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Hywel Williams (Caernarfon) (PC): Does the hon. Gentleman agree that there are specific structural problems in providing child care in rural areas? As a rural Member of Parliament, can he suggest some remedies?

Sir Archy Kirkwood: That is absolutely right. There is a problem, and the Government's response to that aspect of the report was a little weak. They mentioned trying to give local authorities a little more flexibility but I agree with the hon. Gentleman. In rural areas, there is often no critical mass to get child-care providers or run groups such as pre-school playgroups or after-school clubs. There are often not enough children in a geographically discrete area to make that easy.

It is hard to fault the Government on their overall application. However, as part of the inquiry and report, we visited a couple of nurseries in north Kensington on the recommendation of my hon. Friend the Member for Regent's Park and Kensington, North. I remember that clearly because, although we knew about the policy and the Government's direction, which we supported, we found much confusion about funding operations. The difficulties and uncertainty that the nurseries encountered about the security of the funding were worrying. Above all, an acute shortage of places remains. The Daycare Trust estimates that there is only one place for every five children who are under eight. That is a genuine supply problem.

During the visit, it was also driven home to us that families in the United Kingdom pay a much higher proportion of the cost of places than our European counterparts do. The Daycare Trust estimates that UK parents pay 75 per cent. of costs whereas parents on the continent pay some 30 per cent. That information was reinforced last week when the Committee visited Denmark and France, where we were told about the importance of the provision and its extent in sister European countries.

Let me briefly consider targeting resources. Focusing 20 per cent. on the most disadvantaged postcode areas is probably inevitable because one cannot do everything at once. However, I hope that, between now and the next comprehensive spending review next July, the Government will consider expanding the provision not only from 20 per cent. to the 30 per cent. that the Committee recommended, but to deal with the point that the hon. Member for Caernarfon (Hywel Williams) made about rural areas. More flexibility is needed so that people in rural areas can tackle the issues more thoroughly.

I want to underscore the question of pay for child minders. It is a worrying trend that they are not being paid enough and that there is insufficient career development to keep them in the service of the families for whom they provide child care.

The Government's record is hard to criticise but many problems remain. The Committee made some guarded comments about using employers in the way in which the Chancellor implied yesterday. I hope that the Government will reconsider the matter carefully. If I had the money for tax breaks for employers, I should put it into child centres. I would not have chosen an open-ended commitment for employers because that entails problems, which the report tackles in more

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depth. As I said earlier, other Ministers mentioned the pledge of 1,000 centres by 2008, but it was useful to hear the Chancellor put it on the record.

I hope that the report and the debate will support and encourage the work of the Treasury interdepartmental review. We need approximately another £1 billion or £2 billion. That sounds an enormous sum, but it would be for three years. The Daycare Trust estimates that £2.5 billion over 10 years would yield almost universal child centre provision, although some problems in rural areas would probably remain. There is much work to do but the Government's direction is generally right. Opposition parties, Select Committees and those outside the Treasury will always want to move further faster, and I recommend that we do that.

I hope that hon. Members understand that the subject is important and that the Committee has made the best fist of what is for us a short report. We reserve the right to return to the subject, but we want to leave Treasury Ministers with the message that, by their own lights, they cannot succeed unless they do more to develop child care provision in the middle to long term. It is in their interests to put in more resources and establish more child care centres as soon as they can.

Madam Deputy Speaker (Sylvia Heal): I remind hon. Members that Mr. Speaker has imposed a 10-minute limit on contributions from Back Benchers.

2.26 pm

Ms Karen Buck (Regent's Park and Kensington, North) (Lab): I am delighted that we are conducting a debate on child care. I thank the Chairman of the Select Committee on Work and Pensions, the hon. Member for Roxburgh and Berwickshire (Sir Archy Kirkwood) for his warm words. I congratulate him on his leadership and his commitment to the subject, which, as he rightly says, is a passion of mine.

Let me begin by citing two figures that provide some context for our debate. According to the Department's research, 1.3 million households are currently looking for child care that they cannot provide. That gives a human aspect to the Daycare Trust's figures of a place for only one in five children. PricewaterhouseCoopers conducted an analysis of the economic benefits of child care. It found that, in the long term—admittedly, in the long term, we are all dead and figures are subject to all sorts of different pressures—provision of comprehensive, affordable child care would lead to a £40 billion benefit to the economy. There is therefore a lot to play for.

Although the report rightly deals with child care for working parents, it can be viewed only in the larger context of child poverty. The provision of high quality child care for young children is essential to any effort to create a fairer and more equitable society and to close the appalling gap in all sorts of achievements between economically disadvantaged families and others. The chief inspector of schools, David Bell, recently flagged that up when he drew attention to growing inequalities in primary school children's abilities. He said:

Economic and social disadvantage and the variations in access to a quality early-years experience is part of that problem.

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As the Chairman of the Select Committee said, from a standing start in 1997, the achievement has been awesome. The Chancellor added to that yesterday, especially for London, where costs are particularly high. I welcome the achievements and my comments must be viewed in that context. They constitute not criticism, but a desire to close some of the gaps and drive forward.

Our report considered the fact that the emphasis so far has been on the significant and welcome investment in increasing early-years education placements and part-time provision. Again, this is not a criticism; we have to start somewhere, and there are supply-side constraints, particularly in relation to carers and teachers. We are talking here about part-time places, mainly for three and four-year-olds and provision through the Sure Start programmes and the neighbourhood nurseries initiative—NNI—for people living in the 20 per cent. of wards that are the most deprived. Our report makes it clear that, even in the most disadvantaged areas, the Sure Start programmes and NNI do not add up to comprehensive, affordable child care. The provision is, however, concentrated on those areas; we have to start somewhere.

That means that the gap between what is required and what is available is still very large. One point that flows from the Chancellor's statement yesterday is that we must remember the importance of assisting low-income working parents who are not among the most acutely disadvantaged or living in the most acutely disadvantaged areas, because of the phenomenal cost of providing care. A family with an income of between £20,000 and £25,000 who are outside the range of financial support for child care and outside the 20 per cent. of areas that are the most disadvantaged could easily find themselves paying £200 a week for one child-care place. It is right and proper that something should be done to assist them with those costs, both to allow the lone parent or two-parent family to participate in the labour market—part time or full time—and to give the child some experience of early-years education, assuming that the quality is good, as that is usually a positive experience for them.

In driving forward the expansion of child care, to which there is a commitment, and in tackling the huge task of eliminating child poverty by 2020, we must recognise the fundamental limitation in the approach that has so far served us well, which is to use the market mechanism of providing individual subsidies to parents to purchase child care. I believe that this method has several weaknesses. First, it has not been able to drive forward the supply of child care, particularly in isolated rural communities and high-cost urban communities. We can place subsidies in parents' hands, but if the child care is not available, they will not serve their purpose. Although there is a logical argument that the subsidy itself will make the care available, in practice that is extremely hard to achieve when dealing with the very high capital costs involved in developing nurseries, for example.

Similarly, the financial support given through the child care tax credit does not meet the whole cost of child care, particularly in high-cost areas, wherever they might be. Child care costs in London regularly exceed £11,000 a year, for example. Because of the relatively low threshold for families to qualify for the child care

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tax credit, it reaches only a relatively small number of parents. According to the most recent figures, only 285,000 households in the UK, and only 30,000 families in the whole of London, receive the tax credit, involving an average of £63 a week, and an average cost of £7,000 a year. This is not a churlish criticism. That help was not there before, and it is very welcome. It is helping some people a great deal, but in terms of what has to be achieved, it is severely constrained.

When the provision of child care is so dependent on individual purchasing, whether subsidised by the tax credit or not, it becomes very vulnerable to changes in economic circumstances. Speaking as a parent, I must tell the House that I would not want my child to be in child care in a way that was vulnerable to changes in my working circumstances. That is the big weakness of too much dependence on a labour-market-related subsidy or of being too closely connected to employer-based child care.

This brings us back to the evidence of Professor Moss and to the case for children's centres. There will continue to be a case for individual subsidy, because the child minder service needs to be provided for and some people need financial assistance for their home-based care. There is not a case for doing away with the child care tax credit, for precisely that reason, but the next big steps that have to be taken must involve investment in the supply side. We must provide services that will allow non-working parents access to crèches and drop-in facilities as well as early-years education and child care, and that cannot be achieved through the tax credit system. That is the next move forward. I hope that the comprehensive spending review and the manifesto process will pick it up, because I see it as the big idea to help not only working parents, but those on very low incomes and the most disadvantaged, along with middle-income Britain. We must bring children together so as to provide an opportunity for people to enter the workplace and, possibly more importantly, to provide a high-quality early-years experience for our children.

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