Childcare Payments Bill

Public Bill Committee, 16 October 2014.

Examination of Witnesses

Jim Sheridan (Labour, Paisley and Renfrewshire North)

Good morning, colleagues. Our first witnesses this morning are from the Chartered Institute of Payroll Professionals and the Chartered Institute of Personnel and Development. We have until 12.30 pm for this session. Will the witnesses introduce themselves?

Jim Sheridan (Labour, Paisley and Renfrewshire North)

Where are you from, Charles?

Mary Macleod (Conservative, Brentford and Isleworth)

Do I need to declare that I am a member of the CIPD?

Jim Sheridan (Labour, Paisley and Renfrewshire North)

That would be helpful. I hope it has been noted.

Catherine McKinnell (Labour, Newcastle upon Tyne North)

Do you mind if we refer to you by your first names?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

Will you each outline your thoughts on the current voucher system and the Bill in general terms?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

Thank you. Just to follow up on a couple of points that you raised, are you aware of any members of your organisations that are already looking at winding up the voucher schemes in anticipation that their employees may prefer to use a new scheme? Have you had a sense of that from your members yet?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

What about the converse of that? Have you seen members actually taking steps to join the scheme in anticipation of its being better for some of their staff—and therefore they need to join before the deadline?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

Just to follow up on a point you made, Samantha, about employer involvement and engagement in the scheme, there is the benefit you mentioned in terms of NI disregards. But, more generally, the new proposed tax-free scheme—I hesitate to call it that, because it is not that—will ultimately do away with that employer engagement. What do you feel the implications will be for not only employers, but staff in organisations where the link is removed?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

What is the potential implication of removing the link: going from the employer providing the support to it becoming separate from the employer?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

Charles, from the employer’s perspective, do you have any thoughts about the potential implications?

David Heath (Liberal Democrat, Somerton and Frome)

It would be possible, would it not, for the employer to be making a contribution into the child care account as part of the reward package?

David Heath (Liberal Democrat, Somerton and Frome)

Is it your view that that would be a likely course for some employers?

David Heath (Liberal Democrat, Somerton and Frome)

Samantha is shaking her head.

David Heath (Liberal Democrat, Somerton and Frome)

If the Treasury looked at this and found a way in which it could be done that was either tax-neutral or advantageous, that would, presumably, tip the balance.

David Heath (Liberal Democrat, Somerton and Frome)

How about employer-provided nursery arrangements—workplace nurseries? How do you see that working within the context of the Bill?

David Heath (Liberal Democrat, Somerton and Frome)

But there is an injection of cash into it, and 20% of the funding will now come from Government rather than 100% coming from the employer.

Lucy Powell (Labour, Manchester Central)

In our other oral and written evidence, one of the criticisms of the tax-free scheme, as opposed to the employer-supported child care vouchers, has been that it will remove from the equation the employer’s relationship with employees. Can I just probe a bit further on whether you think that is an issue?

I am thinking not just in terms of a mum returning to work, where an employer would sit down and have a conversation with her, but in terms of a dad, for example, whose employer might not even know that he was having a child or his circumstances were changing, but they would become aware of that because he was getting child care vouchers. That would start a different kind of conversation. Do you think that there will be a loss of involvement among employers, or not, because of this change?

Rob Flello (Labour, Stoke-on-Trent South)

And that’s a bad thing? [ Laughter. ]

Lucy Powell (Labour, Manchester Central)

I did not notice that.

Lucy Powell (Labour, Manchester Central)

Building on that, the main beneficiaries, other than the families themselves, of Government subsidies of child care, of which this Bill is another extension, are businesses. Do you think businesses play a sufficient role in that context, and do you think that this Bill will take some of that role away? I suppose that is the point I am making. In my view, we do not hear enough from business about the benefits to their businesses of having available, affordable, good-quality child care, or about businesses really stepping up to take part in that debate and helping to meet that in some way.

Nicholas Dakin (Labour, Scunthorpe)

Can I go back to the issue that you raised about how parental leave works? Do you think that sufficient provision is being made for women on both unpaid and paid maternity leave in the arrangements as you see them working?

Nicholas Dakin (Labour, Scunthorpe)

You would hope that the opportunity would be taken to address that?

Nicholas Dakin (Labour, Scunthorpe)

Thank you. Charles, have you got anything to add?

Nicholas Dakin (Labour, Scunthorpe)

Can I ask, then, about the relationship between universal credit and tax-free child care? How realistic do you think it is for parents to switch between tax credits—and, in future, universal credit—on the one hand and a tax-free child care scheme on the other, according to what is in their best interests? From your technical point of view on this, are there any issues that we should be alert to?

Nicholas Dakin (Labour, Scunthorpe)

So it could create problems for that employer-employee relationship?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

I want to go back to some of the more practical issues. Do you have any particular thoughts on the current proposal for NS&I to be the sole provider of the new scheme? I understand that that will remove a lot of your members’ involvement in terms of the new scheme, but what are your thoughts on having a single provider rather than the multiple providers of the current system?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

To clarify, my understanding is that employers would generally contract with only one voucher provider.

Catherine McKinnell (Labour, Newcastle upon Tyne North)

So it is not so much a concern about the current voucher scheme as a concern about how the tax-free scheme could potentially cause complications?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

You suggested in some of your comments that there is a bit of uncertainty out there because there is no clear information about exactly how the new scheme may work, although there is a vague timetable for autumn 2015. We have taken evidence from NS&I that one of the issues with undertaking the development at this stage is that there is a legal dispute about who should be providing the service. The dispute is causing a delay to the development, and possibly the dissemination, of information about how the scheme will work. What are your members’ thoughts and potential anxieties on that? What do they feel about their inability to plan for the future?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

Are there more Members who wish to come in? I could continue.

Jim Sheridan (Labour, Paisley and Renfrewshire North)

There is one more to come in.

David Heath (Liberal Democrat, Somerton and Frome)

I have a question. You may not know the answer to this, because it is a slightly technical question. Do you have any feel, under the present scheme, for where the main benefits are coming in terms of pay ranges and pay percentiles—at what level is employer-supported child care providing the maximum benefit? Do you have a view, looking at the Bill, as to whether the new scheme will provide the maximum benefit at a higher pay level, a lower pay level or about the same level as the previous one?

Jim Sheridan (Labour, Paisley and Renfrewshire North)

Are there any more questions? I thank the witnesses on behalf of the Committee for sharing their expertise with us. I am sure that the Committee will benefit from it during further deliberations.

Examination of Witness

Jim Sheridan (Labour, Paisley and Renfrewshire North)

Just for the record, can I ask you to introduce yourself for the Committee and for Hansard?

Lucy Powell (Labour, Manchester Central)

Are you okay with us calling you Kitty for the purposes of this Committee?

Lucy Powell (Labour, Manchester Central)

Thanks very much for coming. You said in your written submission that you had some concerns about the design of the Bill. By way of introduction, could you talk to us about some of those concerns, and then perhaps about some of the benefits of the Bill if you want to?

Lucy Powell (Labour, Manchester Central)

£6,000?

Lucy Powell (Labour, Manchester Central)

Okay, that’s great. Can I just probe you a bit further on a couple of those points? We have heard some other evidence that suggests that price inflation is a strong possibility given that we would be pumping demand without addressing supply issues. I know you have done a lot of work internationally on these types of model, so could you expand on what evidence there is that the kind of model that the Bill will bring in is very likely to lead to price inflation? Over what kind of period do you think that the effects of the Bill would be negated, if at all, through prices going up?

Lucy Powell (Labour, Manchester Central)

The time frame?

Lucy Powell (Labour, Manchester Central)

You gave some examples of international comparators that have schemes that stop that from happening. You said in your opening about this being a missed opportunity to put alongside the extra subsidy some more caveats around increasing quality. Where should we be going with public subsidies? How might that work? How might we amend the Bill to bring that into effect?

Lucy Powell (Labour, Manchester Central)

Just to link up some of those points, what is the international evidence on the model that the Bill brings in, which is a totally demand-side subsidy, with no strings attached? What is the evidence about what that would do to the supply of places and to quality, if anything?

Lucy Powell (Labour, Manchester Central)

Personally, I do not think of child care as a market, in the same way as the market for lots of other services and goods, because there are very local markets and in some areas there is no market at all. You might not even have a nursery, let alone a choice of nurseries, or there might be little choice, so it is quite hard to run a market system on that basis.

David Heath (Liberal Democrat, Somerton and Frome)

Can I challenge you on a couple of points, so that I understand exactly what you are saying? First, on the maximum limit of £10,000, I perfectly understand what you are saying about the fact that not everybody can afford £10,000. However, when we talked to providers in previous sessions, they said that, actually, this cap barely covers the going rate in some parts of the country, particularly in central London. So if we were to reduce the upper cap in the way you suggested, we would deprive a lot of people who can just afford to have provision in London with the assistance of this scheme. We would basically be saying, “You can’t have it. We’re not going to provide anything for you. You will not be able to buy provision in London without a deep incursion into your own pockets.” That, to me, is not helping moderately paid families very well. I am challenging you to say, is that not a flaw if we are already at that £10,000 level? That is not the case in some parts of the country; in Somerset, we will not be paying that sort of amount, if we can get a nursery at all, but in London, people are.

David Heath (Liberal Democrat, Somerton and Frome)

Have you evidence to support that? We heard evidence the other way round from the providers.

David Heath (Liberal Democrat, Somerton and Frome)

My colleague Lucy Powell is saying we did not. We had a clear statement from the providers that the going rate in London was £10,000.

David Heath (Liberal Democrat, Somerton and Frome)

That does not alter the fact that there are people who would, under this scheme, be able to just afford the £10,000, but if you bring the cap down to £6,000, they would not be able to afford it.

David Heath (Liberal Democrat, Somerton and Frome)

You have not convinced me yet, because the top-up amount from the pocket would still be bigger in your model than in the other model, but thank you.

David Heath (Liberal Democrat, Somerton and Frome)

Can I deal with the other area I want to understand—cost inflation and whether a soft cap is effective? Can I put it to you that we have this in the provision of elderly care, where the local authority sum is way below what it actually costs to provide the service? It is a national scandal that that is the case, but, nevertheless, that is the case. The effect is to increase fees for anyone who is not totally provided for by the local authority. Far from capping, the arrangements have actually increased the cost to those who are paying from their own pockets, so somebody who is just over the threshold for a total local authority reimbursement loses out. Would the same not apply in this instance?

David Heath (Liberal Democrat, Somerton and Frome)

I think the organic lunch is going to decide it. Thank you.

Catherine McKinnell (Labour, Newcastle upon Tyne North)

One element of the child care payments scheme that differs from the current voucher scheme is the per-child element. What are your thoughts on that? You have proposed a number of ways in which the scheme could be made more progressive; how would that fit with the per-child element? You were talking about a potential cap per hour—would that be per hour per child, or per hour in terms of the total spend that an individual worker would incur? Also, how does it compare internationally? You mentioned Denmark; have other countries gone down the road of looking at it per child rather than as a household spend on child care?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

And do they do it per child?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

One of the benefits you mentioned was the simplicity, but when it comes to the per-child element in certain settings, it potentially gets much more complicated. We took evidence from the nannies’ association, and it is obviously not clear at all how the funding would be allocated to a nanny who looked after three or four children with slightly varying child care requirements.

Going back to your comments on quality, the nannies expressed particular concerns that, although Ofsted registration will be encouraged as a requirement for the receipt of funding, that will not actually do anything to improve quality. What are your thoughts on how you would go about improving quality in that setting and also for childminders, where they are required to Ofsted-register but there are concerns that that will not reflect any improvement in quality?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

I want to touch quickly on the administrative side of things, although that may not be an area that you have looked at. One benefit of the current voucher scheme is that the employer takes on quite a lot of responsibility for administering the scheme—obviously, the parent has to engage in the process to some extent as well.

The measures in the Bill switch that responsibility entirely on to the parents. Concerns have been expressed that parents will potentially be without any support from the employer because employers are no longer engaged with the scheme. What are your thoughts on that? Also, what are your thoughts on the three-monthly enrolment requirement that is being discussed? That might not be your area of interest.

Nicholas Dakin (Labour, Scunthorpe)

Can I come back to the exchange you had earlier with David Heath, so that I can clarify it for myself? We had evidence from Julian Foster of the Child Care Vouchers Association earlier this week. He said:

“The average child care spend, according to the Department for Education’s own statistics, is just over £5,000 a year.”––[Official Report, Childcare Payments Public Bill Committee, 14 October 2014; c. 32; Q32.]

My understanding was in respect of an argument for a differential response. A higher threshold of response with people claiming only up to, say, that amount, would allow those people to access support at a quantum similar to the amount for people claiming beyond that amount, up to £10,000. Have I got that right, or have I misunderstood?

Nicholas Dakin (Labour, Scunthorpe)

Possibly, yes.

Nicholas Dakin (Labour, Scunthorpe)

Okay; that is very helpful. You mentioned universal credit and tax credits. How do you see this working for people who are moving between universal credit on the one hand and tax-free child care on the other? Do we need to think a bit more carefully or is it going to work fine?

Nicholas Dakin (Labour, Scunthorpe)

And if we carry on with two systems, is there a way of making that easier for people?

Nicholas Dakin (Labour, Scunthorpe)

Thank you.

Robert Jenrick (Conservative, Newark)

Can I take you back briefly to the exchange with my colleague David Heath? He referred to the evidence from a previous witness, Katie O'Donovan from Mumsnet, on the question of whether better-off people generally have more expensive child care than the rest of us. She had looked at the evidence and could not find that other than in the case of the very highest category of earners, who might be able to afford their own nannies and so on. In the case of middle-income people, the same kind of child care was generally found across the board. On the issue of whether you should differentiate, she said:

“If people are paying for a full-time nursery place in London, or in about 25 local authorities that the Family and Childcare Trust looked at, then they are paying £10,000 a year”––[Official Report, Childcare Payments Public Bill Committee, 14 October 2014; c. 45; Q91.]

We did research in my own constituency of Newark in the east midlands, where the average is lower, but it is still £7,800. It is by no means a wealthy area. Do you not worry that your suggestions today cut out a key group of people who are not top earners but are essentially middle earners? When you refer to the top of the income distribution, you really mean the second half of the income distribution. Those are key people who we want to get back into the workplace, because they have a lot to contribute and will potentially pay a lot of tax to the Treasury later in their careers.

Lucy Powell (Labour, Manchester Central)

What you are talking about is very attractive, precisely because it will still include a hefty subsidy for the vast majority of what we might describe as middle England. For example, someone might spend £10,000 a year on a full-time nursery place—that might be the case if you were in middle England and had one child. It would certainly become very prohibitive if you had two children and were spending £20,000 to get the full subsidy.

Under this scheme, you would get the maximum subsidy of £2,000 a year. However, under your proposal of 40% or 50% of £6,000 a year, you would still pretty much get £2,000 a year, if not more. The people that my colleagues are talking about would get exactly the same benefit that you are describing. You would presumably have to take something off the people claiming £10,000 a year—

Lucy Powell (Labour, Manchester Central)

It would probably not be that much less, would it?

Lucy Powell (Labour, Manchester Central)

Yes, and you would have to look at that. We have to be careful about exactly what we mean when we ask, “Do rich people have more expensive child care?” because there are two definitions of that. I spend £54 a day on the nursery for my daughter, but most people in my constituency spend £28 a day on child care because that is what they can afford. You can do two different things: spend a higher hourly rate or use more.

Lucy Powell (Labour, Manchester Central)

Yes, exactly.

Jim Sheridan (Labour, Paisley and Renfrewshire North)

All that is left is to thank you for coming along and sharing your views with us. I am sure they will be food for thought for some of us.

Examination of Witnesses

Anne Main (Conservative, St Albans)

Good afternoon. We have until 2.30 pm for this panel. We are going to hear evidence from the Institute for Public Policy Research and the Resolution Foundation. Just for the benefit of Hansard, could I ask the witnesses to introduce themselves and say whom they represent?

Anne Main (Conservative, St Albans)

Thank you. It is quite echoey in here. You might have to speak up a little for some of our less well hearing Members, myself included.

Lucy Powell (Labour, Manchester Central)

Spencer, Vidhya, are you okay with us using your first names?

Lucy Powell (Labour, Manchester Central)

First of all, by way of introduction, would you like to say a little bit about any general points that you want to make about the Bill and any concerns you might have about the way it will work.

Lucy Powell (Labour, Manchester Central)

Did you have a third point?

Lucy Powell (Labour, Manchester Central)

Both those contributions echo a lot of the evidence that we have heard so far. Vidhya, can you expand on your first point about the use of public funds and whether it is progressive enough in terms of what is available? We had a healthy debate earlier when we took evidence from Kitty Stewart, who suggested that you could possibly make the scheme more progressive by lowering the cap but increasing the percentage. There was some discussion about that. What are your thoughts on progressivity and measures that might make things more progressive?

Lucy Powell (Labour, Manchester Central)

We had quite an argy-bargy about where the threshold might sit. Say the amount of money available was the same, have you done any work on what the cap and therefore the percentage would be, and what the benefits would be?

Lucy Powell (Labour, Manchester Central)

It would be great if you send that work to us. You were talking about price inflation. That is something we have been discussing as part of the oral evidence. Could you expand a bit more on some of the work you have looked at? What do you think the evidence points to in terms of the Bill’s impact on price inflation? Over what sort of time frame, therefore, do you think the extra subsidy would be negated for many families?

Lucy Powell (Labour, Manchester Central)

Are there any amendments to the Bill as it stands or models we could look at that would not prevent that happening totally, but mitigate it?

Lucy Powell (Labour, Manchester Central)

You both raised the point about the interaction of universal credit with tax-free child care. Again, it is something we have explored with other witnesses. Perhaps you could expand on your concerns a bit further for the purposes of the Committee. You both produced research to say that a lot of families on that borderline find that their ability to enter the labour market or take on more hours is significantly affected by child care costs. Perhaps you could tell us what you think the solutions are for that interaction problem and how we might overcome it.

Lucy Powell (Labour, Manchester Central)

One suggestion that I think the Children’s Society made was allowing, or at least leaving open at this stage, universal credit recipients to open up a child care account so that they may be able to transition between those systems better. What do you think about that?

Lucy Powell (Labour, Manchester Central)

Spencer, do you have anything that you want to add to that?

Chloe Smith (Conservative, Norwich North)

Thank you both for joining us today. May I ask about your views on having a single provider, National Savings & Investments, and also on Her Majesty’s Revenue and Customs having the various enforcement and penalty powers? On that latter point, there are changes to what currently happens under the employer-supported child care system. Can you start us off with any reflections you have on either the provider, NS&I, or the HMRC regime?

Chloe Smith (Conservative, Norwich North)

Do you think there are any comparisons with other parts of public services and HMRC’s powers that we ought to consider? For example, penalties for incorrectly filling in forms for an application for other benefits.

Catherine McKinnell (Labour, Newcastle upon Tyne North)

I want to explore the issue of maternal employment. I think Spencer has particularly researched that, but I am sure both of you will have comments to make. Sorry, have I got it the wrong way around?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

Both, fine. You mentioned a figure, Spencer, of a £60,000 joint income as the point where you stop taking—

Catherine McKinnell (Labour, Newcastle upon Tyne North)

Sorry. It was household income. In terms of maternal employment, it would be important to extrapolate that a bit. Obviously you could have one earner earning a lot more than the second earner—often it is the mother. So that decision to go back to work starts to look more and more economically unviable when you feel you will spend your entire salary on child care.

Although ideally all households should psychologically split that figure, it does not always work that way for a lot of women. I am interested in the figure that you gave but more generally I would like to know whether the Bill will support more maternal employment—we know the figures in this country are poorer than international comparisons—and if not, how we can improve it.

Catherine McKinnell (Labour, Newcastle upon Tyne North)

Is there more of a supply-side system of support for child care in the Netherlands that keeps those prices down or is it similar to the tax-free proposals that the Government are putting forward?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

In terms of the new proposals?

Anne Main (Conservative, St Albans)

We have two more questions to get in and only six minutes.

Mary Macleod (Conservative, Brentford and Isleworth)

I just want to press you on whether the Bill will get more people into work. You have both said that the Bill improves the current situation; I am interested in entrepreneurs and helping support the self-employed. Do you see this as an approach that will help in making the decision—perhaps largely for women—to get back into work? Linked to that, there is talk here about those who are not in tax, but are you positive about the fact that we have taken the most poorly paid out of tax?

Mary Macleod (Conservative, Brentford and Isleworth)

What makes you say that it will not change behaviour?

Anne Main (Conservative, St Albans)

If you have further points to inform the Committee about, it would be useful if you sent them in.

Nicholas Dakin (Labour, Scunthorpe)

Has sufficient provision been made for women on both paid and unpaid maternity leave in these arrangements? Are there any issues relating to that?

Anne Main (Conservative, St Albans)

We have a few seconds if you want to add anything to the answers you gave to Mary Macleod.

Anne Main (Conservative, St Albans)

Order. I am afraid that brings us to the end of our time to ask questions of the witnesses. On behalf of the Committee, thank you very much. If you have any further points you wish to send to the Committee, I am sure Members will be pleased to receive them.

Anne Main (Conservative, St Albans)

We have until 3.15 pm for this panel. Minister, could your officials please introduce themselves for the record? Also, I believe that you have indicated that you would like to say a few words.

Anne Main (Conservative, St Albans)

Thank you.

Catherine McKinnell (Labour, Newcastle upon Tyne North)

May I put on the record our thanks to the Minister for outlining those changes and for being in listening mode and reflecting some of the concerns that have come out from the evidence sessions? It is incredibly reassuring to see such a swift response to some of the concerns that have been put forward. I hope that that bodes well for the future, given the ongoing concerns that are being raised.

We all welcome the additional child care support, so it is vital that the Government get the scheme as right as possible for as many people as possible. We therefore very much welcome the approach that the Minister is taking, in conjunction with HMRC, to respond to some of the issues.

I want to touch on a few other concerns from the evidence sessions that have not yet been addressed—in particular, the concerns about the time frames that we are working towards and the delivery of tax-free child care within those time frames. The Government have set out the initial time frame as being autumn 2015. One issue is that that is a little bit vague. We have also heard concerns about the legal challenges that are under way and might contribute to a potential delay. That situation is causing a lot of concern to all stakeholders who are potentially affected. Could either the Minister or the officials dealing with the issue respond to those concerns?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

NS&I indicated that the legal challenge was hampering its ability to progress as it does not want to spend money on a system when it is unsure whether it will be delivering it. Is there any indication that the roll-out might be delayed?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

I would highlight that Jane mentioned that any delay on the NS&I side would be due to HMRC.

On the proposed process whereby parents would need to validate their claims every three months, NS&I was unwilling to comment on whether it felt that that was necessary. I would be interested to hear how it would work in practice. Will it be in conjunction with the real-time information system? Will it be real-time information? If so, is it absolutely necessary?

Lucy Powell (Labour, Manchester Central)

Less so now; they were, though.

Bob Russell (Liberal Democrat, Colchester)

Minister, hopefully you recall that at the witness session on Tuesday morning I made an observation to the chief executive of National Savings & Investments that there is probably not an MP in the House who has not had constituents contact him or her because they have had a benefit of one sort or another terminated or suspended, and the first they knew about it was when there was no money there to pay the bills. Jane Platt said that it was a very good point and she would take it away to see what could be done. My question to you, Minister, is: will you also look at a failsafe system, so that if somebody’s payment is suspended or terminated, that information is simultaneously conveyed to the person or parents, so that they can take whatever action is required to deal with the situation they find themselves in?

Bob Russell (Liberal Democrat, Colchester)

Thank you very much.

Lucy Powell (Labour, Manchester Central)

I echo Catherine McKinnell’s comments: it is very refreshing to see a Minister not just in listening but in responding mode. I know that you have only just taken up the role, so I congratulate you on being able to do that so quickly. I want to press you on a few of the points we have heard during the oral evidence. The first is on price inflation and the concerns that, without any mechanisms alongside such an increase of funding into the system, we might see hard-pressed providers—80% of the market is private providers who are very hard pressed at the moment—starting to increase their prices a little, because they know parents have money in their pocket. What can we do to alleviate that?

Lucy Powell (Labour, Manchester Central)

I agree with what you say; I think that the challenge is that places are going down. Even with additional funding, such as the two-year-old offer and so on, it is becoming a greater challenge, but I guess that that is something you will have to consider with Department for Education colleagues.

My second, related, point is about the progressive nature of the support for families. We have just heard what I thought was quite an important fact from the Resolution Foundation: 80% of the new money will go to the top 40% of earners. Do you feel comfortable with the progressive nature of it, or will you look at that? Linked to that, critically, is the impact on maternal employment rates. Given that the extra money will go to top earners, what work has been done to analyse whether the measures will have the impact, which I know you and I both desire, of increasing maternal employment rates?

Lucy Powell (Labour, Manchester Central)

Would you consider looking at the kind of modelling that Kitty Stewart was talking about, in terms of a lower cap and a higher subsidy—perhaps not now, but in future—if you felt that it would have more of an impact on people’s decisions whether to go back to work or work more hours?

Lucy Powell (Labour, Manchester Central)

But what if you lowered the cap?

Lucy Powell (Labour, Manchester Central)

She was talking about having the same money but lowering it, so instead of having to spend £10,000, you would spend an average—

Andrew Jones (Conservative, Harrogate and Knaresborough)

Why was NS&I considered the most appropriate provider of tax-free child care? How confident are you of its ability to deliver the scheme?

Andrew Jones (Conservative, Harrogate and Knaresborough)

May I ask a quick supplementary question, Mrs Main?

Anne Main (Conservative, St Albans)

Very quickly.

Andrew Jones (Conservative, Harrogate and Knaresborough)

Is the plan to use NS&I branding in communication to families?

Nicholas Dakin (Labour, Scunthorpe)

We have heard a lot of evidence about the difficulty of moving between universal credit or tax credits and tax-free child care. What are the Minister’s or her officials’ thoughts about how to make that work?

Nicholas Dakin (Labour, Scunthorpe)

A couple of suggestions have been made, although people have mainly said, “This is a problem,” but have not suggested solutions. I recognise that, as the Minister said, communication will be part of the solution, but the evidence we have heard suggests that it is a bit bigger than a communication challenge. A couple of positive suggestions came forward: one was that people on universal credit should be able to open accounts while they are still on universal credit in order to allow them to transfer more easily; another was that people on maternity leave should be allowed to open accounts. Those were two practical suggestions; what are your views on them?

Nicholas Dakin (Labour, Scunthorpe)

And what about taking out accounts for the first baby when they are on maternity leave and beginning to prepare for that situation?

Chloe Smith (Conservative, Norwich North)

May I first welcome the points you put in your letter about support for parents of disabled children? I think that is very encouraging and I am just marking my interest as we go through the Committee as to what proposals you bring back there. How would you like employers to interact in this new system?

Catherine McKinnell (Labour, Newcastle upon Tyne North)

I just want to go back to NS&I. You mentioned disappointment about the current legal issues, but can you explain why the proposal to allocate the contract to NS&I was not included in the first consultation process? That seems to have given rise to the legal challenge that we are now facing.

Catherine McKinnell (Labour, Newcastle upon Tyne North)

On the discussions that you mentioned you have been having with NS&I and the information that is going to be provided for parents and stakeholders, the overwhelming message from the evidence that we have been taking in these sessions is that people do not feel very well informed at the moment. They do not feel very well consulted or that they understand how the system is going to work. NS&I mentioned that it has an awful lot of experience in dealing with these things. Do you have any comments on your inability to engage with NS&I at that level and whether that is ultimately hampering the process itself?

Mary Macleod (Conservative, Brentford and Isleworth)

Minister, thank you for your initial announcement about the self-employed. It is excellent that that has been added in. I am referring to the issue of income fluctuation and the support for self-employed people.

I want to ask about two of the concerns that have been raised in our witness sessions. To some extent, this leads on from Lucy’s question. Some of the concern was about getting more women into work, and the other bit was that those on low incomes will miss out. Naturally, I want to ensure that we get more women into work and that we are supporting those on low incomes. Do you feel confident that what is proposed is enough to support families on low incomes—the different benefits that are allowed as well as what we are talking about in this case?

Mary Macleod (Conservative, Brentford and Isleworth)

What mechanisms will you use to communicate some of this? Yes, you want the right system, a simple system and something that is communicated well, so that families can access it. What sort of plan is in place to ensure that that communication is effective?

Mary Macleod (Conservative, Brentford and Isleworth)

Maybe you could use MPs to help you as well.

Lucy Powell (Labour, Manchester Central)

Maybe we should not get into a discussion about Sure Start centres, because we might lose some of the spirit of the Committee so far.

Can I probe a bit further the point about the interaction of universal credit with tax-free child care? I understand that your hands are slightly tied because universal credit is on the DWP side, but can I ask whether you have considered, and if not whether you will consider, all the different scenarios? Of course, one aspect of this is someone moving up the pay scale, going from universal credit and into tax-free child care. But as we heard from much of the oral evidence, it will more commonly be people who are borderline and who are moving between the two systems because of changes to circumstances or pay or because they are having an extra child. It seems that there are quite a lot of penalties in the Bill that people may incur unintentionally. If they accidentally open a child care account thinking that that is something to which they are also entitled, they will automatically lose their universal credit. If they change scheme more twice in a year, they then cannot change for another four years. Could you either reassure me that you have thought about all those different things or have another look to ensure that we are not unfairly penalising families for what would otherwise be perfectly reasonable changes to their life?

Lucy Powell (Labour, Manchester Central)

Oh, right, okay. Thank you.

Robert Jenrick (Conservative, Newark)

This has already been raised by Lucy Powell and others, but one of the key debates that we have had today and in previous oral evidence sessions has been about how much impact the scheme will have, how much bang you get for the buck, how many more women will get back into work and at what level of income distribution there will be a benefit. The evidence that we have heard is quite conflicting, with Mumsnet saying one thing and later witnesses saying another. It seems like there is not much sophisticated evidence about the impact of the child care subsidy on maternal return to work. This an important area of policy, so what could your Department do to improve that, maybe not on this occasion but going forward, so that we can have some proper evidence to monitor the success of the scheme?

Nicholas Dakin (Labour, Scunthorpe)

Jane Platt, in her evidence to us, seemed to respond to quite a lot of questions about passing issues back to HMRC, much of which, to be fair, you have picked up in the evidence you have given this afternoon. How are you ensuring that standards are robust?

Nicholas Dakin (Labour, Scunthorpe)

Have you got a sense of how much it will cost Government for each of these accounts to be opened?

Nicholas Dakin (Labour, Scunthorpe)

But you have an answer to that question. You are just unable to share it, so at the point when you are able to share it, you will share it with members of the Committee.

Bob Russell (Liberal Democrat, Colchester)

Minister, I would like to congratulate those who have drafted the Bill. Clause 8(2)(a), as paragraph 52 of the explanatory notes states, enables

“members of the armed forces who have been posted overseas…to be treated as being in the UK.”

I really am pleased about that, but I want to pursue it a bit further. I am sure, Minister, that you would wish HM Treasury to be practising—not just signing up to, but actually fulfilling—the armed forces covenant. With that in mind, could I ask you and your officials to see how it would be possible to engage the Ministry of Defence to ensure that military personnel can be brought into this scheme more knowingly? My experience is that quite often, Army families miss out because they are not aware, and by the very turbulence of Army life, moving here and there, things can be missed or lost. I make the request that somehow there can be dovetailing with the Ministry of Defence.

One more question: can you give me an assurance that the Bill will not be used, either positively or negatively, by the Child Support Agency to affect in any shape or form the way in which maintenance payments are determined?

Bob Russell (Liberal Democrat, Colchester)

Thank you, because any excuse—

Catherine McKinnell (Labour, Newcastle upon Tyne North)

That was a question mark that arose in my mind as you were talking about the calculator and families being able to input lots of data—how confident they would feel that that data would not be misused, so I share that concern.

I also want to follow on from the question that Nic put to you about how important it is to you that this is a successful scheme—that it does not carry any risk. Obviously, NS&I has been quite open and up-front about the fact that Atos runs its back-office operation, and although it has the NS&I brand on it, it very much will, I think, have the Atos brand with it as well. In some of the schemes that it has run for the DWP, that has been nothing short of toxic for quite a lot of people who have not enjoyed its services. What precautions are you taking to make sure that that does not befall this scheme as well?

Anne Main (Conservative, St Albans)

As there are Members who still wish to be called, I will use my discretion under Standing Order No. 83C(11) to extend the sitting by no more than 15 minutes, which will give Mr Flello the opportunity to put his question to the Minister and have an adequate response.

Rob Flello (Labour, Stoke-on-Trent South)

I am very grateful, Mrs Main. I hope that the question and the response do not take 15 minutes. Can I urge the Minister to go back to those KPIs for Atos? I am worried that the same standards, the same procurement process and the same type of questions have been used for the likes of Capita. I have constituents who have been waiting for almost a year to get a proper result out of Capita. I urge the Minister to go back and have another look at the Atos procurement to be absolutely certain that we do not have the same sort of debacle as we had with Capita and Atos in other circumstances.

Catherine McKinnell (Labour, Newcastle upon Tyne North)

That is very helpful. Thank you, Mrs Main, for the slightly extended time. Again, I ask this in the spirit of making sure that this is a successful scheme that works for those who very much need it. Quite a few concerns have been expressed, and there have been reports in the press, about the RTI system causing chaos for some taxpayers. There have obviously been teething problems with the system. Will there be interaction between the new scheme and RTI? If so, what steps are you taking to ensure that these teething problems do not spill over into this child care payment system?

Anne Main (Conservative, St Albans)

I thank the Minister and her officials on behalf of the Committee.