Childcare Payments Bill

Second Reading (and remaining stages)

9.09 pm

Moved by Lord Newby

That the Bill be read a second time.

Lord Newby (LD): My Lords, it is a great pleasure, even at this time of night, to introduce the Childcare Payments Bill, which introduces a new tax-free childcare scheme. The new scheme was announced by the Chancellor of the Exchequer at the 2013 Budget. Once it is in place, the Government will meet 20% of eligible working families’ childcare costs up to an annual maximum of £2,000 for each child. That is the equivalent of basic rate tax relief on childcare costs up to £10,000.

I am sure noble Lords will need no persuading that there is a compelling argument for the Government to support working parents with their childcare costs. Survey data from the Department for Education suggest that more than half of mothers currently not in paid work would prefer to be in paid employment if they could arrange reliable, convenient, affordable and good quality childcare. Likewise, around one-quarter of employed mothers say that they would increase their working hours if they could arrange appropriate childcare.

Sadly, it is the case that many parents find themselves in the difficult position of having to make a stark choice between work and family—between, on the one hand, staying at home to care for their children and, on the other, paying for the childcare to allow them to

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go to work. It is clear that many more parents than are currently able would like to work, provided they can find a successful way to combine work and family life. These are precisely the families that this Bill is designed to help.

To qualify for government support, a parent will simply need to register with HMRC to open an online childcare account. When they pay money into it, the Government will add a further top-up payment. So for every payment of £8 made by a parent, they will receive £2 from the Government, up to a maximum of £500 every quarter. The scheme will provide support for those with children up to the age of 12. This limit will be set out in regulations that the House will have the opportunity to debate after the Bill has received Royal Assent. However, the Government recognise that for parents of disabled children childcare costs can remain high well beyond their 12th birthday. Such parents face a range of additional challenges if they are to have a fulfilling working life alongside the need to care for their child. In recognition of this, the scheme will provide them with support until the September following their child’s 16th birthday.

Noble Lords will be aware that a scheme is already in place under which some parents can receive financial help from the Government with their childcare costs. This is delivered by means of an income tax exemption and a disregard of national insurance contributions provided by the employer-supported childcare scheme. The tax and NICs reliefs will gradually be withdrawn as the new scheme becomes available. The existing scheme has a number of serious shortcomings that mean it is far less effective than it needs to be. For one thing, as its name implies, employer-supported childcare is not available to those who are self-employed. Because it generally works through salary sacrifice arrangements, it is not available to those whose earnings are at or slightly above the level of the national minimum wage.

A further drawback is that whether a parent can receive support from employer-supported childcare is crucially dependent on whether their employer chooses to offer it. The fact is that less than 5% of employers currently offer the scheme. This means that over half of employees are simply unable to access it. Lastly, employer-supported childcare fails to pay any regard to the number of children that parents actually have. It can provide a higher level of support to a family with two adults and one child than it does to a lone parent with multiple children. That is obviously far from satisfactory.

The new scheme has none of the drawbacks of employer-supported childcare. As parents will engage directly with HMRC to open their accounts rather than via their employer, it will be available to anyone who works, provided they meet the relevant eligibility criteria. While around 500,000 parents are currently in receipt of employer-supported childcare, we estimate that up to 1.8 million families will be eligible for support under the new scheme. For the first time, self-employed parents will be able to receive support from the Government with their childcare costs. The Government estimate that around 200,000 self-employed people will directly benefit from the scheme. The level of support available to a parent under the scheme will be

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determined by the number of children that they have, rather than the number of parents whose employers operate the employer-supported childcare scheme. This will bring an end to the manifest unfairness of the current scheme, particularly to lone-parent families that have more than one child.

As well as being available to far more families than employer-supported childcare, the new scheme will give parents the flexibility that they need to allow them to return to work. They will be able to pay money into their childcare accounts when they want to and spend the top-up payments when they need to, such as over school summer holidays. In addition, other family members, friends and employers will also be able to pay money into the accounts if that is what they wish to do. Parents will also be able to withdraw money from their childcare accounts if they need to do so, with their contributions returned to them, and government top-ups returned to the Government. The scheme has been designed to be as simple and straightforward as possible for parents to operate and to minimise the need for them to engage with HMRC. That is fundamental to the scheme’s design.

A primary means of achieving this is the fact that parents will not be required to report changes in their personal circumstances in real time, as is the case for tax credits. Instead, the scheme will be based on quarterly entitlement periods, such that once a parent is eligible, they will continue to be entitled to support for that quarter, regardless of any changes in circumstances they might experience. This flexibility will be particularly valuable to those on lower incomes, who might meet the criteria for receiving government support for their childcare costs through either tax credits or universal credit. Parents will not, of course, be able to claim double support and will instead need to make a choice of which type of support best suits them. With that in view, alongside wider guidance and information, HMRC will provide an easy-to-use online tool for parents choosing between other means of government support and the new tax-free childcare scheme. Parents will be able to enter details about their personal circumstances quickly to see what support is right for them.

I should add that this scheme should not be considered in isolation but should instead be seen as one part of a far broader range of initiatives aimed at helping those with children that this Government have introduced since 2010. The main ones are: first, additional funding for 15 hours a week of free childcare for all three and four year-olds, saving families an additional £380 a year per child; secondly, additional funding for 15 hours a week of free childcare for all disadvantaged two year-olds, saving those families more than £2,400 a year per child; thirdly, an increase in the child tax credit to £3,295 a year, £450 more a year than at the election; fourthly, an increase, from 2016, in the childcare element of universal credit, from 70% to 85% of total childcare costs, to improve work incentives and ensure that it is worthwhile to work up to full-time hours for low and middle-income parents; and finally, the introduction of shared parental leave and statutory shared parental pay for those with children born after 5 April 2015.

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I realise that there are concerns that the effect of these demand-side initiatives might simply be to drive up the costs of childcare. That is why the Government have also taken significant steps to increase the supply of high-quality childcare. The most notable of these are the introduction of childminder agencies to reduce bureaucracy for childcare providers and increase the choices for parents; consulting on proposals to relax planning rules to allow nurseries to expand more easily; and reforming the role of local authorities to improve access to government funding and encourage new entrants to the market.

Noble Lords will also be aware that in his 2014 Autumn Statement last week the Chancellor announced a further government initiative aimed at encouraging the supply of childcare. A further £2 million will be set aside to double the funding available for 2015-16 from the childcare business grant to support the creation of new childcare places. This grant has existed for some 20 months and provides funds to newly registered childcare businesses. To date, it has supported around 4,500 new childminders, who between them have the capacity to offer up to 32,000 new childcare places. I am sure that all noble Lords will welcome this expansion.

The Bill will deliver much needed support for working families. It marks a clear and significant improvement on the existing mechanism for providing such support and is a further tangible demonstration of this Government’s support for parents and their children. I commend it to the House. I beg to move.

9.19 pm

The Earl of Listowel (CB): My Lords, as treasurer of the parliamentary group for children I warmly welcome the Minister’s presentation of the Bill and, indeed, the contents of the Bill. The subsidy will be an improvement on the existing voucher scheme, and the extra support for parents is very welcome.

The Minister made the case for this change. I was reminded of it recently by listening to Professor Melhuish of Birkbeck College, University of London. He presented strong evidence that high-quality early years care improves the educational outcomes of young people. Even if a child has a poor primary school, if they have had high-quality early years education then they are still likely to be doing well at the age of 11, and there will still be a significant difference in educational outcomes to the age of 16. Such provision is therefore very important.

I also thank the Minister for the investment that the coalition Government have been making in this area. He described in detail what has been achieved. I was grateful to the coalition Government for reconsidering their proposals on the ratios of early years educators to children. The Minister at the time raised the important point that as we invest a great deal in early years care in this country, although it is more costly here than it is in many other nations, how can we ensure that we get best bang for the buck in terms of taxpayers’ money? I hope there will be an opportunity after the election of a thorough strategic review of early years provision to look at why we are where we are.

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I welcome what the Minister said about stimulating the supply side, which is so important, and the measures that are being taken, but perhaps more could be done to stimulate it. In particular, it struck me how important nurseries attached to schools are. It is important that there is a lower turnover in staff in nurseries than there is in much other provision. In high-quality provision it is crucial to have staff who can build relationships with children and parents. Of course, the staff in such provision are generally more highly qualified than in other provision. We must address the low pay that dominates this area. It is very disappointing that we invest so much yet many of the people who do this really important work are so poorly paid.

I welcome the Bill. There are a couple of issues on which I would like help from the Minister. I shall try to be as brief as I can so I shall curtail what I might have said. The first issue is that the scheme will not address the additional childcare challenges and costs faced by families with disabled children. The Minister may have made a remark on that and I missed it. The recent independent parliamentary inquiry into childcare for disabled children found that parents with disabled children face significant extra challenges finding and paying for childcare. A survey of parents was undertaken to support the inquiry. More than 1,000 parents with a disabled child responded, and 38% reported paying £11 to £20 an hour for childcare, with a further 5% paying an astonishing £20 an hour. This is in stark contrast to the £3.50 to £4.50 paid by the parents of children who are not disabled. Three-quarters of the parents who responded to the inquiry also said that they had been forced to cut back or give up work entirely because they could not access affordable childcare which was appropriate and met the needs of their child.

Although the tax-free childcare scheme will provide some additional support, the inquiry highlighted the limitations of the scheme for families with disabled children. I understand that the Government are looking at ways in which they can better support parents with disabled children through the scheme by raising the maximum cap for such families above £10,000. This would be helpful for a small number of parents with very high costs, but most of the families affected would not be helped by this step because very few families can afford to spend that amount on childcare.

A better option is to raise the amount of the top-up from 20% for such parents. I am grateful to the Family and Childcare Trust for its briefing in my preparation for this Bill. It has estimated that increasing the top-up to 40% for children who receive disability living allowance would cost just £25 million each year. The Government will spend more than £750 million each year on the new scheme. Surely £25 million is an affordable figure in the light of the help that this step will provide for parents with disabled children. Does the Minister agree?

The inquiry also heard that out-of-school activities were a key means of social inclusion for disabled children and young people. As the tax-free childcare legislation covers costs only for childcare used to enable parents to work, it is regrettable that in its current guise it will not help many families pay for such childcare. In the

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long term we must create a level playing field in childcare for disabled children. There are a number of schemes run by local authorities that support childcare providers to offer places to children with additional needs through training, specialist support and adaptation, and subsidise the difference between the typical fee and the actual cost of care for a disabled child. It is heartening to hear about parents who have struggled and looked through many areas and finally found a place for their child. However, such cases are rare. Funding constraints mean that such schemes are rare. The most effective way in which the Government can support disabled children to access affordable childcare is to learn from the successful approaches developed by local authorities and scale up those schemes nationally.

The second area to which I would like the Minister to give his attention is the tax-free childcare scheme. This scheme must work alongside the childcare element of tax credits and, for a time, the employer-supported childcare voucher scheme that is being phased out. Families will not be able to claim childcare support under tax credits and tax-free childcare at the same time. Many families will find it difficult to identify which childcare support is best for them and will potentially miss out on much needed financial support. The Minister referred to the sort of support that these families can have in his opening remarks.

The Government estimate that at least one in 10 families claiming the childcare element of tax credits will be better off claiming support under the new scheme. As a result, it is very likely that there will be substantial movement between the two schemes. Many parents, particularly those with fluctuating incomes and uncertain working hours, such as those who are self-employed, work overtime or have a zero-hours contract, will find the sheer complexity of the schemes difficult to navigate, potentially leading to the loss of greatly needed financial support.

The Government need to make sure that families are transferred smoothly between each childcare scheme, with a full information campaign and an online childcare support calculator—which I think the Minister was describing—to help the parents affected make the right choice. From my own experience of joining health visitors in meeting with vulnerable mothers and parents I know just how important reliable and clear guidance can be to these families. I therefore hope that the Government will support professionals working in early years, children’s centres and family information services to play their part in guiding parents through the different options for childcare support, as they are ideally placed to offer advice to families from all walks of life.

Finally, I wonder if I could invite the Minister to join me on a visit to a children’s centre—a nursery in Newham with a very good reputation—that I will be making on the morning of Friday 9 January. I am sure that he would be very welcome to join me if he were able to make the time available. I look forward to the Minister’s response.

9.28 pm

The Lord Bishop of Sheffield: My Lords, from these Benches I warmly welcome the Bill, which will provide much needed assistance towards childcare costs for

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many middle-income and low-income families. I also welcome the careful expansion of the availability of childcare. However, there are two areas which I shall mention briefly where further attention may be needed.

The first concerns the equity between this provision and the provision for families in receipt of universal credit. The Children’s Society estimates that by the time universal credit is fully implemented, around half of children may be living in families in receipt of universal credit. Some of the parents in the statistics quoted by the Minister who want to return to work will certainly be in this category. The challenge of childcare costs, for those returning to part-time and low-paid work, is significant.

My questions relate to equity in the administration of support rather than the quantity. I warmly welcome the intention to develop an easy-to-use online tool to help parents to determine the best help available. How will the Government ensure that universal credit and tax-free childcare complement each other effectively? Will the Government consider making childcare accounts available for families in receipt of universal credit? Will they consider making childcare payments from universal credit on the basis of costs incurred rather than payments made? Will they ensure that families have at least a month to report their childcare costs under universal credit and so receive their full entitlement, which is so important?

My second area has already been mentioned and relates to families with disabled children, where childcare costs can be higher. I warmly welcome the extension of support to parents of disabled children up to age 16. Will the Government consider making this Bill even more effective by providing a higher rate of support through the tax-free childcare scheme for children with disabilities, reflecting the higher general costs of childcare for such parents? These questions are in the context of a warm welcome for the proposals in this Bill.

9.30 pm

Baroness Eaton (Con): My Lords, I start by applauding Her Majesty’s Government for the commitment that they have shown to helping families through a broad range of measures, which include, but are not limited to, greater flexibility in parental leave and the expansion of assistance with childcare costs. I and many others on these Benches particularly welcome the early steps that have been taken to tackle the biggest family policy challenge that we and many other western countries face, which is our epidemic levels of family breakdown. The wider family policy landscape is highly relevant to the Bill receiving its Second Reading here today, because the financial help with childcare that the Bill provides will be cast as a significant part of the fulfilment of the Prime Minister’s pledge to make this the most family-friendly country in Europe. Certainly, it is taking the lion’s share of the family policy budget.

The Institute for Fiscal Studies has calculated that the taxpayer is subsidising childcare to the tune of more than £7 billion a year. The rationale for adding to this enormous bill is that doing so will enable parents to play a full part in the labour market. It is concerning, however, that the IFS has concluded that we still lack a proper rationale and evidence base to

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support the assertion that these subsidies will succeed in getting more women into work. The IFS was particularly sceptical of the cross-party support for significantly greater help with childcare costs, saying that this does not always lead to the best policies. Moreover, the Government announced an increase in support for childcare before the Office for Budget Responsibility could estimate the costs.

Although this is a money Bill, surely it is our role at this end of the corridor, when necessary, to point out the downsides to generosity that could begin to look like profligacy when seen alongside other demands on the public purse, particularly those associated with supporting families. Calls to help dual-earner families with paid, formal childcare costs should not be allowed to drown out pleas for recognition of the considerable financial hardship facing many single-earner families. There are many reasons why one parent—often the father these days—takes some time out of the labour market when children or elderly relatives need more time than even flexible work arrangements will allow.

This Government’s introduction of transferable tax allowances for married couples is a huge achievement in a very difficult financial and political climate, but it is worth only around one 10th of the available support for one childcare place—a little over £200 per family in contrast to £2,000 per child. This is scant compensation for the many people who lost their child benefit or saw it reduced, yet we were assured that this cut to discretionary household spending power was essential to tackle the deficit. Many people who supported the withdrawal of child benefit to higher rate taxpayers have been appalled that a far more generous subsidy per child is being made available to families where each individual earns up to £150,000.

Canada’s Conservative Party has recently been able to make good on its 2011 election pledge to allow married couples to use income splitting to reduce tax bills by a maximum of 2,000 Canadian dollars—a benefit approximately five times the value of our transferrable tax allowance. However, there is a big difference, and that is that the Canadian Government are running a surplus. Canada’s income tax system, which treats families the same as roommates living under the same roof with no financial attachment, was judged by Prime Minister Harper to be unrealistic and unfair.

That assessment applies equally well to this Government’s tax-free childcare plans. I urge them to reconsider thresholds for this and the amount that can be claimed per child. This would allow some rebalancing of help for single-earner families during that period in their life cycle when finances are very tight but both parents working is unrealistic or the least family friendly option they can imagine, given their circumstances.

Polling by the Centre for Social Justice found that 82% of adults and 88% of parents thought more should be done to help parents stay at home in the early years. It has recommended doubling the amount parents with children aged under three can transfer, so that the allowance is worth around £400 per year. This would cost around £500 million.

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I conclude by returning to the issue of family breakdown. We are all familiar with the enormous costs incurred by the state when couple relationships, and the families they are founded on, falter. This country is now at the point where almost half of all children are no longer living with both their parents by the time they are 15. We cannot put off the essential task of addressing family breakdown through a wide range of measures, some of which must include support for marriage, which leads to the most stable family form. Recognising marriage in the tax system also takes into account and supports the sacrifices and interdependencies within single-earner families.

However, to a certain extent our hands are tied until the public finances are in better shape. That date is likely to come later rather than sooner if we make our current and future generations of parents dependent on large childcare subsidies and resentful of any reductions to that entitlement at whatever point on the income spectrum the axe may have to fall. Let us obviate the need for the axe by being restrained from the outset.

9.38 pm

Lord Davies of Oldham (Lab): My Lords, the House faces considerable difficulties in tackling this Bill. As it is defined as a money Bill, the Minister has to reply not only to the general arguments—and I congratulate all three noble Lords who have spoken thus far on identifying clear issues to which the Minister should respond—but, as far as possible, to issues of detail, because this is our only chance of dealing with this Bill. The Minister will recognise that there are a whole plethora of issues which, had we more time and the opportunity to be in Committee, we would have enjoyed discussing. As it is a money Bill, we are operating under some constraint and therefore the Minister will forgive me if I both seek to cover the general principles but now and again lapse into a degree of detail to which I shall expect him to respond.

The Opposition of course welcome the Bill. There is no way in which we would oppose a Bill that gives additional help to parents with childcare costs, particularly in the circumstances that the noble Baroness, Lady Eaton, identified: children have grown up in units that differ a great deal from the standard parental position. We are concerned about children and to whom the support is to be directed. The parents will take responsibility for it, but we are concerned about children as regards the Bill.

The great difficulty is that childcare costs have soared in recent years. There has been very little additional help for parents over these past few years, while costs have gone up so sharply. That is why we in the Labour Party are concerned to put a rather different perspective on how to identify in the Bill support for children and their parents. We very much seek to meet the point that the noble Earl, Lord Listowel, identified—he spoke about the need for extra help for the parents and carers of disabled children. We want to increase the age to which they are entitled from the Government’s position of 17 to 18. We think that disabled children involve extra costs. Therefore, the Government should have provided some recognition of such extra costs in the Bill.

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We have some real concerns about the Bill. Commentators have indicated that it is regressive in its impact. The majority of support in top-up payments will go to those with above-average incomes. Support for those in very real need will form only a small fraction of the allocation in the Bill. Those who can afford to spend more will get more from this scheme. We do not think that that can be readily justified.

We are also concerned about the scheme’s complexity. We recognise that parental circumstances can change rapidly due to the very volatile state of employment in the economy. We know that a very high percentage of jobs are insecure and have limited hours—certainly no guaranteed hours with zero-hours contracts. This means that parents have real difficulties as regards making judgments on income. There is a big complicating factor in this. The Government intend to bring in broader income support. It is not at all clear whether parents will be in an intelligent position to judge whether they might get better returns from this scheme or under universal credit. The Government have indicated that some help will be given but, given the obvious complexities of the introduction of universal credit—it has been predicated and worked on for long enough, yet we still do not have it in full—the Bill has to be put against that difficult background.

We also consider the Bill to be late. The Government seek to bring in an improvement that will not come into play until 2015, but childcare costs have risen five times faster than pay since 2010. The impact on families of the failure of the Government to act in the past is quite clear. We intend to expand free childcare for three and four year-olds from the 15 hours that the Government have indicated to 25 hours per week for working parents, as well as guaranteed wraparound childcare access through their local school. The supply side measures will be in addition to the support provided for in the Bill, and we intend to increase the levy on banks to ensure that we have the resources for these.

There are quite difficult decisions about this Bill which, had we been in Committee, we would have gone into in some detail. The Government intend that NS&I will provide the childcare accounts. NS&I, of course, subcontracts a great deal of its work to Atos. We are not at all clear that that gives a great deal of security to such an important resource allocation as this involves, given the past record of that company. As I said, the interaction between the two schemes—universal credit, when it is finally rolled out, and this scheme—is far from clear in government thinking. The Government have to realise that what may work for certain families, with full control of modern technology, high levels of education and an ability to respond to the system, does not apply to those very large numbers of parents and carers of children who will need very great guidance to ensure that they get the best deal out of this scheme or universal credit, when it comes in. It means added bureaucracy for parents and a difficult route to follow.

We also are concerned about costs. This, of course, is a demand-led system. It gives extra resources to those who demand the childcare. The Minister spends enough time in the Treasury on the economics to know that if one increases demand for a product,

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often the consequence is that the price goes up. That certainly happened in the Australian circumstance of a scheme not dissimilar to this one. So what do the Government do about a situation where already severely increased costs over the past five years get a stimulus from being increased again by what is in fact a government subsidy for a demand-led system?

Far from opposing the Bill, we are giving it our full support in its passage. That does not alter the fact that we want to identify these issues clearly on the only occasion we can debate the Bill in this House. The Minister has some very serious issues to confront and to answer, and I look forward to his response.

9.48 pm

Lord Newby: My Lords, I thank all noble Lords who have stayed to contribute to this debate, which was as thoughtful as one would expect in your Lordships’ House. I will attempt to answer some of the specific points that have been raised.

I absolutely agree with the noble Earl, Lord Listowel, about the importance of early years education. It is probably not as widely understood as it should be that very early high-quality educational intervention is an investment, in that it raises the starting point from which everything else flows through a child’s education and, indeed, life. I absolutely agree with him about the need to have good-quality provision at every stage. I take his point about low pay in early years. We hope, for example, that in dealing with those two issues we will see an increase in the qualifications of staff in the early years—in particular, that more staff will be qualified to graduate level. One objective of the new early years pupil premium, which will cost £50 million next year, is to provide funds to improve the quality of early education to disadvantaged children, including improving qualifications.

The noble Earl asked specifically about disabled children. We have recognised already that disabled children are in a separate category by running on the scheme from the age of 12 to 17. I accept the point that some disabled children require higher costs throughout their childhood, including their teenage years. As he mentioned, the Exchequer Secretary has made a commitment to look at increasing the maximum amount that the families of disabled children can pay into a childcare account and thus increase the amount of government top-up that they can receive. I know that that does not go as far as he would like because he would like the proportion of tax benefit to increase. The challenge here, as with many other potential changes to the scheme, is one of cost. My colleague in another place, the Exchequer Secretary, is looking at that and, hopefully, in respect of raising the potential amount of government support through matched payments as per the current scheme, we might see some progress.

As regards disabled children, the noble Earl asked whether we can learn from the local government scheme. In terms of what is already happening, he will be aware of recent reforms to special educational needs provision. I agree that it will be important to learn from the experience of those on the ground. Without looking at my diary, I am not sure what I will be doing

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on 9 January. Last Friday, I visited a nursery in Haggesdon but I am sure that the noble Lord will think that that does not really count. I am very happy to look at whether the suggestion would be possible.

The noble Earl and other noble Lords asked about the problem of this scheme working alongside tax credits and universal credit, and how parents will know whether they are eligible for working tax credit and whether they are best to opt for this scheme or for that scheme. That is why we are doing a number of things to help them. The online tool to which we referred, which will be a ready reckoner, is expected to be the main easy way for parents to access very good information.

Sometimes a bit of an assumption is made—far be it from me to suggest this to the noble Lord, Lord Davies—that parents from poorer backgrounds are incapable of managing relatively simple technology. I do not believe that that is the case. It is so common now for everybody of all income levels to use the internet, whether it is for shopping or whatever, that it is not unreasonable to think that a very clear online tool is an appropriate mechanism as the centrepiece of what we are trying to do. Certainly, my children are happier almost to deal with the consumption of words online than they are with the consumption of words on paper. They look to online sources of information in the first place.

The right reverend Prelate asked a number of detailed questions about the way in which the scheme works, how it will interact with universal credit and whether the Government will consider a number of changes to the way we are planning to administer it. In particular, he asked whether the Government might consider allowing help with childcare costs through universal credit to be paid via a childcare account. We have a number of issues with that suggestion. The new scheme is fundamentally different from schemes such as universal credit, with support paid for different purposes in different ways to meet different circumstances. Universal credit is paid as a monthly lump sum to cover a range of costs, including childcare costs. It is not ring-fenced and is intended to support households to focus on budgeting on a monthly income. The objective is to ease the transition into starting or going back to paid work, which is why it is paid in a similar way to a monthly salary. If the Government move to the suggestion made by the right reverend Prelate, we would end up with a much more complicated scheme than we have at the moment. I think universal credit and the benefits system is complicated enough without running any risk of making it more complicated.

The right reverend Prelate asked about the fact that support for childcare in universal credit would be on the basis of payment of childcare made rather than childcare costs incurred, and that this will mean that people will have to find money up front to meet these costs. I can see that this is considered potentially to be an issue, but for parents moving into work we have the flexible support fund that can be used to pay for childcare to enable a claimant to start work. Budgeting advances that will be available to families under universal credit are also designed to help claimants pay for intermittent household expenses, of which this will be

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one. The money will then be reclaimed over a period. The principle under universal credit that you pay for the childcare costs that you have actually incurred is a very sensible way of approaching matters but having this fund will ease that transition, which is very important.

My noble friend Lady Eaton raised a number of wide issues which we could spend all night debating. For example, she and other noble Lords raised some of the real conundrums in this area about how you spend a limited amount of money to the best effect. I am not sure that any Government are always 100% successful in that, but we are taking funding for a scheme that benefits relatively few people—certainly not the people we necessarily want to benefit, as it is largely by chance the way your employer decides to operate the scheme—and moving it to a scheme that treats everybody in work with children fairly. I think that is a very big gain from this scheme over what we had before. It obviously does not deal with many of the other wider issues she raised, including the extremely interesting debate about the importance of marriage in society and the extent to which that might be reflected in the tax system. I suspect that the political parties will be thinking what more they want to say on that issue as they draw up their manifestos over the next few weeks and months.

One of the key purposes of what the Government have been doing in respect of childcare policy and other policies is to encourage more people, particularly women who wish to do so, to get back into work. Department for Education survey data suggest that more than half of mothers not in paid work would prefer to be in paid employment if they could arrange reliable, convenient, affordable and high-quality childcare. That is one of the attractions of what we are doing with universal credit and, to a certain extent, what we are doing in this scheme.

The relevance of at least one family member—but very often mothers—being in work is the example that that sets to children in terms of how they see their lives developing. One of the statistics in terms of the labour market of which I am most proud is that there are now 390,000 fewer children living in workless households than in 2010. That is 390,000 children who see at least one of their parents going out to work and earning a wage. They see the benefit of that as opposed to many children in the past who saw their parents not going out to work and, sadly, often saw that as being the way that they might spend their own lives. Some of the broader issues that my noble friend Lady Eaton raised may be for another night, or, even better, another day, but I am sure that we will return to them.

The noble Lord, Lord Davies, raised a number of detailed questions, some of which I think I have covered in answers to other noble Lords. He suggested that the qualifying age for disabled children should be raised from 17 to 18. Having an age limit of 17 for disabled children is in line with the employer-supported childcare scheme and the childcare element of both tax credits and universal credits. It would not be right to increase the age limit in the new scheme while leaving it at 17 in other schemes. It would be inconsistent and confusing for parents. To increase the age up to which the child would be entitled to support across all

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these schemes would carry a material Exchequer cost, which is something that we have to be concerned about.

The noble Lord raised concern about Atos acting as a contractor to NS&I in respect of this scheme and whether that might be problematical. I believe that Atos acts as a contractor to NS&I in respect of premium bonds and I do not think that anyone is suggesting that there are any problems in the way that they are currently administered.

The noble Lord, Lord Davies, made a number of points on issues which would involve greater expenditure on childcare. Again, this Government feel that they have an extremely strong record in this area and the constituent parts of the Government will put forward proposals for childcare in the next Parliament, as will

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the noble Lord’s party. I am sure that the noble Earl, Lord Listowel, will be pleased that the parties are competing to see which can be the more generous in this area.

This is a sensible measure which will benefit many families and will use the resource much more fairly than is currently the case. I am extremely pleased that noble Lords who have spoken agree with the Government that this is a sensible and positive move forward to support families and their children.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.

House adjourned at 10.05 pm.