Clause 15 - Childcare accounts

Childcare Payments Bill – in a Public Bill Committee at 11:45 am on 23 October 2014.

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Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury) 11:45, 23 October 2014

I beg to move amendment 10, in clause 15, page 9, line 4, after may—”, insert—

“() amend this Act to allow childcare accounts to be held by persons other than those specified in subsection (1).”

This amendment would allow the Government to bring forward regulations to allow for the provision of Childcare Accounts to be made available to persons receiving childcare support other than top-up payments.

Photo of Jim Sheridan Jim Sheridan Labour, Paisley and Renfrewshire North

With this it will be convenient to discuss the following:

Amendment 11, in clause 69, page 44, line 28, at end insert—

“() regulations under section 15 that amend this Act to allow childcare accounts to be held by persons other than those specified in section 15(1).”

This amendment would make regulations outlined in amendment 10 subject to the approval of both Houses of Parliament.

Amendment 9, in clause 15, page 9, line 36, at end insert—

“(11) The Chancellor of the Exchequer shall, within three months of Royal Assent, undertake a review of the impact of subsection (2).

(12) The report referred to in subsection (11) above must in particular examine and explore alternative options to the requirement for persons with responsibility for more than one child to set up more than one childcare account.

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

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

It is my pleasure to serve under your chairmanship this morning, Mr Sheridan. I will provide a small amount of context to the clause, to set the amendments in context. The clause provides for child care accounts, the mechanism by which the Government have chosen to deliver the top-up payments to eligible parents. The accounts are central to the support that is provided for by the Bill. Once parents make a valid declaration of eligibility, qualified parents will be able to open an online account, into which they,  their employers and others will be able to pay in money specifically to pay for qualifying child care. Any qualifying payment made into the account—“qualifying payment” is defined in clause 19—will automatically be topped up at a rate of 25%. The maximum amount of top-up that the Government will provide per quarter is £500, so the annual cap will be £2,000.

I pay tribute to my hon. Friends the Members for Stockton North and for North West Durham, who put forward a compelling case on the previous clause, and I was pleased to hear that the Minister will look into reviewing some of the limitations, particularly those relating to disabled children.

In respect of non-disabled children, the clause provides for three different account providers—a point that we will come on to shortly. The Government have chosen National Savings & Investments as the deliverer of that role. If the legal challenge is resolved, money in individual child care accounts will be paid directly from NS&I to qualifying child care providers for qualifying child care.

Subsection (2) specifies that

“Each childcare account must be held in respect of one child only.”

That requirement exists irrespective of whether parents will receive a top-up payment for having more than one eligible child, meaning that such parents will have to open and maintain multiple child care accounts. I am happy to be corrected on any of this, but that is our understanding. Amendment 9 seeks to understand why the requirement is necessary, and whether alternatives should be explored that would make it less burdensome for parents. It seems that we are moving from a system that, albeit available to fewer parents, is praised for the fact that employers take on the burden of administering the vouchers on behalf of their employees, which removes a lot of the burden from parents, to a system in which the burden is placed wholly on parents. As we have discussed, there are concerns about that principle.

Subsection (2) takes that principle a step further by implying potentially impracticable solutions for parents who have more than one eligible child. Can the Minister provide clarity on how the mechanisms will work? I appreciate that she entered her role after the Bill had been drafted, and some months after the scheme was initially devised and the Government’s consultation and response were published, but it would be helpful if she could elaborate on the alternatives considered, if any, by the Government before the final proposal was produced.

We heard evidence last week from Frances Norris of the Association for Professional Nannies, who raised particular concerns about the requirement, particularly on nannies and childminders. When asked how she thought the scheme would operate for parents employing nannies, she suggested that parents would indeed have to open two, three or four child care accounts and make two, three or four separate payments to one nanny or childminder. She felt the issue had been insufficiently explored at the consultation stage. She said that

“it is impossible to apportion correctly the amount of child care provided to any single child by a nanny.”––[Official Report, Childcare Payments Public Bill Committee, 14 October 2014; c. 10, Q8.]

She gave the example of someone with one child at school and two children at home, all of whom were under the care of the nanny or childminder at different times of the day.

I want to press the Minister for some clarity on those concerns. Is she aware of the issues that have been raised? Will parents have to open multiple child care accounts and make multiple payments to one carer, nanny or childminder? If so, what plans are in place to ensure that the burden on parents is eased and that the process is made as simple as possible? A single log-in for parents has been mentioned, but if the Minister could provide reassurance on what that will mean in practice, that would be helpful for the Committee and of interest to stakeholders and parents.

Simplicity is often spoken of as one of the scheme’s key objectives, but it does not seem to be the order of the day when parents have several eligible children. Have the Government assessed how many families are likely to have multiple accounts and to make multiple payments to one child-carer? It would be interesting to hear what analysis they have of the number and type of families who will potentially be affected.

Amendments 10 and 11 relate to concerns raised in last week’s evidence sessions about the interaction with universal credit. Subsection (1) defines when child care accounts can be used. It states that they can be used by a qualifying person “receiving top-up payments” and that they must satisfy

“the requirements imposed by or under this Act.”

The concern is that those requirements preclude child care accounts from being used for or by parents on any other form of Government support, such as universal credit. Although the Government have made it clear that child care accounts are purely to provide top-up payments under the Bill, some witnesses we heard evidence from last week suggested that such accounts could be hugely beneficial for other low-income families.

Amendment 10 therefore provides for regulations to allow the requirements to be repealed in the future. It allows the Bill to proceed as drafted, but it keeps open the possibility that child care accounts could be extended for the purposes of other Government child care support schemes, and it provides for that to be done by way of regulations. That should be attractive to the Government, given that universal credit is very much in its infancy. In order to avoid having to revisit the entire scheme, and as the Minister said in response to the previous clause, it is important that parents on universal credit and in other Government schemes are treated on a par with parents under this scheme, and the amendment would enable the Government to ensure that that happened.

Photo of Alex Cunningham Alex Cunningham Labour, Stockton North

My hon. Friend outlines carefully and comprehensively what an administrative burden this could be on families. What troubles me, given what we heard from our witnesses, is the issue of arrears and the way the system can be so far behind in paying people. Families can face the prospect of borrowing money again and again just to cover their child care costs, because the Bill’s provisions do not allow for earlier payment.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

My hon. Friend raises a key issue. I reiterate that the Minister has expressed a desire to ensure that the treatment of universal credit parents is on a par with the treatment of those who can access the top-up scheme. Ensuring that that alignment is absolutely correct is vital for the reason my hon. Friend  sets out: we could end up penalising parents on universal credit when they switch to the new scheme. They would start their working life and have their new child care arrangements but be in debt, which could put many of them in tremendous difficulty.

In last week’s evidence sessions, we heard a number of reasons to allow for the possibility of alignment. First, it would minimise the enormous complexities involved in the relationship between the new scheme and other Government support child care schemes. Secondly, as my hon. Friend said, with respect to universal credit, it would mean that the Government would be paying support in advance of the costs being incurred, rather than in arrears, which would mean that those households on universal credit that were on the lowest incomes would be treated in the same way as those in receipt of top-up payments, a parity of which we all recognise the benefits.

We have discussed at length the inherent complexities in the scheme and in its relationship and interaction with other schemes. That is particularly true for universal credit; parents on fluctuating incomes could find that they move between the schemes on numerous occasions as their circumstances changed. Victoria Todd of the Low Incomes Tax Reform Group outlined particular concerns last week, when she said:

“I think people at the lower end of the income scale will be caught in a very difficult position, because if you have higher income and you are not currently receiving any child care support, it is fairly straightforward. The scheme, as a stand-alone scheme, is okay, but when you introduce all these complexities”— which we know exist—

“it is a problem.”––[Official Report, Childcare Payments Public Bill Committee, 14 October 2014; c. 52, Q101.]

There are serious concerns about whether the better off calculator that is being developed will provide parents with sufficient information to enable them truly to be informed about their decision. A better-aligned process in which Government support is provided through a single mechanism—child care accounts—across top-up payments, and which includes universal credit recipients and others, could be hugely beneficial to those parents who most need Government support, and who will have to deal with the inherent complexities of the scheme.

We also heard last week from Sam Royston from the Children’s Society, who summed things up as follows:

“We welcome some of the really helpful tools given for budgeting for households on tax-free child care, particularly payments in advance of having to pay out child care costs. We would like to see households on lower incomes treated in the same way”.––[Official Report, Childcare Payments Public Bill Committee, 14 October 2014; c. 61, Q124.]

He also said:

“We think there are several things that have been done with the introduction of tax-free child care that will be beneficial to many of the households receiving support, and that is particularly true of using top-up accounts”.––[Official Report, Childcare Payments Public Bill Committee, 14 October 2014; c. 62, Q127.]

Witnesses raised an issue that lies at the very heart of universal credit: many low-income parents will have to find some way to pay for their various costs, such as child care—often one of the biggest burdens for parents and households—some three to four weeks before they actually receive their universal credit award. Those parents receiving top-up payments, who, one could argue, are in a slightly better-off position in terms of income, will  have no such difficulty, because they will receive Government support before they pay for their child care.

What are the Minister’s thoughts on those issues? Does she appreciate that child care accounts can be an important budgeting tool for households in receipt of child care support through tax credits or, in due course, universal credit? Given that child care support through universal credit will be paid in arrears, does she accept that child care accounts could provide a far more effective means of providing support that does not potentially leave low-income parents in debt?

The Committee should bear those points in mind when considering the amendments, which suggest a course of action that the Government could take. They do not mandate that that course must be taken now, but leave the door open as universal credit is rolled out. I appreciate that the Minister is not responsible for universal credit, which I am sure she is relieved about. Nevertheless, the amendments would open the door for the Government to make changes in due course to provide a much smoother transition for parents on universal credit as the interaction between the new scheme and universal credit becomes more apparent.

I have made my arguments to the Minister, and hope that the Government can find a way to support the amendments, which would support parents moving from universal credit into the top-up payments scheme.

Photo of Priti Patel Priti Patel The Exchequer Secretary 12:00, 23 October 2014

Amendment 9 would require a review of the requirement to hold separate child care accounts for each child where there is more than one eligible child in a family. Under the scheme, support from the Government will be calculated on an individual basis rather than the combined child care costs of the household. That is a key principle of the scheme as it ensures that every child receives the same level of support based on their individual child care costs. If entitlement was calculated on a household basis, some children could receive more just because they have siblings who do not use their full entitlement, which would be unfair. As there is no limit on the number of children a family can claim for, the scheme ensures that all children will benefit equally, regardless of the size of the family.

As the scheme has been designed on the basis of individual entitlement, it follows that the IT and banking system must be able to link payments in and out of accounts to individual children. Having a separate account for each child will make the scheme simple to operate and, importantly, enable parents using the online tool to see clearly how their top-ups have been calculated, how much of the child’s entitlement has been used and what child care payments have been made to each child. Such transparency will make it less likely that mistakes, such as prohibited payments, will occur.

We are clear and determined that the scheme will be smooth and straightforward for parents to use, and that the system is designed to make it simple to manage multiple accounts. Reconfirmation dates, as we have touched on before, for all the eligible children in a family will be aligned and parents will be able to access all their accounts online through one simple login and  navigate quickly and easily between them. It is a similar experience to online banking, where a single login can show, for example, savings and ISA accounts. Having a separate account for each child delivers clarity and simplicity to the scheme. The design of IT systems and processes will ensure that we keep the scheme as simple as possible and do not create any complicating complex administrative burdens.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I appreciate the Minister’s positive outlook regarding complexity for parents, but one concern they will have is falling foul of the scheme and, as she mentioned, prohibited payments. In cases where there are three children and one carer, will there be clear Government guidance to ensure that parents do not feel nervous about possibly falling foul of the scheme and having to pay back some of the top-up?

Photo of Priti Patel Priti Patel The Exchequer Secretary

The shadow Minister makes a valid point. We do not want parents to—I do not like the term—fall foul. It is not about falling foul. The guidance we will provide is about simplicity and showing parents how the scheme works. That is the reason why we are working with parents and stakeholders on the design. That is incredibly important. We do not want parents to feel that they have done something wrong; on the contrary, it is a positive mechanism to provide financial support for child care for their children. We are clear about that, and it is worth concentrating on the terminology and language we use here. It is about being positive and open. Having one login and being able to see the list of children’s accounts enables that transparency and clarity, which is important.

I welcome the debate on amendments 10 and 11, and I will set out the context of the basic rules associated with clause 15 that apply to child care accounts and the way they are governed and overseen. Those accounts will provide a simple mechanism for parents to deposit their own funds, receive the top-up payments and make payments to child care providers. Obviously, that is about ensuring that public funds are spent for their intended purposes.

We have touched on delivering simplicity, which is important. Registration will be as straightforward as possible. Again, the process is being designed with parents in mind, and we are working on that with stakeholders.

Amendment 10 would allow regulations to be brought forward to permit parents who receive support from other schemes, such as universal credit or tax credits, to receive payments through a child care account. I should remind the Committee that the new scheme is fundamentally different from schemes such as universal credit and tax credits, where support is paid into accounts for different purposes and in different ways to meet different circumstances from those being addressed by tax-free child care.

Let me take universal credit as an example. It is paid by the Government as a monthly lump sum and includes support with child care costs. That support is in the form of cash, and its use is not restricted solely to meeting child care costs. The monthly payment under universal credit is not ring-fenced, and it is intended, as we have discussed, to support households in focusing on budgeting on a monthly income. The objective is to  ease the transition into starting, or going back to, paid work, which is why universal credit is paid in a similar way to a monthly salary. Moving instead to a system based on child care accounts that separates support for child care costs from other support would do what we are trying to avoid: complicating the system for those on universal credit. We have spoken about simplicity in the implementation of tax-free child care, and the last thing we would want to do is bring in any complications.

In addition, paying support for child care through a child care account, while making other support available in the form of direct payments into a bank account, would add further complexity to the universal credit system and potentially increase the administrative costs of running the two systems in parallel.

What is more, there are other ways the Government are ensuring that parents claiming universal credit get the child care support they need. The flexible support fund can be used for a wide range of activities, including child care, to enable a claimant to start work. In addition, budgeting advances will be made available to families under universal credit. Those are designed to help claimants meet intermittent household expenses, and they can help towards meeting the costs of obtaining or retaining employment, including child care costs.

More generally, amendment 10 would not work. It would not allow parents in receipt of support from other schemes to receive payments through a child care account. Clause 15 does not specify who may hold child care accounts. Therefore, widening its scope, as this amendment seeks to, would require more fundamental changes to the eligibility conditions in the Bill. I therefore remain unconvinced by the amendment, and I would also like to resist amendment 11, which deals with the parliamentary procedure for any regulations brought in under amendment 10. I therefore ask Members not to press the amendments.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I appreciate that the Minister has taken on board the reasons why we tabled the amendment. I am disappointed that the Government are not willing to consider leaving the door open to bringing those on universal credit into line with those who move out of universal credit, who can benefit from the top-up payment system.

I fear that we may have to revisit the issue once universal credit is rolled out, because, although the Minister outlined the various kinds of Government support that should be available for the parents affected, there is still huge concern that it will be difficult for some of our most vulnerable parents to make the transition into work and to take on responsibility for child care costs in their entirety. That will present difficulties for some of the lowest paid working parents, but I appreciate that the Government are not willing at this stage to leave the door open, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 ordered to stand part of the Bill.