As Shadow Economic Secretary to the Treasury, Catherine has been leading the Opposition’s response to the Government’s Childcare Payments Bill, which is currently going through Parliament.

The Bill had its ‘Report Stage’ and ‘Third Reading’ in the Commons yesterday (17th November), during which Catherine tabled an amendment which would have committed the Government to assess the benefits of Labour’s plan to extend free childcare from 15 to 25 hours per week for working parents of 3 and 4 year olds.

This is a transcript of Catherine’s speech:

Catherine McKinnell: New clause 1 stands in my name and that of my hon. Friend the Member for Wirral South (Alison McGovern), whom I wish to congratulate on her new role. It calls on the Government to consider the necessary help that hundreds of thousands of parents of three to four-year-olds need now to cover the ever-rising costs of child care.

Before I elaborate on the new clause further, I wish to reiterate a point that the Opposition have stressed throughout proceedings on the Bill. We welcome any new investment in child care and, in particular, any extra support for hard-pressed parents and families up and down the country who are struggling to juggle work and family life. It is worth remembering because, after all, we are the party which, in government, pioneered investment in early years. The principle that every child matters was at the centre of the Labour Government’s work across all Departments. We are the party that, in government, made no apology for focusing our efforts on, and redirecting any available support to, the children and families who needed our help the most. We are the party that, in government, made it its business to tackle disadvantage and to improve the life chances of every single child from the earliest possible age to give them the best possible start in life.

Andy Sawford (Corby) (Lab/Co-op): I agree with the case my hon. Friend is making. Does she share my concern about the closure across the country of Sure Start centres, which were a key part of that commitment to support children and families, including the Raunds Sure Start centre in my constituency, which the Tory county council is now going to close?

Catherine McKinnell: My hon. Friend makes a very valuable point and I was just about to come to that. We are the party of Sure Start and the thousands of Sure Start centres that existed in 2010. It is not specifically relevant to this debate, but we could not allow it to pass without mentioning the very deep concern up and down the country about the future of our Sure Start centres.

There are concerns, which were made abundantly clear by a number of witnesses in Committee last month, that the Bill does not go anywhere near far enough to provide the support that thousands of parents and families desperately need right now. They need that support now, not in 12 months’ time, which is why we tabled new clause 1. Based on the Family and Childcare Trust’s annual survey, we know that child care costs have risen five times faster than wages since 2010, at a time when wages have lagged behind prices, leaving people £1,600 a year worse off on average. This support is even more vital when we see how much parents have lost out as a result of the Government’s choices: the decisions to cut tax credits, child benefit and maternity pay, and to close thousands of Sure Start centres.

As we saw and read in the news yesterday, research from the London School of Economics and the Institute for Social and Economic Research at the University of Essex shows clearly how the burden of austerity under this Government has fallen most heavily on those with lower incomes. The research found that the Government’s tax and benefit changes have seen the poorest lose about 3% of their incomes, while the richest half of the country have actually seen their incomes increase by 1% to 2%. That blows away the Government’s claims from the start that we are somehow all in this together. The research highlighted the fact that families with children have fared worst of all, which confirms our worst fears. Single parent families, in particular, have lost far more through cuts to tax credits and other support than they may have gained through any tax changes, proving that the Government have given with one hand but taken away far more with the other—so much for being the most family-friendly country. Families have lost out on up to £1,500 a year due to changes to tax credits alone. Tax credits are a vital part of income for many working parents, especially those on the most modest incomes.

When we look at all the tax and benefit changes since 2010, including the Government’s much lauded and touted personal allowance increases, we see that families have clearly been hit hardest of all, and that will remain the case right up to the general election. A family with both parents in work will be about £2,073 a year worse off and a family with a single parent in work will be about £1,300 a year worse off. Despite the Conservatives’ claim of creating the most family-friendly country and the Liberal Democrats’ supposed belief that families should get the support they need to thrive, the Government have not been family friendly and they have not stepped in to provide families with the help they so desperately need to get to grips with the soaring costs of child care.

Far from stepping in, they have pulled the rug from under the feet of many families. Any extra help for parents struggling with the cost of child care is clearly to be welcomed. However, not only is the Bill too little too late for hundreds of thousands of families, we are disappointed that the Government have so far refused to consider that additional support could be offered to families right now. That is why we have tabled new clause 1.

Mr Jim Cunningham (Coventry South) (Lab): Does my hon. Friend agree that we can see the Government’s attitude to child care with their closure of more than 400 Sure Start centres?

Catherine McKinnell: Up and down the country, there is deep concern about the disappearing Sure Start services. We know that the worst is yet to come when we look at the dire straits in which many local authorities find themselves and the difficult decisions that many are having to make about their Sure Start services. My hon. Friend makes a very good point: that does sum up the Government’s attitude to support for children and families. They simply wash their hands of the issue whenever it is raised in this House.

We tabled new clause 1 because we want to compel the Government to explore the effectiveness of extending the free entitlement for three and four-year-olds when both parents are in work. The first part of new clause 1 seeks to understand what support the current proposals will provide to the parents who need it most. The free entitlement introduced under the Labour Government, which happily has been continued under this Government, makes a real difference to hard-pressed families. The simple truth is that, months after the Bill was first published and introduced, we are still none the wiser about exactly how many parents will be better off as a result of the top-up payments, or, crucially, by how much.

That stands in marked contrast to our plans to extend the free entitlement for three and four-year-olds, which will be worth £40 a week, or £1,500 a year, to about half a million children. We know from the Government’s impact assessment that of those families who will be newly eligible for support under the Bill—those who are self-employed, or those whose employers do not currently offer employer supported childcare vouchers—the average benefit will be about £600 a year. Clearly, that is far lower than the £2,000 per child that the Government have been touting ever since they announced the policy for top-up payments in March.

It is worth remembering that some 520,000 families currently benefit from ESC vouchers. The Government’s impact assessment sets out a number of case studies where families might be better off or, indeed, worse off under the new top-up payments. The impact assessment suggests that families can retain their ESC vouchers if they wish, but goes on to list a whole range of caveats relating to whether parents will be able to continue to qualify, whether they would be better off remaining under the current voucher scheme, or whether the new top-up scheme might be better for them.

Clauses 62 and 63 seek to wind down the ESC scheme over the next few years, closing it to new entrants. Presumably, ESC vouchers will eventually vanish completely. If a parent changes jobs or if their employer stops offering vouchers—this could well happen, as voucher providers are set to see the majority of their business disappear—they will have no choice but to switch to top-up payments, leaving many worse off.

We heard evidence from a wide range of witnesses in Committee last month who cited the Resolution Foundation’s work. It is worrying that the Resolution Foundation had to undertake that work because the Government have not done sufficient work to look at the true impact on parents. The Resolution Foundation suggests that 80% of the families who will benefit from top-up payments are in the top 40% of income distribution. The remaining 20% will go to those in the middle of the distribution scale. If the key aims of the Bill are to support parents with the cost of child care and to help more parents back into work by making work an economically viable option, those figures raise questions about whether its aims are achievable through this Government scheme alone. In contrast, many child care experts agree that Labour’s child care plans, as outlined in new clause 1, meet these twin aims.

In a follow-up to one of our Committee sittings, the Minister made a worrying admission. In a letter to Committee members, she revealed that on her Department’s estimation almost 10% of eligible families—about 170,000 families—did not have access to the internet and therefore, effectively, might not have access to the top-up payments. The Bill requires that parents hold online child care accounts to receive the Government top-up payments. It is proposed that these would be administered by NS&I, with back office functions provided by Atos. It now transpires, however, that about 170,000 families might be excluded from these top-up payments simply because they do not have access to the internet. That is another reason why the Government should support new clause 1 and our proposals to extend the free entitlement, which would not have any of these implications or complications for parents.

In response, the Government plan to make exceptions for certain people, such as those with a disability or those who live in remote areas and have poor internet connectivity, but the point still stands: if someone does not have a computer or internet-enabled device, either because they cannot afford one or because they choose not to have one, it could essentially exclude them from the top-up payments and child care support. I hope that the Minister will respond to that issue, which I am sure even she would agree is hugely concerning.

Putting aside the question of who will benefit, our other concern—and another reason why we will be pressing new clause 1 to a vote—is whether the Government scheme will be as valuable to parents in a few years as when it is introduced. Our new clause 1 suggests extending free entitlement for three to four-year-olds whose parents are both in work and is a supply-led form of support that experts agree would neither have the same implications for child care prices nor potentially expose parents to artificial inflation—a concern about the Bill that has been expressed repeatedly. We have heard from a wide variety of witnesses that the potential benefits of the scheme could be wiped out by future increases in child care costs, which we know have already risen by 30% in the past four years and will continue to rise and outstrip the value of the support.

The Institute for Public Policy Research and the Resolution Foundation have pointed to Australia and highlighted that demand-led subsidies, such as top-up payments, on their own, with no additional safeguards in place, only lead to even greater child care price inflation and pressure on hard-pressed parents’ budgets. Our new clause calls on the Government to consider a supply-led measure—extending the provision for three to four-year-olds—that is not so susceptible to the risk of price inflation. The Government have so far dismissed the widely expressed and legitimate concerns about the impact of the Bill on future child care prices. I hope the Minister can respond to these concerns, as expressed in new clause 1, as well as new clause 2, which we will come to later.

The third point I want to make concerns perhaps the most striking thing we took away from the evidence sessions last month and our line-by-line scrutiny sessions: the potential nightmare of complexity and confusion that parents might face following the introduction of top-up payments. The Bill proposes an entirely new mechanism for administering support for parents. By contrast, the measures in new clause 1 would simply extend an existing scheme—three to four-year-olds are already entitled to 15 hours of free child care—by providing an additional 10 hours where both parents are in work.

Widespread concerns have been raised that the Bill might add complexity and confusion when parents come to access child care support and have to decide whether to remain within the voucher scheme or switch to the top-up scheme. In particular, it might create additional confusion for parents on lower incomes who might not be in a position to make an active choice between schemes, but instead might have to move between schemes as their incomes fluctuate—as they move between being eligible for tax credits and universal credit support and losing that eligibility as they move into higher-paid work. We discussed those issues at length in Committee, but so far Ministers have failed to address them. For that reason, our new clause 1 seeks an alternative, additional support and cushion for vulnerable parents on the borderline between universal credit and the top-up payment scheme.

We know that there are plans to develop an online “better off” calculator, similar to the tax credit calculator, to aid parents in making these decisions, but if Ministers cannot tell hon. Members who will benefit from which scheme and by how much—depending on their income and circumstances—how do they propose to convey these messages to parents simply and effectively? How will parents be able to make a straightforward decision? So far, Ministers have been unable to answer these questions. Given that child care is vital for so many people who are in work, looking for work or looking to increase their hours, we need to know exactly how much support this scheme will provide for parents struggling with child care.

It is no use promising parents that the Government will provide thousands of pounds of support when in reality they will get much less; it is no good offering support to parents when the scheme comes into operation if in a short time that help will be worth far less; and it is no good dreaming up an entire new mechanism of child care support if it only makes parents’ lives more complicated —or, worse still, is prone to errors and failure. Furthermore, the scheme is untested and potentially costly. The figures have already been significantly revised, raising concerns about whether they have been properly calculated.

For those reasons, we have tabled new clause 1. Given the numerous concerns expressed about the Government’s top-up scheme, we urge Ministers to give proper consideration to an additional, alternative plan—one that we know works and will make a big difference to 500,000 working families with three to four-year-olds: the plan to extend Labour’s free entitlement for three to four-year-olds from 15 hours to 25 hours a week for 38 weeks a year. We know that it would be worth £1,500 per year per child; that the funding would go directly to child care providers and therefore would not leave parents so exposed to inflated child care prices; and that it would be simple and straightforward to administer and implement for both parents and the Government; and we know how it would be funded—through an increase in the bank levy, which has returned so much less than the Government said it would.

The free early education entitlement for three to four-year-olds introduced under Labour has been hugely successful in providing vital support for parents and in helping them back into work. We know from the latest data from the Department for Education this year that some 94% of three-year-olds and 99% of four-year-olds—around 1.3 million children in total—currently benefit from this provision, the vast majority of whom, 1.2 million children, benefit from the full 15 hours a week to which they are entitled.

Kitty Stewart, research associate and associate professor at the Centre for the Analysis of Social Exclusion at the London School of Economics gave evidence to the Bill Committee last month. She commented on the remarkable progress seen with this child care offer over the last decade or so, saying:

“Considerable progress has been made in expanding access to early education and childcare over the last decade. One million new places have been created and the near universal take up of the free entitlement for three and four year olds is a remarkable achievement, ensuring that those families who were least likely to use ECEC services now have access.”

That is why we believe, as set out in new clause 1, that the Government should consider extending this hugely successful and effective offer to three and four-year-olds whose parents both work, in addition to the support provided in the Bill. We believe that doing so would be a far more effective way of achieving the Government’s aim of supporting parents with the cost of child care and helping more parents get back into work—aims that I know we all support.

 

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