Friend the Member for Newcastle upon Tyne North? We share a vested interest in child care matters—when I was serving on a previous Bill Committee, I was in the same condition as she is now. I am therefore more than happy to help her with some of the heavy lifting, because I know how difficult it can be to make long speeches when an arrival is imminent. I also thank the witnesses and the Minister for helping us to explore the Bill in the oral evidence sessions and I thank the Minister for the concessions that she has made so far.

This is a really important Bill for families. Child care costs are rising much faster than wages and child care remains a big barrier to families trying to make ends meet and, in particular, to mums who want help to go back to work, or work more hours. We know that increasing child care provision is good for the economy,  because it helps mums back to work. Labour has plans to extend free child care, which analysis shows could help as many as 100,000 mums back to work. It remains to be seen, however, what direct impact the Bill will have on maternal employment rates and I hope that the Minister will expand on the economic benefits during the Committee’s sittings.

Witnesses and other organisations raised real concerns about parts of the Bill and about its design in particular. While the Opposition support its principle and overall impact, we will seek to raise such concerns in Committee.

Perhaps one of the biggest concerns raised by witnesses, especially given the soaring child care costs we have discussed this morning, is how this new money might actually lead to further price inflation. That is why the Opposition have tabled amendment 2. We seek to put in place a review of this tax-free child care after one year and, subsequently, on a three-year basis, to assess child care costs for parents in work, whether this so-called tax-free child care has made child care more affordable for parents and how the supply of child care impacts on the cost. Under the amendment, the Chancellor would have to publish a report of each review before the House.

A key issue that has been raised is that the Bill is likely—indeed, very likely, according to some of the witnesses we heard from—to lead to further price inflation. In fact, some people—certainly the Institute for Public Policy Research—suggested that that would negate the extra support in a matter of a few years. As we know, the majority of child care providers—about 80% of the market—are private businesses, and we heard from the National Day Nurseries Association that providers are feeling the strain, which is why so many have been going out of business over the last few years.

Providers’ costs are rising, but the public subsidy for three and four-year-olds has not increased. Many providers cross-subsidise free places, relying on the paid hours to fill the gap. As providers see more money going into parents’ pockets to pay for child care, therefore, they are very likely to push up prices. The Family and Childcare Trust warned that

“there is little incentive for these providers not to increase prices to take advantage of the extra subsidy.”

The NDNA underlined that point, stating that

“on price inflation, when we speak to our members every year, some of them say that they have not put up their fees for two years during the recession. They will have to play catch-up.”––[Official Report, Childcare Payments Public Bill Committee, 14 October 2014; c. 15, Q15.]

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

My hon. Friend is outlining what many of the witnesses told us—that we could expect prices to increase perhaps way beyond inflation as a result of the extra money. That does not mean that we should not have the extra money, but we need to monitor the issue closely. However, I am particularly concerned about higher costs for parents with disabled children. The prices for their care have outstripped all other costs in recent years. How can we make sure we get the information we require over the next year so that we can demonstrate that we need to do something about that as a nation?

Photo of Lucy Powell Lucy Powell Shadow Minister (Education)

My hon. Friend is absolutely right. The issues we will be discussing in relation to the majority of families are even more acute for families with disabled children. He and my hon. Friend the Member for North West Durham produced a fantastic report on child care for disabled families, and I hope we will discuss the issue. The issues for families with disabled children, as for other families, centre on supply, and there is nothing in the Bill to address some of the fundamental issues of supply in the sector. That is particularly true for those who have poor access to their local market, whether because they are in a rural area or an area of high deprivation, and for those seeking child care for disabled children. All those issues can impact quite markedly on cost and supply.

To return to my speech, the cash subsidies to parents might not expand the amount of child care available, but they do affect the disposable income available to parents to pay for child care. This demand-side subsidy will form about half the spending in the UK and is likely to have some impact on cost, but a greater reliance on demand-side subsidy is likely to lead to additional price inflation, which may erode the effect of such support over the medium term.

The Government are investing £750 million through the Bill. That is a large amount in these straitened times, and with no strings attached, but Ministers are missing the opportunity to take this issue seriously. In the evidence sessions, we heard from people such as Kitty Stewart that, in Australia, the introduction of a child care rebate of 30% coincided with a rise of more than 100% in costs between 1997 and 2006, compared with general inflation of 27% over the same period. In the single year of 2008, when the child care rebate was raised to cover 50% of all remaining costs, costs rose by 10%. In its evidence, the IPPR also warned about the Netherlands experience. Under the previous Labour Government, when we introduced tax credits and employer-supported voucher schemes, we saw similar price increases in England over that same period, as the Family and Childcare Trust warned. There is plenty of evidence, both domestic and from abroad, that shows that introducing additional money purely on demand-side subsidies can mean that prices rise significantly.

A key aim of the Bill is to help make work pay by making child care more affordable. However, when the amount of help for families was capped at £1,200 a year, the IPPR raised concerns that that support would be eroded in a fairly short space of time. Its analysis showed that, by 2008, the gains of the scheme would be wiped out, with parents paying proportionately more of their disposable income despite that extra money going in. If we look ahead to 2018, if child care prices are uprated using the Daycare Trust averages and incorporating the £2,550 that a family would get as a benefit of tax-free child care, with the eligible amounts increasing in line with inflation, the figures rise—I realise as I am reading this that it does not quite make sense, so I will skip this bit. Plenty of analysis has been done by the IPPR and the Daycare Trust that shows that, over a period of four years, an average family would be paying more for their child care costs, despite the extra investment, than they are today.

How might we guard against price inflation? What does the Minister think about that after hearing some of the comments during the evidence sessions? Kitty Stewart made an interesting suggestion of price capping or capping the hourly rate to keep fees low and to prohibit and stop some of the price inflation that we might see. What does the Minister think of her compelling evidence?

Part of the problem with rising child care costs is that supply in many areas of the country does not meet the demand from parents, as we discussed earlier. That is true for all parents, but particularly for parents of disabled children, those working atypical hours and those living in deprived communities, where local markets do not work for many parents. The Government have watered down the sufficiency duty on many local authorities. That is one of the key reasons why supply is falling. We need to hear more from the Government on what they will do to increase supply and quality in the child care markets.

The Government came into office with a strong agenda on what they described as deregulation. They thought that deregulation of the child care markets and loosening of ratios would resolve the problem. Thankfully, they dropped those proposals as they did not have the support of parents around the country. What is their plan to increase supply of child care places now? Ofsted figures show that there are 41,000 fewer early years child care places across the country since 2009. The hon. Member for Dover and I often have an exchange about the reduction of childminders, but he will know that the number of childminders has decreased over the course of this Government by more than 3,000.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover 10:00, 21 October 2014

There are a couple of points here. That figure is a minor difference compared to the complete decimation that took place before. The hon. Lady should recognise that. I hope she will talk about the evidence given by the Family and Childcare Trust, which talked about childminders, the importance of making it easier, deregulating, and making, if you like, the supply-side reforms. Does she recognise that we ought to be looking at supply-side reforms as well?

Photo of Lucy Powell Lucy Powell Shadow Minister (Education)

I absolutely agree that we should be looking at supply-side reforms, but the hon. Gentleman and I probably differ on what the reforms would look like. I am interested in meeting the twin challenge of bringing prices down for the parent while increasing quality. We must try to meet both those agendas. The truth is that in order to do so we need a public subsidy in the middle. What we are discussing today is whether the public subsidy will actually increase quality or bring down prices. I am not sure that it will do either.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

On a point of information, the hon. Lady mentioned decreases, but she did not mention that average child care costs fell last year for the first time in 10 years.

Photo of Lucy Powell Lucy Powell Shadow Minister (Education)

The hon. Gentleman might want to look a little closer at the figures. I would not be quite so quick to jump to my feet to gloat about a 30% increase in costs over the course of this Parliament. Last year,  costs fell by 1% in England alone, but I am not sure whether he would want to jump to his feet with the overall figure in mind.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

The compelling evidence that we heard from the National Day Nurseries Association and the British Association for Professional Nannies underlined the quality challenge as well as the supply challenge. If we do not get the quality of supply right, we will not be doing anybody any favours. How should the Government respond to that challenge?

Photo of Lucy Powell Lucy Powell Shadow Minister (Education)

I recently wrote to the Deputy Prime Minister on that point and gave him an action plan for how he might increase quality and supply in the system, which I also shared with the new Minister responsible for child care in the Department for Education. I see little evidence of the proposals being brought forward.

Returning to my main point, price inflation and poor supply are particularly acute for some types of families, such as those who are deprived or who live in rural areas. Alison Garnham from the Child Poverty Action Group underlined the point in her evidence:

“It is really difficult to talk about market impact because there is an imperfect market operating in child care. For higher-income couples, the child care market probably does operate as a market, but for lower-income families, it really does not; it is completely dysfunctional.”––[Official Report, Childcare Payments Public Bill Committee, 14 October 2014; c. 64, Q130.]

I wonder what the Minister will say in response to that point, because she and her colleagues believe that market forces will deliver what the Government want, which is a lower price point and higher quality, but I do not believe that that will happen as a result of the Bill. The NDNA agreed that the Bill will increase demand, but will do nothing to increase supply. Mumsnet said:

“Although the extra support is welcome, if there is no guarantee that supply will increase we must pose a big question about what will happen over the next five years.”––[Official Report, Childcare Payments Public Bill Committee, 14 October 2014; c. 41, Q86.]

In conclusion, the tax-free child care scheme is a significant injection of funding into the child care system that will unfortunately do relatively little to help address access, quality and affordability over time. Amendment 2 would provide a means to review and analyse the Bill’s impact on child care prices over a period of time. Substantial Government investment could simply disappear if supply issues are not dealt with and prices are not controlled. How will the Minister respond to those points? Will she accept the suggested review of prices? What are the Government doing about supply? What does she think of Kitty Stewart’s suggestion for a cap on prices and hours? What does she make of the evidence from the IPPR and others about price inflation?

Photo of Priti Patel Priti Patel The Exchequer Secretary

It is a pleasure to serve under your chairmanship, Mr Sheridan. I thank the Committee for how the debate has started this morning.

Clause 1 introduces the Bill’s provisions and provides a general overview of the new Government tax-free child care scheme, which will provide financial help to working families for their child care costs. Committee members have already started the debate, but as we proceed to consider the other clauses, we will definitely have a thorough debate about the nature of the Bill,  eligibility and other aspects. Before I respond to the amendments and the questions that have been posed, I would like to set out why the scheme is needed and why it will provide such vital support for hard-working families throughout the country.

The Government are determined to help families to provide what is best for their children. As we heard last week in the evidence sessions, including when I gave evidence, the important thing is the timing and impact of child care support in children’s formative first few years. We recognise that many families face a difficult decision about whether it makes greater financial sense for them to stay at home and look after their children, therefore putting aside employment opportunities and career ambitions, or for them to go out to work and pay for child care. Those are the families that the Government are helping through the package of reforms in the Bill.

Our ambition is for those who wish to work to be able to do so. That is the underlying principle of the Bill. It is in the public interest to reduce the barriers and burdens on parents and support their movement back into the labour market, where they will both help to contribute to economic growth and, more importantly, be able to fulfil themselves. Today’s sitting is topical and timely, coming as it does after yesterday’s publication of the report by the Social Mobility and Child Poverty Commission, which featured a great deal of emphasis on social mobility and the need to give parents the opportunity to fulfil themselves personally by having the chance to pursue employment and careers—child care costs should not be a reason why people cannot do that.

Since 2010, the Government have introduced a comprehensive package of measures to help working families to cover nursery costs for their children. Unprecedented increases in the personal allowance, which my hon. Friends have already mentioned, have allowed people to keep more of the money they earn. We have extended entitlement to free early education to 15 hours for all three and four-year-olds and, by 2014-15, 260,000 two-year-olds from the most disadvantaged backgrounds are to receive 15 hours of free child care. On top of that, there has been an increase in the rate of child care support provided through universal credit from 70% to 85%, which will enable more families to move off benefits and into employment. Those are significant and radical measures that represent real changes for working families.

We have increased families’ freedom to find the right balance between work and family life, and the policies in the Bill are aimed at continuing that work. At the same time, we continue to focus on ensuring that early education continues to improve our children’s life chances, especially those from the poorest backgrounds, to whom we want to give a fairer start in life. No one can be complacent. The latest survey data from the Department for Education indicate that nearly a quarter of employed mothers would increase their working hours if they were able to access suitable high-quality child care. That is a challenge faced by many working parents and that all Governments have tried to address in the past. Through the Bill, we are taking action by providing working families with funding worth up to £2,000 per child per year.

The Committee will not be surprised to hear that a number of important stakeholder groups—we heard from some last week, but there are many others, including those involved in the consultation process and the development of the Bill—have warmly welcomed what the Government are doing with the Bill. The Professional Association for Childcare and Early Years welcomed the scheme, rightly pointing out that improving access to child care will help to support families balancing work and home life. The Family and Childcare Trust said that it was delighted by the measures and that the Government listened to its suggestions and recommendations as the details of the scheme were developed.

The support will be delivered through top-up payments. For every £80 a parent contributes to child care, the Government will provide a top-up of £20. The scheme extends to child care costs of up to £10,000 per child, and it is estimated that a million families in the UK will be better off.

I want to describe how the scheme will work in a little more detail. To qualify for these payments from Government, a parent must meet a series of eligibility conditions.

Photo of Lucy Powell Lucy Powell Shadow Minister (Education) 10:15, 21 October 2014

The Minister says that 1 million families will be better off. Will she break that down a little bit further for us? I understood that 1 million families will qualify for the scheme, but it is not clear to me or to many of the stakeholders we have heard from that 1 million families will be better off. Some will be worse off if they are basic rate taxpayers.

Photo of Priti Patel Priti Patel The Exchequer Secretary

I thank the hon. Lady for her question. I was going to come on to eligibility, because that will help to inform the Committee how families will be better off. I will touch on some of the specific points she raised about who will be better off, who will qualify and the financial support in the Government’s wider child care package.

Clauses 6 to 13 set out a series of eligibility conditions; we will come on to look at those later. There are requirements on parents to: submit a declaration of eligibility to Her Majesty’s Revenue and Customs each quarter, confirming personal circumstances, to demonstrate that they remain eligible for the scheme; have a qualifying child as defined in clause 14 and supporting regulations; and have a child care account as defined in later clauses, and pay money into that account. Those eligibility conditions are required to satisfy the criteria before we go into questions of who and how, and the detail.

Once a parent has had their eligibility confirmed, they will be entitled to Government support for three months, regardless of changes in circumstance. We covered that point last week in the evidence sessions. That will significantly reduce the burden on parents, who will be required to reconfirm eligibility only at the end of each three-month entitlement period. The point is that we are ensuring that child care accounts are simple to operate for parents and child care providers, while giving parents the certainty that their money will be secure.

On the hon. Lady’s point on families having access to the scheme, tax-free child care will be available for up to 1.9 million families. Approximately 1 million families  will be better off under the scheme. It is different from existing schemes, and it is worth touching on the financial support available to families through it. The Government have already increased entitlement to child care provision. We have announced that families who are eligible for universal credit will benefit from additional support under the scheme, with 85% of the total cost of child care being met by the Government. That comes back to the extremely important underlying principle of the Bill: supporting families as they move into work.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

One issue that has been raised is the fact that 80% of the benefit of this policy goes to the top 40% of earners. Can the Minister reassure us that the Government have given some consideration not only to those in receipt of universal credit, but to those who, though not in receipt of universal credit, are on low incomes and are struggling with child care costs?

Photo of Priti Patel Priti Patel The Exchequer Secretary

We touched on that last week in the evidence sessions. The scheme is about supporting all working families and providing support, in terms of child care provision and places. The overall system of child care support remains focused on those on lower incomes. Families in receipt of tax credits are already in receipt of more generous support as regards their child care costs. UC will extend to cover up to 85% of the costs of child care. That will be available regardless of the number of hours worked.

It is worth me emphasising that this scheme is not about helping only wealthy families—that is a misconception. It is about ensuring that all families qualify for support with their child care costs. Of course, that is subject to meeting the conditions of the scheme’s eligibility criteria, which I briefly outlined.

To qualify, parents must meet a minimum income level, based on the amount earned from working eight hours a week on the national minimum wage. That means that parents will qualify when they earn just over £50 a week on average. It is therefore a misconception to say that the Bill benefits only one group of people. I also emphasise the fact that support has been extended significantly under universal credit and that those in receipt of tax credits already get more generous support with regard to child care costs.

On eligibility, it is worth saying—we touched on this last week—that the scheme has been designed having learnt many of the lessons of previous schemes. Its simplicity is paramount: it has been designed to ensure that child care accounts are simple to operate both for parents and for child care providers so that the money flows and is secure. The scheme marks a significant improvement on existing employer-supported child care schemes in a number of ways.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

I have a couple of key points about what the Government are doing with the Bill, compared with the previous schemes. First, it is fairer than employer-supported child care because it is per child, not per adult. Secondly, it helps to provide fairness to self-employed people, who have found it so hard to access any kind of child care help.

Photo of Priti Patel Priti Patel The Exchequer Secretary

My hon. Friend pre-empts the point I was going to make—we touched on it last week. The current schemes provide no support at all for those who are self-employed and that is exactly where the new scheme offers a significant benefit.

Less than 5% of employers offer the employer-supported scheme, which means that more than half of all employees—as well as all self-employed parents—are without essential access to any Government support for child care. Frankly, that cannot be right. By contrast, the new scheme will be available to all working families, provided they meet the eligibility criteria, which we will come to later. We expect that the new scheme will be open to at least twice the number of people who currently access employer-supported child care. That has been widely welcomed by parents and other stakeholders as well as the Committee.

Another significant weakness of the existing scheme is that it favours some parents to the disadvantage of others. In particular, it provides twice as much support to couples where both partners work for employers who offer the scheme as it does to single parents. That is neither fair nor right. The new scheme will address that unfairness by ensuring that the level of support provided is determined not by the number of parents who can access the scheme, but by the number of children in the household. That means, for example, that two-parent and lone-parent households with the same number of children will have access to the same level of support.

In summary, the Bill introduces an important addition to the Government’s programme to support families with young children. The scheme will provide much needed help to hard-working families with their child care costs. It will enable them to go out to work when they choose to do so and help them to enrich their careers.

The hon. Member for Manchester Central asked about child care supply. There is no evidence to suggest that the scheme will increase costs. We all accept that child care costs have risen faster than inflation since 2003, but, in addition to the reforms that are being put in place by the Government, there are signs that costs are now stabilising. I emphasise that we are not complacent and are working to increase the child care supply further, which will improve choice and affordability for parents.

I think that I mentioned this point last week, but it is worth repeating that more schools are opening nurseries. We are establishing childminder agencies to increase the availability of childminders, and are also increasing the number of school nurseries that extend their opening times from 8 am to 6 pm, because parents’ working hours can change. We are supporting good nurseries to grow, and are making it easier for them by removing planning restrictions and some of the red tape associated with setting them up.

There is further work to do, as I have said. We are making start-up grants available, totalling £2 million, to help people to set up new child care businesses. We are making up to 32,000 good and outstanding childminders automatically eligible for early education funding. As more people go back to work, there will clearly be demands on the system, and it is incumbent on us to work collectively to find ways to meet that challenge.

The Government have already made a commitment to review the impact of the scheme within two years of implementation. That was set out in the impact assessment published alongside the Bill. That, together with the Government’s clear and continuing commitment to tackling child poverty, and reporting on progress, is essential. Child poverty was mentioned earlier; the Government are committed to the goal of bringing child poverty in  this country to an end, once and for all, by 2020. Under the Child Poverty Act 2010, we are required regularly to report, through the publication of UK strategies for child poverty, on the progress that we are making towards that goal.

Progress has been made. We are committed to tackling the root causes of child poverty. Employment has increased by 1.7 million, but it is worth touching on other measures in the troubled families programme, in which the Government have invested £200 million. An additional 400,000 families will get back to work through the measures that we are concentrating on. Resources are being targeted. We are focused on breaking the cycle for poor children.

Photo of Lucy Powell Lucy Powell Shadow Minister (Education)

The Minister makes a good point about supporting poor families, but I wonder whether she is content with the Government’s record on Sure Start centres, which are an important part of that support, especially in the early weeks and months. Recent figures have shown that there are now 623 fewer Sure Start centres. Is she happy with that record?

Photo of Priti Patel Priti Patel The Exchequer Secretary

Those are not figures that I recognise, for a start. This is not about Sure Start centres; it is about the value and purpose of children’s centres. I have been to many children’s centres even in the past three months, and I saw a great one run by 4Children in Newham, which I may have mentioned last week when I gave evidence. Integrated services are benefiting parents and children. The same is happening in my constituency.

It is a question of targeting the resources, ensuring that the children’s centres are in the right locations, providing the right support to communities, and providing additional resources, particularly in parts of the country where we know through the troubled families programme that there are challenging families, so that we can focus assiduously on breaking the cycle of deprivation for poor children.

Photo of Pat Glass Pat Glass Labour, North West Durham

At the children’s centres did the Minister see any children? She may know that the Select Committee on Education recently published a report on child care showing that there are no longer any children in more than a third of child care centres.

Photo of Priti Patel Priti Patel The Exchequer Secretary

Let me reassure the hon. Lady that all the centres that I have been to, including the ones in my constituency

Photo of Pat Glass Pat Glass Labour, North West Durham

You were very lucky, then.

Photo of Priti Patel Priti Patel The Exchequer Secretary

I do not think it is about luck at all. These are children’s centres doing the right thing. They are full of children who are benefiting from the provision there, which should be welcomed. Parents are also spending good-quality time with their children, particularly at the start of the new school year. New children are going into centres, where their parents are helping them settle down. Children’s centres—certainly the ones that I have visited—are successfully reaching out to the families most in need; 90% of eligible families are registered. It  has been a privilege to meet many of those families and see their children benefiting from the quality environment provided.

The steps that we are taking to increase choice and provision of child care will, I hope, give the Committee confidence that any fears that the scheme will simply drive up the costs of child care and cause problems with provision are inaccurate. The points made have been welcome, and this has been a constructive debate. I commend the clause to the Committee, and I hope that the amendment will be withdrawn.

Photo of Jim Sheridan Jim Sheridan Labour, Paisley and Renfrewshire North 10:30, 21 October 2014

Before I call the Opposition spokesperson, as this has been an extensive debate, I seek your comments. It would be appropriate for anyone wishing to contribute to a clause stand part debate to make that contribution now. If no one wishes to contribute, I call Lucy Powell.

Photo of Lucy Powell Lucy Powell Shadow Minister (Education)

I thank the Minister for her response, but we will not withdraw the amendment. She says that there is no evidence that the Bill would cause price inflation. I outlined to her, as did many others, that the oral evidence session showed both domestic and international cases in which demand-side injections of cash without strings attached led strongly to price inflation. I know that families will be extremely concerned to see money being spent simply to increase costs.

Question put, That the amendment be made.

The Committee divided: Ayes 7, Noes 9.

Division number 1 Decision Time — Clause 1 - Entitlement to receive money towards costs of childcare

Aye: 7 MPs

No: 9 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Clause 1 ordered to stand part of the Bill.