With this it will be convenient to discuss the following:
Clause 63 stand part.
New clause 6—Grandfathering employer vouchers—
‘Sections 62 and 63 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 the impact of the restrictions under sections 62 and 63 on—
(i) the value of Government childcare support available to eligible persons;
(ii) the take-up and availability of family-friendly schemes in businesses; and
(iii) the participation rate of employers in childcare support schemes.’
New clause 6 is a probing new clause to explore further the impacts of grandfathering employer-supported child care on two issues that we heard about during our oral evidence sessions. The first is about family-friendly business practices in companies who support employees through the employer-supported child care scheme. The second is about whether those people who would be better off staying in the ESC scheme—single-earner households and others—will find that, over time, they cannot do that because their scheme is being phased out. We want to know what the Government intend to do about that.
As we have discussed previously, the so-called tax-free child care scheme is in many ways a superior version of the employer-supported child care scheme. It will certainly be available to many more people—the self-employed in particular, which is to be welcomed. However, as we heard in the oral evidence sessions, there are concerns about what role employers will continue to have in family-friendly business practices, because the current scheme enables them to have broader conversations with their employees. The Government have committed to
“explore how employers could play a role in Tax-Free Childcare if they wish to do so.”
Will the Minister expand on how she sees that happening?
The intention of the Bill is to give many more families the benefits of employer-supported child care, which is why we are talking about the new proposals. However, there are some families who are not going to be eligible for tax-free child care, but are currently eligible for employer-supported child care. Other families are better off staying in the employer-supported child care scheme than moving to tax-free child care.
Some employers will stop offering the employer-supported child care because of demand. What assessment have the Government made of the impact of that on those families? Has the Minister considered that? Those are the main issues around grandfathering the employer voucher schemes.
Clauses 62 and 63 close to new entrants—or grandfather—the tax exemption and national insurance contributions disregard currently paid to employer-supported child care. However, they permit those already receiving such support to continue to do so for as long as they work for the same employer and the employer offers the scheme. New clause 6 would make the grandfathering of employer-supported child care contingent on the Government’s publishing a report within six months of Royal Assent. The report would cover the impact of closing the existing scheme to new entrants.
On the value of support received by parents, family-friendly employee packages more generally involve the participation of employers in the child care support schemes. We have repeatedly set out the reasons why the new scheme is a vast improvement on the current arrangements—most importantly, the extension to working families who meet the eligibility criteria. We have also been clear that, depending on circumstances, some parents currently in receipt of support under employer-supported child care will be better off staying in that scheme rather than moving to the new one. We have emphasised that existing users of employer-supported child care will be able to continue to receive support for as long as they choose to do so, provided that they remain with that employer.
As we have touched on before, alongside wider guidance and support we will provide a calculator and the mechanism to help parents decide which scheme works best for them. The new clause refers to the effect of grandfathering the existing scheme on the participation of employers in child care support schemes and the more family-friendly packages.
We are not abolishing the employer’s role in child care support; we are closing to new entrants the tax exemption and national insurance disregard for child care vouchers and directly contracted child care. However, that is very much about the proactive role of employers that offer family-friendly packages to their employees. We cannot escape the fact that fewer than 5% of employers currently offer employer-supported child care, which leaves out more than half of all employees, as well as all the self-employed. That is why we are having this discussion.
The new scheme will ensure that all working families, whether employed or self-employed, will be able to access the support provided they meet the eligibility conditions. Employers will be able to play a role in the scheme, if they want to, as part of the wider family-friendly employee package. For example, during the consultations, dialogues and discussions that we have had, many employers have told us that their role could include the provision of information to employees about the employer making payments into the child care account on behalf of their employee.
We estimate that about a million families will be better off once the scheme has been introduced, which is of course a vast improvement for those who currently receive no help. I have explained why the new scheme will be a vast improvement on the current one, how parents who are already in the employer-supported child care scheme will be able to remain in it if they prefer, and how employers will still be able to be involved in the new scheme. I therefore see no reason for the new clause to be added to the Bill, so I urge the hon. Lady not to press it.
I am happy not to press the new clause, but I urge the Minister to bear in mind those families who, over time, will find themselves worse off because they are prohibited from remaining in an employer scheme that is being wound down. Over the coming years, we should all keep a watchful eye out to ensure that employers really do play their part in the family-friendly package.