The clause allows for compensation to be paid to parents who missed top-up payments through no fault of their own. Regulation 14 of the draft regulations sets out three scenarios in which compensation might be payable. The first scenario is that a person wins an appeal on review, but the review or appeal process takes several months, after which they are allowed to receive the top-up payments to which they were entitled.
The second scenario is that a person is waiting for employment and support allowance or carers’ allowance to be paid to them in order for HMRC to confirm their eligibility, so their declaration is valid. Again, that process could take several months, so the person would be entitled to compensation. The third is that a person is waiting for disability living allowance, personal independence payment or armed forces independence payment to be paid for HMRC to confirm their eligibility.
I do not want to distract the Committee by discussing how long it might take someone to get PIP or DLA eligibility under the current system, as I trust that Ministers will keep on top of that issue. However, given that each of those three scenarios could take several months, and the third one could take a year or more, will the Minister clarify whether the payment will only ever be the 20% of the child care costs that the parent would have otherwise got during that period, up to the maximum amount? Alternatively, will there be additional compensation for families who, for example, incurred extra costs and got into debt while awaiting such a payment? The Bill is not clear on that, so will there be compensation over and above any entitlement, given that such cases could take months and months and be of great cost to households?
Clause 61 requires HMRC to pay compensation to a parent where they have been unable to receive support under the new scheme in certain circumstances. It requires HMRC to pay a parent an amount equivalent to the top-up payment that they should have received but, in fact, did not for reasons outside their control.
The effective compensation will be 20% of the child care costs incurred during the time in which a parent was unable to access the scheme. That amount will be subject to the same limit that applies to top-up payments in the schemes: an individual payment will never exceed £2,000 a year.
In such circumstances, it is only right that parents should receive a payment in compensation. For example, a person might have successfully appealed against a decision by HMRC that prevented them from opening an account, but, by the time that appeal was resolved, they might no longer need the account. They should be compensated for the top-ups that they would have received during that process. It is right to acknowledge that sometimes things go wrong and that we need to put them right. The clause allows HMRC to do that.
I said that the maximum amount of compensation would be 20% of the amount spent on qualifying child care costs, and I will give an example. On 1 January, HMRC might decide that a person who has applied for a child care account is not eligible. That person might then appeal successfully against that decision, so HMRC opens a child care account for them on 1 April. That person would be able to get that compensatory payment of 20% for the child care costs that they incurred during that quarter. That payment would be subject to the limits that would have applied if they had had a child care account open during that period. Therefore, in that case, the payment would be no more than £500.