Childcare payments

Small Charitable Donations and Childcare Payments Bill – in a Public Bill Committee at 10:15 am on 18th October 2016.

Alert me about debates like this

Question proposed, That the clause stand part of the Bill.

Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury

We now change tack slightly. The second issue addressed by the Bill is childcare payments. Clause 5 will make a number of minor, technical amendments to the Childcare Payments Act 2014, which introduced a new Government scheme to provide tax-free childcare. We had a broader debate about childcare on Second Reading, but I make it clear to the Committee that these are technical amendments to ensure that the scheme works for the benefit of parents who claim financial support for their childcare costs. I will first explain how the tax-free childcare scheme will work and then explain the changes and why they are needed.

Tax-free childcare will support working parents and help with the costs of childcare, enabling them to go out to work or to work more. Parents will be able to set up a childcare account online, deposit money into their account and receive a 20% top-up from the Government to pay their childcare providers. For every £8 a parent pays towards their childcare costs through the account, the Government will provide a top-up of £2. Parents will be able to receive up to £2,000 of support towards childcare costs of up to £10,000 per child per year, up to the age of 12. That support will be doubled for parents of disabled children, who are entitled to up to £4,000 top-up on childcare costs of up to £20,000 per year, up to the age of 17.

Tax-free childcare is digital by default. Parents first apply for and then use their childcare account online, although non-digital routes will of course be provided for those unable to use the default digital form. HMRC will check a parent’s eligibility for tax-free childcare. Parents will then be able to open and pay into a childcare account for each of their children, and the Government will top up the account. Parents can then use their childcare account to pay for a regulated childcare provider.

We are ensuring that childcare accounts are as simple as possible for parents to operate, because we do not want to add to their burdens. Once HMRC has confirmed that a parent is eligible, the parent is entitled to use the scheme for a three-month entitlement period. Each quarter, parents must confirm their circumstances and that they still meet the eligibility requirements, with a quick online declaration for all their children at the same time. Tax-free childcare will be trialled with more than 1,000 parents later this year and gradually rolled out from early next year.

Photo of James Heappey James Heappey Conservative, Wells

I speak as a father. My wife and I take advantage of exactly this scheme. Digitising the process once the employer has put it in place is very helpful, but will the Minister look at digitising the process that the employer follows to get the childcare vouchers registered initially? Most employers are still using the paper mechanism for that, which delays the system somewhat.

Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury

I note my hon. Friend’s point and will ensure that it is looked at. It relates to a different aspect of the childcare provision that the Government provides, but he neatly illustrates the point that we do not want the process for getting support for childcare to be onerous. Tax-child childcare, which is designed to be digital by default, is a move forward.

Photo of Bridget Phillipson Bridget Phillipson Labour, Houghton and Sunderland South

Will the Minister set out what conversations she is having with colleagues in the Department for Education about ensuring adequate places for children? She may be aware that the Public Accounts Committee has raised concerns about the number of childcare places available to parents. It is all good and well to put schemes in place to help parents, but we need to make sure that there are places for children to take up.

Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury 10:30 am, 18th October 2016

Although not directly germane to the Bill, I am happy to draw the hon. Lady’s remarks to the attention of colleagues in the Department for Education. I suspect that they have already noted the PAC’s reports—I think most of us as Ministers would take great note—but I will of course ensure that they see the point she has made.

To reassure the Committee, HMRC has been user-testing its systems with parents with regard to tax-free childcare. Over 400 parents have been consulted so far. That allows HMRC to improve the services it offers to parents. As a result of that user testing, the first change that the Bill proposes relates to the quarterly reconfirmation process. HMRC has the power to change the length and entitlement period to make parents’ online journey as simple as possible. At the moment, they can change the standard three-month period by up to one month, so entitlement periods of between two and four months can be set. The one-month rule does not allow reconfirmation dates for all of a parent’s children to always be aligned—for example, where a parent applies for a childcare account for an additional child at a later date, or if a new household is formed. If the application is made in the middle month of their existing entitlement period, then alignment for reconfirmation is not possible.

Let me give the Committee an example. Helen is returning to work after maternity leave for her second child, Jenny. She already has a childcare account for her first child, Iain. Her current entitlement period for Iain runs from January to March. She is returning to work on 15 February. Whether the first entitlement period for Jenny is shortened to two months or lengthened to four months, it will not align with that for Iain. Therefore Helen is faced with two online reconfirmation journeys a quarter instead of only one. This amendment to the Childcare Payments Act will allow entitlement periods to be varied to between one month and five months. That will allow HMRC to always give parents such as Helen a single reconfirmation for all her children.

I am taking the second and third changes made to the Childcare Payments Act by this clause together as they are very similar in nature. Both allow HMRC to set out what online forms parents should use when querying HMRC decisions. The first does this for ordinary review requests; the second does it for requests made outside the normal time limits. Parents can query any HMRC decision that adversely affects them, for instance a decision that they are not eligible or a decision to impose a penalty on them. If they remain unhappy after the review they can appeal to an independent tribunal. As I have set out, tax-free childcare is a digital-by-default system. Parents apply to open childcare accounts, and then use those accounts, via online forms set out by HMRC for that purpose.

These amendments give HMRC the power to specify in regulations the online forms to be used by parents when requesting a review of any HMRC decisions. That will allow tax-free childcare to be consistently digital by default across the full service. Regulations under these powers will provide the same safeguards for those unable to interact digitally with HMRC as in-scheme regulations. The safeguards allow those unable to interact digitally to get the same service through other means, which is important. The safeguards are in regulation 22 of the Childcare Payments Regulations 2015.

In conclusion, these are minor, technical amendments to the Childcare Payments Act 2014 that will allow HMRC to improve parents’ experience and the consistency of tax-free childcare. I therefore urge the Committee to accept that the clause should stand part of the Bill.

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Chief Secretary to the Treasury, Member, Labour Party National Executive Committee

I will keep my comments brief. Clause 5 relates to the Government’s tax-free childcare scheme and makes minor changes to the Childcare Payments Act 2014, which is the legislative basis for the scheme. First, it would allow HMRC to vary the entitlement period in certain cases by two months rather than one, as currently stated in the legislation. The entitlement period refers to the period of time after which parents must confirm that they still meet the eligibility criteria. Typically this must be done quarterly; however, HMRC can vary that in certain cases. Clause 5 changes this variable amount to two months, to

“enable alignment of eligibility periods for additional children when parents already have another child in the scheme.”

We certainly welcome these proposals.

The other change relates to parents who want to apply for a review of a decision made by HMRC that affects them, or who wish to do so outside the usual time limits. Normally that must be done within 30 days of being notified of the decision, although that timeframe can be extended. The clause also allows regulations to be made to specify the form and manner of such applications. I believe that the Government’s intention is to allow such applications to be made digitally, but perhaps the Minister will confirm that.

These are technical changes, and the Opposition do not oppose them. However, we have significant concerns about the tax-free childcare scheme more broadly. I will not say more about that now as we are debating the finer points of the Bill, but we will perhaps revisit that at a later stage.

Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury

I will of course draw the hon. Lady’s wider comments about childcare to the attention of the relevant Ministers.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (House of Lords)

I feel that as someone who is likely to be using the tax-free childcare scheme for eight or nine years, it is sensible for me to make some comments. The current childcare voucher scheme is quite cumbersome—particularly given the paper methods that are used—and difficult for people to access, so I am pleased that the Government have listened to comments about the need to change how parents can access the scheme and ensure that there is consistency. I am pleased that the Government have piloted online access and listened to parents about making changes to that.

I have a couple of questions. First, I would like to check that the Minister is committed to ensuring that during the scheme’s roll-out, which I understand will happen next year, it is kept under constant review and feedback from parents is looked at. A relatively small group of 400 or 1,000 parents may not cover all the circumstances that we might see once the scheme is completely rolled out, so it would be useful if the Government were to continue in listening mode, and I would very much appreciate that assurance.

My other question relates to the conversations about the scheme with the Scottish Government. At the SNP conference at the weekend, announcements were made about changes that the SNP Government will make to some of the ways in which parents in Scotland can access childcare. What discussions have the UK Government had with the Scottish Government about how this Government’s new tax-free childcare scheme will link into the Scottish Government’s consultations on and proposed changes to the types of childcare that parents can access with their free hours? The Scottish Government are looking at making changes to the flexibility of the free hours that are provided to parents in Scotland and the settings that parents can access with that childcare provision. How will that scheme in Scotland link to the tax-free childcare scheme? Have the UK Government had any conversations yet about that with the Scottish Government? If not, will they commit to doing so?

Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury

I thank the hon. Lady for her comments. Of course we want the tax-free childcare scheme to work for parents. It is designed to make their lives easier, and that must be central to the way we approach the roll-out, which will be gradual, robust and extensively trialled with a variety of parents, to ensure that we replicate as many different circumstances as possible, as she said.

On the hon. Lady’s second point, we always deal with issues that relate to the devolved Administrations as appropriate. I will look at her broader point about how different childcare policies interact, but I do not think that that is directly relevant to the clause. In general terms, I reassure her that we are always assiduous in ensuring that where there are issues of interaction with the devolved Administrations that pertain to Bills, those are sorted out at official level ahead of proceedings such as these.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6