Clause 62 - Restrictions on claiming tax exemption for childcare vouchers

Part of Childcare Payments Bill – in a Public Bill Committee at 10:15 am on 28 October 2014.

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Photo of Priti Patel Priti Patel The Exchequer Secretary 10:15, 28 October 2014

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.