Finance Bill

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Mr. Laws: We understood that the proposal was only part of the Government's child care strategy. Indeed, at £20 million per year, it would be worrying if

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it were the entire strategy. Can the Paymaster General clarify how many additional child care places it will create?

Dawn Primarolo: With respect, the hon. Gentleman has obviously forgotten that he has already asked me that question. I was about to answer it. If I fail to answer any questions, I am sure that I shall be informed.

The Chairman: Order. It is late on a Thursday afternoon. Time is pegging on and whoever's telephone is bleeping like mad had better switch it off now. I should be obliged if members of the Committee could remember the questions that they asked before they ask them again. It might also be useful for them to listen to what is being said; they can always return to their questions.

Dawn Primarolo: Thank you, Mr. McWilliam. You are right. It is late on a Thursday, and we have been in Committee for a long time.

I wish to remind members of the Committee what will be available before the schedule is enacted. Child care vouchers are fully taxable, but exempt from class 1 employers' and employees' national insurance. Vouchers can be used to pay for both informal and formal child care. The provision of a place in a workplace nursery is exempt from both tax and class 1A national insurance, and the provision of child care contracted by the employer and provided to the employee as a benefit in kind is taxable, but exempt from national insurance class 1A.

The changes made under the schedule are modest. The first will introduce a new tax exemption on child care vouchers of up to £50 a week. The employer will give the value of the vouchers to the total maximum of £50 to the child care provider for the employees. There is no need to calculate whether it is near the limit or around the limit. It will be a straight limit of £50, and it will be restricted, in line with other Government policies, to registered and approved child care. That touches on the point about nannies made by the hon. Members for Yeovil and for Hertford and Stortford. It means that any child care provider that is registered and approved by the Government will receive that. The Department for Education and Skills is about to publish regulations for consultation that will extend the areas of recognised child care providers. At present, nannies are not accepted. There is an equivalent in the tax credit legislation. When the new regulations are finally agreed, which will be soon, they will expand the approved area. The area must be approved.

If grandparents are registered as child minders, they are approved carers and, thus, registered under the scheme. If grandparents are not registered and therefore in the informal child care market, they would not be included in the provisions—they must be registered. A clear principle is involved. When the Government are providing taxpayers' money for the care of children, whether through a voucher or by way of a tax credit—direct payments of up to 70 per cent.—

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it has to be clear that quality and safety are assured, even if that is, at the minimum, through a registration scheme. Despite the fact that nannies are highly qualified, where they are registered is a rather complicated matter. I hope that the DFES will be able to clarify that.

4.45 pm

Mr. Laws: The Paymaster General has helpfully clarified Government policy. Will the regulations allow relatives of the employee who receives the vouchers to care for an individual and carry out child minding responsibilities at the employee's home, having been properly approved and registered to do so.

Dawn Primarolo: It is very difficult to give the hon. Gentleman an absolute answer, because the regulations will have to be consulted on. Ofsted is doing the registration. The issue that he raised will have to be addressed, for a number of reasons. For example, the parent might do shift work, which would make caring for the child in their own home more appropriate; or, if the child has a disability, adaptations might have been made in the home, making such care much more appropriate. At present, no registration cloak covers all such matters.

The issue was not on the political agenda of the previous Government when we were elected in 1997, so we have advanced from zero. We have provided nursery places and child tax credits, and with these provisions we are encouraging the development of child care places, be they in public sector, employer-provided or in the private sector, and whether they be playgroups, out-of-school clubs and so on. All such measures need to be appropriately regulated. The Department for Education and Skills is addressing that issue in its regulations.

The proposals also deal with the cap of class 1 national insurance exemptions on child care vouchers to £50 a week. The provisions limit that cap to formal child care, as we have explored, to match the new exemption. The full tax and national insurance exemption on workplace nursery provisions is being left in place. I shall return to that, because the hon. Member for Hertford and Stortford asked why the consultation started by saying one thing but ended up somewhere else. The proposals extend the exemption to cover any direct provision of formal child care by the employer—I think that that was the point that my hon. Friend the Member for Wolverhampton, South-West made. That would include where an employer contracts directly with a registered or approved child carer, for example, a child minding network—such organisations now exist—a commercial nursery or an after-school club. The extended exemption for employer-contracted child care would, like the vouchers, be limited to £50 a week.

I have tried to explain what we have and what the schedule moves us to. We have tried to ensure that the provision of workplace nurseries, which works well under the current exemptions, is not disturbed, and to widen the scope of the type of child care available, but limit it by cash. I shall return to how many families we

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think will benefit, how much it will cost over the five years, how many employers currently provide child care vouchers and to how much we expect that to increase.

Mr. Laws rose—

Dawn Primarolo: If the hon. Gentleman will bear with me, I will get to those points. I am trying to deal with this in a logical manner.

As I said, £50 is not nearly enough to cover most parents' child care costs. I am not disputing that. The Government are putting in place assistance to parents on the basis that a contribution of £50 is better than nothing at all. We also must consider the cost to the public and whether such assistance can be afforded. As the hon. Member for Hertford and Stortford said, the proposal in the consultation document was to extend the workplace nursery exemption to cover all registered and approved child care but to limit the exemption to £50 a week.

Respondents to the consultation told us that limiting the existing full exemption for employer-run provision to £50 a week would impose difficult valuations of the benefit. In some sense, that is precisely what the hon. Gentleman suggested. We took that on board, and on reflection decided to keep the original full exemption for genuine workplace nurseries and extend it to people who work at a location but who are not necessarily employed by the employer who provides the on-site nursery facility.

Employers have been saying to us that they cannot afford to provide their own workplace nursery, that it just does not make sense. They do not have enough employees who would use such a nursery, but they would like to buy places in the nursery provision of a company just up the road. We will allow them to do that. I am sure that the hon. Gentleman would agree that an exemption to cover other registered and approved child care provision is a good and sensible step forward. Each time, we look at what is already in the system and ask whether we can make it better. In a sense, he is right: we tweaked the exemption because we thought it necessary to do so.

Mr. Prisk: The Paymaster General is carefully and thoroughly providing answers that will reassure those people who are affected. I sought to present a concern that was raised at the Inland Revenue open day. Although there is a diminished responsibility for employers in the valuation context, given the weekly nature of the cost and the chances of its moving up and down—it is not an annual but a weekly cost—there is a danger that the valuation, or compliance, burden has moved rather than been removed. That is the essence of the concern. I wonder whether she can clarify that point.

Dawn Primarolo: Yes, I did pick up that point from the hon. Gentleman. If he will bear with me, I will get to it. I am trying to group my answers. First, I laid out current policy, then the changes that the clause makes and why. I plan to move on to discuss the £50 figure, then how much higher rate, basic rate and lower rate taxpayers will gain, and then questions such as how

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many parents, how many employers and how much money. Finally, I will deal with his points, including his question about weekly assessments.

Let me deal first with why we settled on £50. It was not unreasonable for us to consider the typical level of support being paid to employees, as the voucher system was already in place but only for national insurance. It is not brand new; it is already in the system, but just for tax relief. The typical support at present is £30 to £40 a week. Perhaps hon. Gentlemen think that I have been too generous. In the consultation, some people asked for a lot more—up to £100—but the £50 a week exemption seemed sensible to encourage employers to help their staff with child care and to encourage more employees to accept such help. That is what we are trying to do.

Rob Marris: I may be misreading page 333 of the Bill and the provision to insert new section 270A, but it seems that, if a non-resident parent is paying partially to maintain his child—it is usually a he—both parents could receive the £50 voucher, pursuant to line 7 of page 334. Will the Paymaster General clarify that?

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