Liam Byrne today warned Iain Duncan Smith that childcare will be Labour’s key battleground for the Welfare Reform Bill as debate begins in the House of Lords. Byrne has challenged the Tories to accept a slew of amendments Labour will be tabling, which are designed to ensure that parents don’t lose out on childcare entitlements when Universal Credit is introduced.
Highlighting new figures from the House of Commons library, Byrne will point to lost tax of £47 million from 32,000 parents – mainly women – who have given up work in the last year mainly because they can no longer afford childcare.
The Government has over the last year slashed family’s entitlements from 80pc to 70pc of costs. But Universal Credit is set to make the problem worse as eligibility for childcare is widened with no top up funding to plug the gap. Parents’ maximum entitlements could therefore fall, locking second earners and single parents into part time work.
Byrne also pointed to recent research from the Resolution Foundation and Gingerbread which shows that at the moment parents could face effective tax rates of 94% on every additional pound they earn due to the lack of affordable childcare.
Labour’s amendments first tabled by Stephen Timms in the Commons establish a principle that families working more than 16 a week should not lose out. Chris Grayling however, brushed the concerns aside saying “…we do not intend to make any further changes to the amount of money available for child care”.
The battle comes as polling from Lord Ashcroft shows support for the Conservatives amongst women on middle-to-low incomes melting away in marginal seats.
Liam Byrne said:
“The government has got to call off its attack on Britain’s childcare. With parents struggling to make ends meet, it beggars belief that the Tories are stopping parents working the hours and shifts they need by taking away their childcare. Quite simply they are planning to lock parents into poverty.
“We need a new bargain that rewards people doing the right thing rather than penalises hard-working families.
“The Tories are out of touch with most people’s lives and unable to address the big challenges facing Britain in the future.”
1. 32,000 more women choose to look after their family and home rather than seek employment
“With average monthly costs associated with working (£120), childcare (£288) and schooling (£147) mounting up, some people (usually women) find that it is simply uneconomical to work and we have seen 32,000 more women choose to look after their family and home rather than seek employment since Q3, 2010.”
Aviva Family Finances report, page 15
2. House of Commons Library research commissioned by the office of Liam Byrne MP on cost to Exchequer of 32 000 not working due mainly to childcare costs
“A full time employee on £17513 pays around £3240 a year in income tax and NI. If 40% of the 32,000 are full time this gives 12,800 full time employees leaving work. At £3240 each, this gives a loss of around £40 million.
Adding the full time and part time figures gives £47 million for income tax and national insurance lost.”
3. Daycare Trust concerns on childcare cuts
“Parents in the UK contribute more towards childcare costs than any other country in Europe, and costs have risen every year for the last ten years.
“At Daycare Trust we are particularly concerned about the recent cuts to the childcare element of working tax credits. Too many parents are already making the tough decision to give up their jobs because the extortionate costs of childcare do not make it worth their while. We fear that these tax credits cuts will mean that many more parents could also be priced out of the job market.”
Anand Shukla, Chief Executive, Daycare Trust, Aviva Family Finances report, page 14
4. Parents face losing over 94p in the pound as they increase their working hours beyond 24 hours a week
The Resolution Foundation and Gingerbread say in a joint report that the government’s funding of childcare under universal credit “could shatter its commitment to make work pay”. They say parents face losing over 94p in the pound as they increase their working hours beyond 24 hours a week. If you are on the minimum wage, 24 hours a week earns you under £7,000 a year.
5. Labour’s amendments in the Commons, which will be closely mirrored in the House of Lords:
Welfare Reform Bill 2011 – Childcare Amendments tabled in the Commons
Debated on the 5th April 2011, committee stage:
In Clause 12, page 5, line 32, leave out ‘such’ and insert ‘childcare costs in prescribed circumstances (up to a maximum of not less than 80 per cent. of the prescribed allowable amount) and such other.’
This amendment would restore the level of childcare support to 80% of total costs, as it currently is under Tax Credits.
Debated on the 13th June 2011, report stage:
(1) The amount in respect of other particular needs or circumstance, under section 12, shall include a childcare element for claimants who are in work, except in prescribed circumstances.
(2)The maximum award of the childcare element shall be a prescribed proportion of childcare costs (not less than 80%, or 90% where the element contributes to care for a disabled child), up to a prescribed maximum value (not less than £175 per week for one child and £300 for two or more children).
(3) “Childcare charges” are charges of a prescribed description incurred in respect of childcare by the claimant or claimants by whom a universal credit claim is made.
(4) “Childcare”, in relation to a person or persons, means care provided for any child up to the last day in the week in which 1 September falls following the child’s 15th birthday or their 16th birthday if they are disabled, for whom the person is responsible, or for whom either or both of the persons is or are responsible; and by a person of a prescribed description.
(5) Except in prescribed circumstances, the childcare element shall not be paid where a claimant is in work for fewer than a prescribed number of hours a week or, in the case of a couple, where one or both of the claimants are in work for fewer than a prescribed number of hours a week.
(6) For the purposes of this section, regulations are to provide for a definition of “work.”’.
This new clause would have retained the current upper limits on the amount any household can receive in childcare payments. It would increase the percentage paid from 70% to 80%. It requires there to be a definition of ‘in work’ so that only people working a minimum number of hours would be eligible, in order to make the proposal more affordable and to support working families.
6. The Government was all over the place during the Commons Committee Stage of the Welfare Reform Bill, they failed to give the information promised.
Mr Duncan Smith: Those are one and the same question, so if I deal with them within child care, I can deal with it more generally as well. It is my intention, as far as is humanly possible, to make sure that when you reach that stage of the Bill, I can give you all this information….I hope to be able to come forward to the Committee with those sets of options so that there can be some greater decisions made in time for that part of the Bill. I promise to try to do that but if I do not, it will certainly be done within the Committee stage.
Mr Chris Grayling: “…we do not intend to make any further changes to the amount of money available for child care”