Clause 12 - The person and his or her partner must not be in a relevant childcare scheme

Childcare Payments Bill – in a Public Bill Committee at 3:15 pm on 21 October 2014.

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Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury) 3:15, 21 October 2014

I beg to move amendment 8, in clause 12, page 7, line 43, at end insert—

‘(7) The section shall not come into force except as specified in paragraph (a) below.

(a) the Chancellor of the Exchequer shall bring the section into force by order within six months of the passing of this Act.

(b) a statutory instrument containing an order under paragraph (a) shall be accompanied by a report which details—

(i) a comparative analysis of the beneficiaries of top-up payments versus other relevant childcare schemes;

(ii) what additional package of measures will be enacted to raise awareness and understanding of the comparative benefits of relevant childcare schemes; and

(iii) what information will be provided to persons to enable them to make informed decisions about which scheme will be most beneficial to them.’

Clause 12 covers the seventh eligibility condition, providing that a person or their partner cannot be in another relevant child care scheme, including employer-supported child care, universal credit or directly contracted child care. That ties in with clauses 62 and 63, which provide for the restricting of the employer-supported child care scheme to new entrants. We will come to those clauses later, but it might be helpful to remind the Committee to bear them in mind while discussing clause 12 and our amendment, because implications flow from the later clauses.

Clause 12, along with clause 11, which we debated at length, will effectively force parents to make a choice between various schemes—they may be eligible for all three. My hon. Friend the Member for Manchester Central set out at some length the enormous potential for complications if families edge in and out of eligibility or if their circumstances fluctuate over time. The addition of top-up payments will present another option for parents when choosing which form of Government support for the cost of child care is most appropriate.

There are various factors to consider, including the intricacies of the schemes and how they will apply to a parent or care-giver, and what the tangible benefit will be to a parent or care-giver. I guess the fundamental question that parents will ask themselves is which scheme will make them better off. Many parents will face that critical choice next year, so how will the Government ensure that parents are properly equipped to make it? What information will be provided to parents to ensure that that decision is as straightforward as possible for them? Is it even possible to make it a straightforward choice?

That is the context of amendment 8, which calls on the Government to provide a comparative analysis of the two schemes—we know that that would be useful to parents—and to explain what additional measures they will introduce to raise parents’ awareness of the choice they will face. It also asks the Government what information they will provide, once parents are aware of the importance of that choice, to help them to make it. Those are our key questions.

We had some useful discussions during the witness sessions last week, when we managed to get to the nub of some of the issues. In the final evidence session, we discussed them at length with the Minister and officials. We know that the Government intend to design and introduce an online tool to help parents with that choice. The scheme’s director in HMRC suggested that it is already working with the Government Digital Service on what she described it as

“a really easy to use online calculator.”––[Official Report, Childcare Payments Public Bill Committee, 16 October 2014; c. 116, Q232.]

She made it clear that it will be not only for parents deciding between top-up payments and universal credit, but for parents having to decide whether to move off employer-supported child care and opt for other child care schemes or top-up payments.

As we know from previous examples, such as HMRC’s child care indicator, which compared employer-supported child care support with tax credits, such tools are not  always simple to use or effective, in spite of HMRC’s best efforts. Last week, we heard from the Low Incomes Tax Reform Group about its concern that a calculator could be impossible to create, particularly one that would manage to cover all scenarios. That said, its written evidence also made some recommendations about what a successful tool would need to be able to do, namely, give parents projections of how they would fare under each scheme if their circumstances were to change. That has to be the key.

As I have mentioned, the issue with clause 12 is that parents will need to make an active choice between one scheme or another. However, once parents have chosen to step away from employer-supported child care, or not to take it up while it is still available to them because they know that top-up payments are on the horizon instead, they will not be able to reverse their choice. In other words, there is no going back for parents if or when their circumstances change, whether because they are spending less on child care, having another child or changing employer.

In spite of Government commitments to make transitions between schemes as simple and as smooth as possible, parents on top-up payments will not be able to return to employer-supported child care if their circumstances change. As a result of clauses 62 and 63, which we will consider later, employer-supported child care will no longer be available to new applicants after some point in autumn 2015.

Photo of Maria Miller Maria Miller Conservative, Basingstoke

I have a small point to make. Circumstances do change, but must we not be careful not to make a good and extremely well thought through plan more complex than it needs to be to take account of a very small number of situations in which circumstances might change? Surely parents would like a simpler system, rather than having more complexity built in.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I understand the right hon. Lady’s point, which is the point that we are making in amendment 8. The system is already complex, including for those who will be transitioning between universal credit and the top-up payment system. Those on child care vouchers will need to decide whether to keep the vouchers or to transition to the new system. Circumstances change, but that is outwith many parents’ control. The issue that we are debating, however, is the information made available to parents to help them make that choice. As much as the Government hope to simplify the system with their new scheme, there are complexities in the system already that the new proposals will do nothing to simplify. They will add an extra level of complexity for parents during the transition period when they need to make the decision about what arrangement is better for them.

In an ideal world, the whole system would be simplified, but in reality it will get increasingly complex, so the information available to parents about which choice is better for them is key. Surveys are suggesting that parents are not being properly informed—the worry is that they will not be in future either—about the changes that due to take effect or how they should go about making the decisions on whether to transition from one form of child care support to another.

The Childcare Voucher Providers Association conducted a survey of more than 23,000 parents in June 2014, and some of the findings about parents’ awareness and the need for more information were particularly interesting. The survey found that two thirds of parents believed that they had been insufficiently informed about the new scheme, or about whether they would be better off continuing to claim the employer-supported child care vouchers or transitioning to the new scheme in autumn 2015; and that 7% said that they would definitely move to top-up payments, while 67% said that they required more information. Almost a third said that they would remain on employer-supported child care. That survey suggests that some parents think they might be better off staying on employer-supported child care, but also that parents need more information before they can make that decision.

We heard some interesting and valuable evidence from payroll and human resources practitioners last week. Charles Cotton from the Chartered Institute of Personnel and Development said:

“A lot depends on how many winners and losers there are in an organisation…it is important that we have information to communicate to our employees, so we can let them know that there is a change and to say, ‘In these circumstances you may be better off going to the new regime’, or, ‘Under these circumstances you may be better off sticking with child care vouchers.’”––[Official Report, Childcare Payments Public Bill Committee, 16 October 2014; c. 76, Q146.]

He went on to suggest that the clear message from his organisation’s members over the summer was that they as employers needed more information and clear guidance on the introduction, so that they could plan ahead and start providing meaningful advice to their employees to help them make the all-important decision on which scheme to choose.

Photo of Rob Flello Rob Flello Labour, Stoke-on-Trent South 3:30, 21 October 2014

Has my hon. Friend given thought to the situation where an employer, acting in good faith, gives some advice to an employee to switch from one scheme to another, and that employee finds that they are worse off and goes back to the employer and says, “You gave me advice. You might have been acting in good faith, but you have cost me money”?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

My hon. Friend outlines a nightmare scenario for employers. I suspect that they might be nervous about giving advice to their employees for that reason, especially given the complexity of the situation and the changing circumstances. For example, they might advise an employee to go one way, then the employee’s child might suddenly reach school age, and their entitlement for two children would reduce to one, meaning that it would have been better to stay on the voucher scheme. They might then feel frustration with their employer.

That scenario reiterates the point we are making: the Government’s role in this is vital. Employers will be nervous about giving advice to their employees, and they will very much depend on the Government being able to provide meaningful information, advice and tools to help employees make decisions. I suspect that employers will be keen to direct employees in the direction of Government-provided information sources, rather  than ending up in the nightmare scenario of being held responsible for a reduction in child care support. I do not think that any employer would wish to be left in that situation.

Samantha Mann of the Chartered Institute of Payroll Professionals pointed out that information, as well as being provided to employers, needs to be communicated to the media and to professional technical writers, so that they can build it into training courses and advise employers. Have the Minister and her Department factored such requirements into the Government’s communications strategy? Will she say a bit more about that and provide a bit more detail on how exactly the information will be communicated to employers and individuals, who will ultimately be the ones to take the decisions?

There have been various strands of work to attempt to understand the circumstances in which parents will be better off under each scheme. Obviously, such calculations depend on a whole range of changeable factors, but often the work has concluded that some parents will find themselves better off staying on the employer-supported child care scheme unless their child care expenditure is relatively high. Officials have suggested that work is under way on a better off calculator. Presumably the Government have some idea of which scheme different parents will be better off under. What exactly will the better off calculator involve? Will the tool understand and take account of the nuances between the two schemes and how the differences could benefit some parents as opposed to others?

The consultation response included a fairly crude table comparing the two schemes, which suggested that parents will be better off under top-up payments because there is the potential to receive £2,000 in support. On the face of it, that is more than employer-supported child care currently provides. However, that is clearly a rather blunt comparison, and it is pretty useless given the intricacies and nuances of the two schemes, not to mention myriad differences in parents’ circumstances. Can the Minister reassure the Committee that the online tool that is being developed will be far more sophisticated than that, and therefore far more useful to parents?

Some of the witnesses who gave evidence last week urged the Government to be a bit more up-front and transparent about the realities of the new scheme. There is no point in the Government painting an image of all parents being better off and benefiting to the tune of £2,000 per child, when in reality the majority of parents who will focus keenly on the decision tool to decide whether or not they can work will not receive anywhere near that amount of top-up payment—it is likely to be at a much lower level.

In the previous debate on clause 11, we discussed serious concerns about the complexities of and interactions among the various schemes, and how parents’ decisions will be affected. Later clauses in the Bill restrict new entrants to the employer-supported child care scheme so that only those parents who are on the scheme by a certain date next year—I believe that that has not been made clear—will be able to stay on it. The stakes are therefore very high for those currently on the employer-supported child care scheme. Should they come off it and opt for top-up payments? There will be no going back for those parents once they have made that decision,  so the key question that the Minister must answer to reassure the Committee is this: how is she going to ensure that parents understand the complexities and the significance of their decision? How will parents be helped to make up their minds? I hope the Minister can reassure us so that we do not have to push the amendment to a vote.

Photo of Priti Patel Priti Patel The Exchequer Secretary

I am delighted to discuss clause 12 because it gives me the opportunity to alleviate the gloom and pessimism that has come from the Opposition, and to be positive about how the Government are going to communicate tax-free child care.

Clause 12 sets out the seventh of the eligibility conditions for the scheme, as has been well documented already and as is clear in the Bill. As I said earlier, the new scheme represents a vast improvement on employer-supported child care. By definition, the current scheme is not available to anyone who is self-employed, whereas the new scheme will, for the first time, be available to the employed and the self-employed alike. An even greater flaw in employer-supported child care is that its availability depends on whether employers offer the scheme to their employees. As I have already highlighted, HMRC estimates that less than 5% of employers currently make the scheme available to their employees. People are missing out, but the Bill will do something about it.

On the other hand, the availability of the new scheme to those in employment will no longer be a matter of luck. Instead, provided that they meet the eligibility conditions, anyone can receive support. It is hopefully self-evident that the new scheme marks a massive improvement on what it will replace. As we have said previously, it is only right that a parent should not be able to access Government support twice.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The Minister’s language goes to the heart of the problem. The Government continue to make blanket statements that parents will be better off under the new scheme, and that it is a better scheme all round. That sends out misleading messages to the lucky people who are currently on the employer-supported child care scheme who will have to make a very difficult decision about whether to switch to the new scheme or stay with their current provision.

Photo of Priti Patel Priti Patel The Exchequer Secretary

I disagree with the hon. Lady. The point about tax-free child care is that it opens up the scope for other families to access child care support. We should all welcome that. That is not about rhetoric or language because it is a fact. That is the Government’s mission, not only with the Bill, but through the other measures that we have undertaken and that the Committee has touched on in our discussions about previous clauses.

Photo of Maria Miller Maria Miller Conservative, Basingstoke

Am I right in saying that 95% of employers do not offer employer-supported child care, which excludes more than half of employees from support? Indeed, it excludes all self-employed parents.

Photo of Priti Patel Priti Patel The Exchequer Secretary

My right hon. Friend is absolutely right. That is where the new scheme is groundbreaking compared with the previous schemes that are in the marketplace. Those schemes are restricted, but the new one is about providing support for many more working parents and households, and that should be welcomed.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The Opposition do not oppose what she is saying about opening up eligibility to additional parents and to self-employed workers; that is all to be welcomed. The point of amendment 8 is to ensure that those who are currently on employer-supported child care schemes are given the information they need to support them in deciding whether to take the new scheme or not. The Minister’s comments should be focused on that, as that is where the concern lies.

Photo of Priti Patel Priti Patel The Exchequer Secretary

I will come to those points, but I want to emphasise that the scheme is very positive and is about making child care support more available to families, parents and households who do not currently have access to it.

To ensure that employers and parents are aware of tax-free child care and familiar with the changes to the current arrangements well in advance of its introduction, we intend to communicate it to them using a wide variety of channels. I emphasise again that the scheme is not being designed by officials in isolation; they are working with parents, stakeholders and employers. It is right and proper that we do that to get it right. We are planning to advertise the scheme online, as has been discussed, and to target parents through the range of communications means that are out there—not just digital, but print communications too. Many of the stakeholders that we have engaged with, and those that the hon. Lady has referred to, have a positive role to play in communicating with and engaging parents. We welcome that.

It is fair to say that while we are taking the Bill through Committee, we are almost speculating about what the methodology will be. We aim to ramp up all communications in the spring of 2015 to support the introduction of an online tool that will allow parents to check their entitlement under tax-free child care. As I mentioned in the discussion on clause 11, we have just published draft guidance on the scheme. The aim is to develop the guidance so that it is clear, and so that it is easy for consumers and parents to familiarise themselves with tax-free child care.

For parents who are already in the existing scheme, we want to give them the choice of whether to stay in it or move on to the new scheme. We will publish detailed guidance and an easy-to-understand tool to support them in that decision making. Through that tool, parents will be able to understand their personal details and circumstances so that they can make the choice—it is important that parents make that choice themselves. The two schemes are obviously different, but through that tool in particular, and through communications, it is important that we do the right thing and provide all the necessary information to support parents and help them make an informed choice about the type of schemes that are available and how they can go about making their decision.

As I have said—I will not labour the point again— the new scheme will address many of the failings of the existing scheme. We are keen on, and committed to, ensuring that we do our utmost to secure the communications, deal with the facts and engage with parents so that they can make an informed choice. On that basis, I ask the hon. Lady to withdraw the amendment.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury) 3:45, 21 October 2014

I thank the Minister for her response, and I hope that she takes on board the complexity that she has potentially introduced for those who are currently in receipt of employer-supported child care, and who will need to make the difficult decision about transitioning on to the new scheme. I appreciate that the Government and HMRC do not yet have all the details of how they will go about getting the information out there and ensuring that parents feel confident about making the choices that they need to make, but I am reassured that we have put our concerns on record and communicated to the Minister and her officials how vital it is that that information is available to parents. We hope that it will be sufficiently sophisticated to help parents make those difficult decisions. We appreciate her reassurance that the issues have been taken on board, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 ordered to stand part of the Bill.