Thursday 3 December 2020
[David Mundell in the Chair]
Covid-19: Access to and Acceptance of Cash
I remind hon. Members that there have been some changes to normal practice to support the new call list system and ensure that social distancing can be respected. Before they use their microphones, Members should sanitise them using the cleaning materials provided, which they should dispose of as they leave the room. Members are asked to respect the one-way system around the room. They should speak only from the horseshoe, and they can speak only if they are on the call list. That applies even if debates are undersubscribed. Members cannot join the debate if they are not on the call list. I remind Members that they must arrive for the start of debates in Westminster Hall, but they are not expected to remain for the wind-ups.
I beg to move,
That this House has considered access to and acceptance of cash during the covid-19 outbreak.
It is a pleasure to serve under your chairmanship, Mr Mundell, however unexpectedly. I am a great believer in innovation in the Standing Orders, so it is good to see it happening in real time. I thank all hon. Members for attending this debate. I draw the House’s attention to my entry in the Register of Members’ Financial Interest. I have been a member of the LINK Consumer Council for all of three days, but I should make everyone aware of it none the less.
It is strange. A year ago, we were all debating who should appear on banknotes—which famous historical figure deserved the right to appear on our currency. Now, 12 months on, we are debating whether banknotes even have a future. I open my wallet and the moths fly out, not because I am stingy in any way but because I now use banknotes only to pay my window cleaner or my drycleaner.
Members will know that this topic is twofold, being about acceptance of cash and access to cash. The two are closely interlinked. Members have been arguing for some time about the preservation of ATMs to preserve access to cash, and I pay tribute to the hon. Member for North Ayrshire and Arran (Patricia Gibson), who has done a lot on that in the past. We are now seeing a growing trend towards as cashless society that affects all ATMs by reducing the consumer’s need for hard cash and making that infrastructure unviable. The key question becomes: what is the point of preserving access to cash if there is nowhere to spend it in the first place?
The trend has affected us all, but particularly the most elderly and vulnerable. Some may be nervous about using technology, or they may to struggle to remember a personal identification number or manage their personal finances. They may be among the 1.8 million people who are still unbanked and rely on a jam-jar approach to monitoring pots of money for bills, which cannot be done with a card. Recently published research from the consumer organisation Which? showed that two in five people reported being unable to pay with cash at a shop and did not have another payment method at the point of purchase. Indeed, two in 10 could not then buy medicine that they needed.
We see regional differences. London clearly leads the way: 75% of card usage there is now cashless, compared with 50% in my region of the north-west. I am also conscious that, as Members representing the highland fastnesses of the far north of Scotland can attest, there are many remote rural areas with very poor broadband, so it is not possible simply to install an iZettle—a little handheld device that permits cashless transactions.
Even in the three years up to lockdown, there was a drop of 20% to 30% in ATM withdrawals. Of course, when lockdown hit, that usage fell off a cliff. It has now recovered to some three quarters of what it was, but I very much suspect that the remaining quarter is unlikely to come back. We are turning cashless almost without noticing it, and certainly without discussing it. The trend is accelerating. LINK predicts that as few as one in 30 transactions will involve cash within the next five years or so.
There are many regulators in this field. One of them, the Payment Systems Regulator, has delayed its consumer tracker due to covid, even though it is more needed than ever. The PSR is rightly now focusing on access based on deprivation, rather than just on geographical area. We have indeed seen, just as in my constituency, a much sharper reduction in free-to-use ATMs in the more deprived areas.
A key noticeable feature of the initial lockdown was the sudden drop-off in the number of shops accepting cash. I saw that in my constituency. A fruit and veg shop suddenly went cashless—something that never would have occurred to me as likely to happen. Part of the trend of shops stopping taking cash was the fear of the virus remaining on banknote and coin surfaces. In the past week, I have noticed that the Bank of England has sought to clear up that myth, and I hope that shop workers and customers will start to feel more confident that using banknotes and cash does not put them at greater risk of contracting the virus.
Which? said that the reduction is also due to the underlying challenge of handling cash. Perhaps it means driving further to deposit a day’s takings at the bank, given the number of bank closures, or queuing for up to half an hour to make a deposit in a post office, which means that the working day is extended. Each time they have to go, the unit cost goes up, as fewer use cash. That drives more businesses cashless for simple economic reasons.
We have seen innovation from ATM providers and FinTech. LINK continues to have the role of ensuring that protected ATMs are replaced when needed and subsidising low-volume ATMs. It pioneered other approaches such as a community right to request an ATM as well as a range of schemes focused on promoting local cash recycling and more use of cashback without purchase in shops. However, even if the cashback without purchase pilots prove successful, it still requires the Government to renew the regulations concerning what is called PSR 2 for them to continue. That is critical because the pilots end soon. Will the Minister confirm that the regulations will be tabled in due time so that the industry can make sure it continues that good work? Will he also extend them to include deposits, so that local businesses have more options for where to take their cash at the end of the working day? In case he thinks this is a rather obscure point, he might wish to be aware that there is one pilot at a SPAR in Castle Street, Hereford, which is one of the trialled pilots. Perhaps he is more likely to be found in the Waitrose by the football ground rather than in SPAR on Castle Street, but he might wish to visit to see how it is working in practice.
I know the Government have promised an access to cash Bill. The Treasury is starting a review of access to cash as well, but can the Minister comment on the timing of the Bill? I am very concerned because we need a Bill sooner rather than later. The changes are happening now. Cash is disappearing now. Even if we do not get the Bill soon, I hope that some of the structural changes needed in the sector that do not require legislation can be accelerated by the Treasury.
The Government have set up so many institutional bodies. The Joint Authorities Cash Strategy is a key one, which is trying to reduce the cost of the hidden cash infrastructure that distributes notes and coins by consolidation and removes duplication. We do no talk about this often enough; we just look at what the consumer does, not at what happens behind the cash machine or cash register, which is just as important. In addition, the Payment Services Regulator now has a steering group for consumer working groups, each meeting weekly and coming up with solutions to immediate and medium-term problems. One might argue that there is far too much going on. The National Audit Office report, “The production and distribution of cash”, published in September, made that point and highlighted five separate bodies with an oversight role in cash infrastructure. This surely needs rationalising to make it more effective. Many bodies recommend that the Financial Conduct Authority takes on responsibility for protecting access to cash.
Serious thought is being given to the public utility model for cash infrastructure by another group that the Government set up, the Wholesale Distribution Steering Group. I would support that model, as the minutes from the steering group’s meeting on 18 November stated,
“without some action being taken the current wholesale cash distribution system would not remain efficient or effective against the backdrop of declining cash volumes.”
That puts it in a nutshell. We must not allow vested commercial interests to veto much-needed reform, particularly if all we end up discussing is interbank rates, so will the Government accelerate the proposal for a public utility model so that we can reduce the £5 billion cost of the hidden wiring that makes up the infrastructure?
We also need a long-term solution. We cannot pretend that we are not heading for an almost wholly cashless society at some point in the future. The question surely is: how do we get there? I very much hope the Government’s access to cash Bill will include a commitment to set up a body a bit like Digital UK, which managed the transition from analogue to digital TV. It is perfectly possible to create a guiding hand that knits together all the different interest groups, working with both the infrastructure providers and the charities that work on debt advice or support the elderly. They could manage that transition and make sure that those at greatest risk of being marginalised are helped through the process. I confess that is not my idea. I cannot claim the credit. That goes to Natalie Ceeney, who chaired the initial access to cash review.
I would also like the Government to probe into whether we should enshrine a legal right to pay cash for bills up to £100, as Denmark has done. It could perhaps be time limited until such point as the transition is completed. A more radical idea still might be a short-term legal requirement for shops to continue to accept cash as a primary way to protect both the acceptance of cash and by extension the cash infrastructure, including ATMs. That might be controversial if unit costs continue to increase for businesses, but I want to know the Minister’s views before I start planning my amendments to the Bill when it finally appears.
The sector is innovating, even though it is hamstrung by competing commercial pressures and some arcane internal debates. The Government have at least identified the problem and have raised the sense of urgency, and not just because I have started pestering the Economic Secretary to the Treasury whenever I pass him on the street. He now crosses the road very quickly when he sees me coming, and I do not blame him! I still think we need to have a wider national conversation and a much greater sense of urgency about how we manage the process. The transition is happening as we speak and not many people are noticing it. There will rapidly come a time when people ask, “Why did we not think about this more clearly at the time it was happening?” As the deputy chairman of the Swedish Riksbank, Cecilia Skingsley, said:
“If we don’t do anything we are looking at a future where money is spontaneously privatised.”
I do not think any of us in this House want to see that. We all have constituents who fall into the potentially vulnerable categories. We want to make sure that their interests are cared for as technology forges ahead. The Government have made a good start, but they need to follow through and much more speedily than is currently the case.
I look forward to hearing what other hon. Members have to say.
Thank you, Mr Mundell. It is a pleasure to serve under your chairmanship. I congratulate the hon. Member for Blackpool North and Cleveleys (Paul Maynard) on securing this debate. We have worked together on this issue for a number of years.
There is no doubt that the covid-19 crisis has hastened the move to a cashless society. Before the restrictions, people were talking about a timescale of years; it is now months, even weeks away. Cash does not seem to be king anymore. As my honourable colleague mentioned, it is coming back and is now at 75% of pre-covid levels—more in some areas—but surveys are being done at the moment to measure the use of cash and I worry that that will skew the results.
For many people, not having cash is a good thing. For an increasing number of people shopping online, using contactless payments and digital transfers, internet shopping is a boon, but it can increase the opportunity to scammers and fraudsters, and there are people who worry about using digital methods of payment and would prefer to keep cash. Many people have no bank account or credit card. They find budgeting far easier with notes and coins—after all, with cash, you cannot spend more than you have in your purse or wallet.
Many of my constituents are going back to those days. I can remember my mother having a little pocket for each bill—that is the way not to get into an overdraft. It has always been thus for people on lower incomes. Even with covid-19, people in deprived areas continue to rely on cash more than those in wealthier areas. LINK research shows a clear connection between deprivation and cash usage. Cash usage has dropped 70% year on year in the wealthiest areas, but only 35% in more deprived areas. That is the case in my constituency. Many people either choose to or have no option but to use cash. It is becoming harder and harder to pay using cash—in fact, we may well be at a tipping point, where the cash services once gone will not come back. Tipping point is a good way of putting it; I have difficulty in paying tips now. I do not really trust putting a tip on to my card. I would rather give the person giving the service the cash, and that is getting more and more difficult.
ATMs are being shut down throughout the country. In some cases, it is a response to falling demand, but once they have gone, it is much more expensive to restore them. It will be harder to get shops to accept cash again after they have insisted on contactless payments and cards for the best part of a year. Cash has been portrayed as somehow dirty and able to pass on the virus. That has not helped.
Research conducted for Money Mail suggests that half of all retailers plan to go cashless or have already done so due to the virus. I do not want to be in a situation where we find that because people choose to or have to use cash, their choice of where to shop is extremely limited. They might be taken advantage of in that situation.
LINK suggests that a cashless society presents a serious problem for 2 million people who still rely solely on cash and Natalie Ceeney, who chaired the access to cash review, says that as many as 8 million people would struggle to cope in a cashless society. These people need cash and they need confidence that the shops they use will accept cash for the goods they want to buy.
We must look at innovative and flexible ways of ensuring people have access to cash—for example, cashback without purchase, where people can go into local shops without buying anything. I welcome the extension of cashback, but it has to be part of a strategy. Things are happening piecemeal at the moment. Bank branches are shutting, ATMs are closing, and increasing numbers of shops are going cashless. We may need to look at making it mandatory for shops to have to accept cash, particularly those providing essentials such as food, medicine and so on. Do we need to look at a universal service obligation, so that banks are required to ensure cash access across the whole country, as happens in Sweden?
We also need to look at deposits. Post offices are almost seen as the silver bullet, but the postmaster in my constituency, who was quite elderly, had to self-isolate, and the post office has now been shut for nine months. People have no access to their cash now in that area. Three post offices in my constituency have also closed, with nobody able to take them over. These are in small pockets of community where to get cash is a journey.
There has been a 23% increase in the number of pay-to-use ATMs in the most deprived areas and that statistic worries me more than any other. If people have to pay to take out their cash, the £1.50 they pay to access their cash can be the difference between topping up their meter and having heat, and not being able to. Perhaps we should be looking at reforming the interchange fees to provide a bigger subsidy for provision in certain areas. It would be good to hear the Minister’s views on that.
I agree that vested interests should not accelerate the decline of cash. There is a case for reducing the number of ATMs in the face of decreasing use, but not the distribution and geographical reach. We need to maintain the footprint as we move forward, and we have to move forward. We need a Bill that deals with the issues and we need it very soon. We also need co-ordination of all the interested parties so that we can have a joined-up approach. Covid-19 has pushed an already fragile cash system to the brink of collapse. Unless the Government act now, we will sleepwalk into a cashless society and millions will be left behind.
It is a pleasure to serve under your chairmanship, Mr Mundell, which I think is a first in the 21 years that we have known each other.
I will dwell briefly on cash machines, because excellent reference has already been made by the two previous speakers. I commend the hon. Members for Blackpool North and Cleveleys (Paul Maynard) and for Makerfield (Yvonne Fovargue) for two very fine speeches, which will mean a lot to my constituents in the far north of Scotland.
There is a village called Durness in north-west Sutherland, which is the northernmost and westernmost inhabited community on the British mainland. Every year, they have a tremendous Highland games and tourists come from far and wide. I remember my predecessor bar one, Robert Maclennan, the late Lord Maclennan of Rogart, being chieftain of the games some years ago, resplendent in kilt and everything else. He greeted me very warmly and said he had had six glasses of whisky. He was in extremely good form.
There was a cash machine in Durness, run by the Bank of Ireland, part of Robbie and Fiona Mackay’s shop. They used to tell me that the amount of money that came out of that machine the day before the games and during the games was absolutely staggering—tens of thousands of pounds. That was, of course, then spent on whisky or on whatever else at the highland games and it went straight back into the local economy. Then the machine was taken away. As Robbie Mackay said, “They can get cashback in the shop, but I can’t stay open until the wee small hours; I can’t be open at 6 in the morning.” That was the problem and it became a huge cause célèbre in that part of Sutherland.At the end of the day we did get a cash machine back in, but as the hon. Member for Makerfield said, getting them back again once they have been closed is a near-impossible task. I can tell Members that it is: I have the T-shirt. For every one we win, we lose a lot of others.
The second anecdote—just to colour in the cash machine issue—is that some years ago, maybe even 10 years ago, there were huge gales in the north of Scotland and the electricity went out—not for a few hours, not for a day, but for three, four or even five days in some communities in my present constituency. That meant, of course, that the cash machine did not work, and neither did contactless, so it is worth remembering that the present electronic regime is vulnerable to an electricity failure.
That is as much as I want to say about cash machines, except that they absolutely underpin my constituency. Of course we can withdraw cash from bank branches, but as I have said an awful lot of times during my three years in this place, we now only have one bank branch in the entire county of Sutherland. That is 2,028 square miles; it is a vast county, with one bank branch, in Golspie. That means that people have to make a 150-mile round trip to go to a bank branch, which is causing huge difficulties for my constituents.
As all colleagues here today know—I have mentioned this many times in this House—it seems as if there is a sickening liturgy of closures, one after the other, which we are unable to do anything about. Of course I am told, “You can use the post office.” That is not the silver bullet, because—as has already been alluded to—many is the post office that has already shut, or is shutting, in the relevant town, and the distances to get to the nearest post office are impossible. In no way do I denigrate what the Post Office does: it is a splendid institution, dating from the 19th century, and it is something that we can be very proud of as a British innovation.
I apologise for repeating myself, but one thing that I and others have been advocating is a joint banking hub approach, whereby the clearing banks work together to form a joint hub that would be owned in Scotland by the main clearing banks. That would mean a human face or faces behind the counter, who can advise. I bank electronically—I do it through my mobile—but I got a fright quite recently when I saw a debit coming off my account that I did not know anything about, and it was actually a banking fraud. Now, by dialling various numbers and taking a long time over it I got to the bottom of it, but had I been older than I am, or had I been a vulnerable person, that would have been very frightening. What better than to be able to go into a bank branch and ask, “What is happening here?” and be told, “Ah, this is a fraud we know about. We will kill it right now and get the money returned to you”?
I am not having a go at the Government, because the Government have actually been helpful. Before the pandemic, I had a constructive meeting with the Economic Secretary to the Treasury, and I was very grateful to him for that. He thought that there was possibly some mileage in the Government looking at the concept of a jointly owned banking hub, and indeed, on the business front, that concept has already been established—not for the north of Scotland, but nearer London, I think. Before the covid outbreak, I had hoped that I could have a look at it and see how it worked, and whether we could apply the same principle to the clearing bank idea, tweaking it suitably.
The other thing about having a human face behind a counter, or in a building that really exists and is reasonably accessible to people, is the issue of depositing money. We can take money out of a cash machine, but we cannot stick it back through the slot, and during the covid pandemic I have heard from businesses that, by the very nature of what they do, have had to travel a considerable distance to bank their weekly takings. That, I suggest, is not terribly safe, not only because of the security risk—a person travelling with that amount of money on them, in their car—but, sadly, because of the likelihood of transmitting the disease. We can learn lessons from the pandemic about this.
When it comes to the idea of a hub, where there is a will, there is a way. It could be done, and what I try to say to the banks of Scotland is that it would benefit them in so many ways. I am digressing from taking cash out of machines, so I will be very brief, but I have constituents who tell me that they have a brilliant idea to start a little business, but that whereas their father or grandfather would have talked through the sums with the bank manager and the bank would have supported them to the tune of, perhaps, £20,000, my constituents cannot do that because it is not so easy now. They may have to travel somewhere far away, which, because of covid, is not so good.
I started with a light-hearted point about the Durness highland games; I conclude on the splendid galas that we have in our highlands. Wick gala is famous, and it is excellent, with great entertainment. There are lots of different acts on the backs of lorries. I remember, on one lorry, an excellent take-off of my immediate predecessor Viscount Thurso, which was very humorous; indeed, his lordship enjoyed it enormously. The way to contribute to the Wick gala is to throw money at the floats, which is caught in little nets. A lot of things that are good for civic society involve cash being given. In my hometown of Tain, people go around with buckets which money is thrown into. That is how it is done; it cannot be done with a card or contactless.
With that light-hearted point, I congratulate the hon. Member for Blackpool North and Cleveleys on securing the debate. It is super to see a constructive debate such as this taking place. I look forward with great interest to the Minister’s reply.
It is a pleasure to serve under your chairship, Mr Mundell, and shortly under the chairship of my hon. Friend the Member for Makerfield (Yvonne Fovargue). I thank the Backbench Business Committee for finding the time to put this issue on the parliamentary agenda. This is a 90-minute debate, but for me and, I think, the public the issue is really straightforward: people should not be charged to access their own money. It really is as simple as that.
Data from the GMB union—I declare an interest as a member—found that access to free cash in my constituency had fallen by 46% since 2018, one of the top five biggest falls in free cash machines across the UK. Let us call that what it is—a stealth tax on the most vulnerable and those on the lowest incomes. Low income is the biggest indicator of cash dependence. Lower-income households are less likely to have access to digital infrastructure and more likely to use cash, for budgeting reasons. Older constituents contacted me during the pandemic, concerned that they could not pay with cash. We know that older people are less likely to be able to access banking digitally. Those people literally cannot afford to be left behind.
[Yvonne Fovargue in the Chair]
From an accessibility standpoint, a range of health problems may make it more difficult to use digital payments. Cognitive difficulties may make it challenging to remember a PIN—particularly if my child has kept me up all night and I really struggle to remember which PIN is which. Those with certain visual impairments may prefer the tactile nature of cash. Those with mental health problems may not trust digital payments, or may find it more difficult to control compulsive spending, affecting some people living with bipolar disorder or with gambling addiction, for example.
The pandemic has changed everyone’s way of life completely, and I entirely understand that, for now, we need to do everything we can to slow the spread of the virus. However, as businesses adjust to the new normal I will be pleading to allow the safe return of cash payments, because so many people would still like that option, and so many depend on it. Like many industries right now, the cash industry has been hit hard, as the number of cash withdrawals halved during the initial weeks of the covid crisis. However, this crisis was long in the making, with figures from Which? from February 2020 showing that 1,200 bank branches and 9,500 free-to-use ATMs were lost in 2018. That is having a real impact in Luton North. We are losing bank branches, with Barclays—around the corner from me, on Marsh Road—the latest to announce plans to go. When I went there last week, the queues were 15 people deep, 2 metres apart. That bank branch is well used and needs to be saved.
The industry is now on a knife edge. G4S, which operates some cash-handling services, is threatening more than 1,000 jobs with restructuring plans, and Loomis has announced 300 redundancies. When do the Government plan to bring forward the legislation promised in March to protect the cash industry? Will it include protections not only for accessing cash but for accessing free cash? My constituents are already some of the most overcharged in the country for getting at their own money. My constituents need the legislation to offer a legal right to pay for goods and services in cash, especially essential goods and services. Can the Government pledge that any legislation will ensure the availability of cashback from medium and large retailers? I ask the Minister to ensure the Government keep their promise and do more to back this vital industry and make progress towards ending this stealth tax on low incomes.
It is a real pleasure to serve under your unexpected chairmanship, Ms Fovargue. I am grateful to my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) not only for securing time in Westminster Hall to debate access to cash and acceptance of cash during the covid-19 pandemic, but for his continuing work on this subject, as highlighted in his very thoughtful opening speech. I am also grateful to the other participants so far—including you, Ms Fovargue—for raising a series of important points, some of which I will repeat.
This debate is urgent, because I fear that, accelerated by covid-19, we are sleepwalking quickly to a cashless society in a totally unmanaged and unprepared way, with potentially disastrous consequences for many of our constituents. I know there will be people who advocate the benefits of a cashless society, but even if that is the case, we must not proceed in this unplanned and ad hoc way. We know from research that some 17% of adults in the UK—around 8 million—would struggle in a cashless society, and those struggling the most would be the elderly, the vulnerable, the economically excluded and those in rural communities such as my Dumfriesshire, Clydesdale and Tweeddale constituency.
Shockingly, the National Audit Office’s recent report on cash found a fragmented system of oversight, with the Financial Conduct Authority regulating banks and the Payment Systems Regulator regulating payment systems identified by the Treasury. Coherence and co-ordination is urgently needed in this regard, along with clear, robust messaging from the Government on the importance of being able to use cash, at least for the time being. In my view, the Government’s promised legislation should not just address access to cash, but make the Financial Conduct Authority responsible for regulating a well-functioning retail cash system.
When I have previously raised this issue, the ability to access cash and the cost of doing so was the primary concern, along with the need for small businesses, charities and local organisations of the type that the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) mentioned, to be able to deposit cash. Now, however, the immediate focus has to be on cash acceptance. It is pointless to access cash if people cannot use it, yet cash is increasingly refused as a means of exchange. The Bank of England noted in its quarterly bulletin that 42% of people had recently visited a store that did not accept cash. More worryingly, Which?, to which my hon. Friend the Member for Blackpool North and Cleveleys referred, conducted a survey that found that four in 10 of those who had experienced difficulties paying with cash had been left empty-handed when trying to buy groceries, and almost two in 10 had been unable to buy medicine. Indeed, I learned only yesterday of another pharmacy that has gone cashless.
Industry-collated data suggests a 71% decline in cash use between early March and mid-April of this year. Conversely, my experience is of the importance of cash to people who have relied on it during the pandemic. Cash has been the means by which local communities have supported themselves, with neighbours, friends and family buying essentials for one another. Short of handing over one’s PIN and bank card, cash was the only option for many of those who needed others to help them when faced with domestic emergencies, given that such people were mostly older or vulnerable and were certainly not users of apps, credit cards or digital banking services. Indeed, many are part of the so-called unbanked community.
As others have touched on, there is no doubt that part of the issue is the false perception that cash has not been safe to use during the pandemic. In my view, some have seized on that perception as an excuse to go cashless for their own purposes. In any event, it is just not true: as far back as April, the Bank for International Settlements advised that the risk of transmitting covid-19 via banknotes was low when compared with credit card terminals or pin pads. That view is shared by the Bank of England, which found that,
“the survival of virus on banknotes is no greater—indeed appears potentially less—than on reference surfaces representative of the many surfaces that people may come into contact with in their routine life.”
Cash is safer still if users follow the routine guidance on washing their hands regularly and on social distancing.
The Government now have a major role to play in making it absolutely clear that people should be able to use cash in routine transactions. If that is not possible on a voluntary basis among retailers and other service providers, legislation should be considered—at least for a fixed period—to support those who are least able to manage without cash in transitioning to a cashless economy. My hon. Friend the Member for Blackpool North and Cleveleys drew a useful comparison with the transition to digital television.
Amid the pushback on the use of cash, accessing and depositing cash has become increasingly difficult, with bank branch closures and the decline of free-to-use cash machines. Since 2015 there has been a 17% reduction in the number of free-to-use cash machines, and since 2010, 39% of the bank and building society branch network has closed. That has been acutely felt by local communities in my constituency, which have seen seven Royal Bank of Scotland branch closures in recent years, as well as the closure of the West Linton branch of the Bank of Scotland. Covid-19 has only added to the impetus of that trend: three other local cash machines have been lost, and the TSB in Peebles is scheduled to be shut. In your speech, Ms Fovargue, you made an important point about post offices, as did other hon. Members. Post offices in my constituency have been closed the next day because the postmaster was ill, meaning that people could not gain access to the post office.
Indeed. The challenge of the high street is a considerable one.
Although our local post offices do a good and worthwhile job where they are still in the community, they are not a silver bullet. It is sometimes suggested that everything will be sorted out by the post office. The challenge is not only in having post offices in every community in the first place, but in the considerable issues that post offices face in providing those services and, very often, operating a retail outlet. That is why we need the joined-up approach to the whole cash system, as I have said.
As my hon. Friend the Member for Blackpool North and Cleveleys mentioned, there has been a rise in the number of cash machines that charge for use. Most cash withdrawals from machines are relatively small, so the charges mean that users effectively face a 10% to 30% tax on each transaction. Generic figures on the number of free-to-use cash machines mask the scarcity of such machines in rural and deprived areas.
When I last counted, there were fewer free-to-use cash machines in the almost 1,700 square miles of my Dumfriesshire, Clydesdale and Tweeddale constituency than can be found on or just off Victoria Street, a few moments from here. That imbalance is plain wrong and the industry must correct that. I welcome the fact that the banks, LINK and the card operators, which have come forward with innovative proposals about the interchange rate that applies to cash transactions, are all contributing to the thoughtful work that the Financial Conduct Authority and Payment Systems Regulator are undertaking, about which my hon. Friend the Member for Blackpool North and Cleveleys spoke in detail.
I was pleased to have the opportunity to discuss these issues recently with the Economic Secretary to the Treasury. I welcome his commitment to legislation and other initiatives on access to cash, but, as I have said, I hope they will go beyond access to cash and cover the entire cash system and responsibility for it. That legislation is needed now, along with the Government’s robust advocacy of our ability to use cash. Without action, our cash system is in danger of collapsing, leaving the elderly and most vulnerable to pay the price. I hope that the Minister can promise that action today as a matter of urgency.
I congratulate the hon. Member for Blackpool North and Cleveleys (Paul Maynard) on securing this debate. This is not the first time we have debated this subject in Westminster Hall; I understand that the hon. Member for North Ayrshire and Arran (Patricia Gibson) and probably numerous other Scottish MPs have had previously had a similar debate. We are back to rehearse the issues, in a nice way. It was a pleasure to hear the opening speech from the hon. Member for Blackpool North and Cleveleys.
I do not feel particularly old—some days I do, but other days I do not—but I am one of those old-school people when it comes to cash and cheques. People can still get cheque books, by the way; I get one almost every month. By and large, the people from whom I buy stuff have been more than happy to receive a cheque. Unfortunately, that has changed, and I will give a few examples to illustrate the issues to which the hon. Gentleman and other hon. Members have referred. I understand the rationale behind shops asking people to use contactless payment if possible at this time, but that is not and cannot be sustainable. A number of businesses in Belfast and Northern Ireland have refused to take cash during the coronavirus pandemic and have lost business for life.
I digress slightly, but flights from Northern Ireland to here are quite restricted. I have to go over first thing in the morning and come back last thing at night, because there are not many options. British Airways has put a flight on in the last week. It informed us this week that we could not get a boarding pass online, but we had to present ourselves at the airport where a person would hand it over face to face. That is totally contrary to the coronavirus rules, and it is hard to understand how some have changed their methodology while others have not. Incidentally, there is not the same problem with Aer Lingus and other airlines.
I will give an example of the problems with contactless payment. My parliamentary aide, who was determined to shop in the local high street for her Christmas gifts, went to the local Menarys department store in the main town of Newtownards to buy Christmas gifts for her children’s teachers. When she came to pay, an issue with the card machine meant that she could not. That seems to be a recurring problem, although I do not know why. She has told me that she will make every effort to go back and select the merchandise and pay for it, because she knows that coronavirus and the lockdown could be the death knell for the high street. Next week, there will be a debate about the high street, not in Westminster Hall, but in the main Chamber. It will probably be oversubscribed, because every hon. Member present will want to make a contribution if possible. The fact that my aide does not bother to carry money and has her card on her phone meant the loss of that sale, as it would for many people.
I requested a breakdown of access to cash in Strangford and received some interesting results. In total, the constituency lost 13 free-to-use ATMs from January 2018 to September 2020, according to the latest data at that time, despite the fact that the number of pay-to-use ATMs increased by four. There was also a reduction of two ATMs from the start of lockdown in March to May 2020. By the end of 2021, my constituency will have lost seven bank branches since 2015. That figure includes the proposed closure of a TSB branch that was announced earlier this year.
Access to cash is declining and our reliance on contactless is growing, but the technology and security are not keeping pace with that. A chat with local merchants will tell of the unreliability of card machines, or of being caught out when a customer unintentionally leaves before it is realised that their card has been declined. I have seen that happen in the Members’ Dining Room. Let me be clear that that is nobody’s fault; nobody is doing that intentionally, and they have put their card on the reader. Of course, in the Members’ Dining Room, people do not go too far away—they only go to wherever they are going to sit to have a cup of tea, or whatever they are having—and the staff come up and say, “Look, that didn’t go through. Will you go back and do it again?” That can happen, and it underlines some of the issues.
I have been contacted by the Association of Convenience Stores, which represents some 33,500 local shops and petrol forecourts across the whole of the United Kingdom of Great Britain and Northern Ireland, many of which trade as independents under brands such as Spar, Nisa and Costcutter. I support their calls to restore the independent setting of LINK interchange fees for ATMs and to require bank participation in LINK; to enable cashback without a purchase, but without any obligation for retailers to offer that service and with guaranteed fair remuneration; and to develop an access to cash guarantee to ensure that access is maintained where exceptional circumstances lead to a lack of coverage. The hon. Member for Luton North (Sarah Owen) referred to that as well. We do need some help from the Minister, who is here to respond to our requests.
As Which? put it,
“The pandemic has accelerated the decline in cash use and demand: ATM withdrawals fell significantly during the first national lockdown, and with an increasing number of shops encouraging non-cash payments, we anticipate this reduction in cash to persist long after restrictions have been lifted. This is putting immense pressure on the UK’s already fragile cash infrastructure, leaving it at a high risk of collapse.
However, while overall use has fallen, our research has found that cash remains a fundamental payment method for many, often vulnerable, people.”
The right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) talked about that just before I rose to speak. We are here to speak for vulnerable people. Every one of us will mention them, we all know them and we know what the issues are for them. I am sure that the hon. Member for North Ayrshire and Arran, who will follow me, will underline that with real understanding and with lots of examples of where the system falls down for them.
In a survey in May, less than half of all consumers said that they were accessing or using cash in the same way as before the pandemic, while almost a third said that coronavirus would not affect their cash use in the next six months. Although the Government pledged to protect access to cash in March, just before coronavirus came online, legislation is needed urgently to prevent people from losing access to their only payment method. We have all said that, but I will say it again. I know that others, including the shadow Minister, will say the same thing.
I believe the Government must set out a clear timetable for introducing a Bill to Parliament, with detail on the scope and contents of the proposed legislation, highlighting how it will build on and complement current work being done to protect consumers’ ability to access cash. Can the Minister set that out?
My constituents have, by and large, supported the coronavirus rules and regulations, and they have understood the need not to use cash, but they also understand the predicament and the problems that come with having a cashless society. We need to make sure that the vulnerable are looked after. Quite clearly, at the moment, they are not.
I am delighted to speak in the debate, and I echo the congratulations that have been offered to the hon. Member for Blackpool North and Cleveleys (Paul Maynard) on securing it, and on his clear exposition of the scope of the challenges that we and our communities face in access to and use of cash.
I want to express my good cheer at the fact that there is such a level of common purpose in the Chamber today. That does not happen as often as we might like, but there is clear agreement here. I want to pick up on something that the hon. Member for Strangford (Jim Shannon) said. He described himself as old school, because he still uses cheques. I cannot speak for anyone else in the Chamber, but I also use them. I can go one better, because recently, having forgotten my cheque book, I had cause to buy that quaint old relic called a postal order, which is very unfashionable. I was quite surprised; I had not bought one for about 35 years, and they look really quite sexy now—far different from how they used to look.
There was a debate similar to this one at the end of May last year, covering many of the same issues; again, that was referred to by the hon. Member for Strangford. All the issues we would expect were debated: how for some of us cash is convenient but for others it is a vital budgeting tool; the level of control that it offers, which digital transactions do not; and the fact that there is a sensible reason why debt charities always advise those living with damaging levels of debt to cut up their cards as a first step to regaining some financial control. Members around the Chamber have repeatedly referred to the way our cash machines are disappearing from our high streets—faster than snow off a dyke. Some businesses do not accept cash payments at all, and some 1.3 million people in the UK do not have a bank account and already suffer financial exclusion. Those problems were highlighted even before covid-19 and the need to factor in the effect of cash not being accepted in the current climate. The same arguments and concerns have rightly been repeated today.
How different the world looks now, only 19 short months after that debate in May last year. Now we are living with covid-19. We live in a world where the cash network has been placed under increasing strain, pushing it ever closer to collapse. Alongside that, as we have heard from many Members today, there is a continuing trend for considerable shrinkage in the availability of free-to-use cash links in communities; 9,500 have been lost since 2017, and it is feared that further losses are on the way. More than a third of bank branches have been lost in less than five years, and we can all guess that there will be further bank closures to come. That is extremely worrying, because for many of our constituents cash is not just the preferred way of payment—although for many that is the case; for many, cash is the only purchasing method at their disposal, as you said, Ms Fovargue.
The hon. Member for Strangford also reminded us that cash is something that we all sometimes need to rely on, whether we like it or not, because of technical glitches with card machines, and even some high-profile IT glitches in the banking world. I thank the hon. Gentleman for reminding us of that.
The Chancellor committed to introducing legislation to protect access to cash in March 2020; however, the pandemic has dramatically shortened the timeframe needed for intervention, and unless it is introduced urgently the ability to get access to cash and spend it could be permanently lost to many consumers, causing significant harm and financial exclusion.
The speed of the stampede away from cash and towards digital payments is fine for some people, and good luck to them. However, the price of that speed is that many are left behind. The consumer body Which?—many have referred to its excellent work on the matter—revealed that 85% of us would find it difficult to live our lives without the ability to withdraw cash. That makes the 23% rise in pay-to-use cash machines, particularly concentrated in socially deprived areas, all the more worrying. I share the concerns highlighted by the hon. Member for Luton North (Sarah Owen).
This speeding towards digital payments, which were taking hold before covid, has accelerated at an astonishing rate in the current climate, and that has quickened the decline of our high street cash machines and bank branches. The loss of bank branches has affected my constituency of North Ayrshire and Arran. I believe it is one of the worst hit in the UK when we consider the distance to the next bank, although I take on board the challenges that the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) talked about in his rural constituency. These matters have been repeatedly raised in the Commons by me and other Members. I echo the hon. Gentleman’s comments about the pressing need for banking hubs. It is really important that they are expedited in all our communities that have suffered.
[Rushanara Ali in the Chair]
Covid has made the situation of our cash infrastructure all the more perilous. As we have heard, many retailers are simply refusing to accept cash. During the global pandemic, when there is already no end of serious matters to contend with, too many of our constituents have to contend with their lives being made unnecessarily difficult because they cannot pay for the goods and services they need with cash, as the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) set out.
Research by Which? showed that in May, one in 10 people had been unable to pay for items with cash during lockdown because they were refused by the retailer. Of that number, 26% were unable to purchase the items that they needed as they had no alternative to cash. In October, Which? found that four out of 10 of those who responded to its survey left a shop empty handed when they tried to pay for groceries with cash. The right hon. Gentleman also highlighted that. As we have heard, action on access to cash is utterly meaningless if the widespread acceptance of cash is lost in our shops. We urgently need the Financial Conduct Authority to publish a UK-wide tracker of levels of cash acceptance.
I echo the calls for the Minister to set out what interventions his Government will take to ensure that people, especially those who rely on cash, can continue to use it to pay for essential goods and services. There is currently an absence of legislation to protect such access to cash. Alongside that, we need an impact assessment of the effect of cash refusal on consumers, to consider the relationship between the acceptance of cash and consumer access to it.
The genuine fear that we have heard today is that cash payment options have been fatally and profoundly—but, I hope, not irreversibly—affected to the point where the post-covid use of cash in our society is on its death bed. I suppose we are here today to see whether it can be resuscitated. The UK Government have a duty to ensure that access to cash does not disappear, for the sake of our rural and socioeconomically challenged communities, which particularly rely on that medium.
Following the UK Government’s legislative proposals to protect access to cash, the proposal to give the Financial Conduct Authority the responsibility for overseeing access to cash is to be welcomed. Alongside that, it is important that the Financial Conduct Authority is given proper teeth. It needs comprehensive powers to ensure strategic and comprehensive regulation.
It seems clear that expediting those proposals has become ever more urgent, given that the diminishing of the cash infrastructure has been accelerated in recent months. The Financial Conduct Authority should be given a statutory duty to protect our cash infrastructure. It should be responsible for monitoring and reporting on levels of cash access, as well as designing and implementing a framework funded by the industry by which a minimum level of access to cash can be maintained. Our cash infrastructure will not be sustainable without that level of intervention from the Government. We can already see it crumbling before our eyes at a shocking rate, as every single participant in the debate has mentioned.
In addition, the Government should set out a clear timetable—others have also called for this—for introducing a Bill to Parliament as soon as possible. That should include the detail, scope and contents of the proposed legislation, with a clear exposition of how it will build on and complement current work being done to protect consumers’ ability to access cash. I know that Conservative Governments are often reluctant to have such direct intervention on such matters, but when direct intervention is required, the Government must be brave enough to make that intervention.
It is a pleasure to serve under you in the Chair, Ms Ali, and to have had revolving Chairs this afternoon. My hon. Friend the Member for Makerfield (Yvonne Fovargue) and the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) also did fine work in the Chair.
I am very grateful to the hon. Member for Blackpool North and Cleveleys (Paul Maynard) for securing this important debate and for his excellent contribution. I should just draw the House’s attention to the fact that my husband is employed by the Bank of England. I will refer to the Bank later.
As many hon. Members have set out, the use of cash in this country has been declining for some time and the decline has been accelerated by the pandemic. Many consumers today are turning towards digital payment methods. However, as we have heard, that change in behaviour does not fall evenly across society.
According to the Treasury Committee report on increasing financial inclusion, there are still about 1 million people in the UK without a bank account and some older, lower-income households that rely on cash to budget or because of a lack of access to online banking. Many communities and many people, especially older and more vulnerable ones, still rely on cash. As we have heard, the Access to Cash review carried out by Natalie Ceeney estimated that that was the case for some 17% of the population.
We have been seeing a shift away from using cash and towards digital for some time, but that has clearly been accelerated by the pandemic. Data from LINK suggests that ATM cash withdrawals were down by 60% between March and April this year, compared with the same period in the previous year. Although ATM withdrawals have increased since that period earlier this year, the change in behaviour is likely to be long-lasting.
Many people are able to adapt to the changes and welcome them, but an unmanaged drift towards a cashless society risks seriously disadvantaging many of the people we represent. We have heard in many contributions today what that might mean for communities and individuals in regions and nations of the UK.
My hon. Friend the Member for Makerfield, who brings to the House real experience in these matters, talked about the pressures faced by families on lower incomes and described how many people find it easier to budget using cash. Like my hon. Friend the Member for Luton North (Sarah Owen), I am a GMB member. I was very pleased to hear her raise its concerns about job losses. She is a passionate advocate on behalf of her constituents, and I know she will keep pressing Government on this issue.
It is clear that we need to find ways to manage and protect access to cash. Otherwise, we risk exacerbating inequality and shutting people out from access to various services. We know that a failure to manage the transition and a sudden inability to access cash will cause problems for many of our constituents. I saw that in my own constituency last year, following the decision by Barclays to opt out of the Post Office cash withdrawal scheme. That followed a bank closure not long before in a community in my constituency. There was significant worry about what this would mean for my constituents in Hetton-le-Hole and how they would adjust. We should not underestimate the anxieties that such developments can cause and what they mean for the local high street.
I welcomed at the time Barclays’ decision to reverse the plans, but notwithstanding the wonderful news on the vaccine that we have seen, the reality is that the future of our society may well mean reduced reliance on face-to-face everyday services for some time to come, and the Government should be thinking about how we protect those services for those in our communities who would otherwise be left isolated.
In the light of that, I welcome the commitment from the Government in the March Budget to legislate on cash access, and I congratulate organisations such as Which? that have been tireless campaigners in this area. However, I am worried that if we do not get to grips with this task quickly, the cost of inaction or, indeed, slow action will only make the inequalities that we see even more severe.
Without clear legislation, we risk the creation of cash deserts. We must not allow the financial exclusion of those who rely on cash purchases. I recognise that Ministers have previously recommitted to bringing forward that legislation, and that the call for evidence ended only last week, but can the Minister set out today a rough timescale for legislating on this matter? Does he agree that the longer the current situation goes on, the more severe the consequences may be, and that uncertainty is damaging? We know that an unmanaged transition to a cashless society would not just affect families who rely on cash, but could have a significant impact on jobs and businesses. As the GMB has rightly pointed out, many small and medium-sized enterprises rely on cash transactions. Many thousands of people work within the cash transit and ATM service industry, too.
Has the Minister considered the implications that this trend will have on jobs and livelihoods? If so, what are the Government doing to ensure that businesses can adapt and plan for the future?
We know that the infrastructure around cash is a critical element in this debate, as we have heard from Members of different parties. Joint research by the FCA and the University of Bristol found that the number of free-to-use ATMs fell 19% between March 2018 and March 2020, and that number is likely to continue falling. It should worry all of us that the conversion from free-to-use to pay-to-use ATMs appears to be concentrated in deprived communities where there is much greater reliance on cash.
There is also an obvious need to protect ATMs in rural communities, as we have heard this afternoon. Across the country, the Post Office plays a vital role for those who need access to cash. In 60% of rural settings, post offices are the nearest cash access point, yet thousands of post offices remain worried about the future. Of course, that concern is not limited to rural communities. Can the Minister tell us what work his Department is doing with the banks and ATM providers to review these matters and to ensure that people who depend on cash have good geographical, and free, access to it?
The Minister will doubtless be aware of the recommendations made in the 2019 Access to Cash review about how we maintain the infrastructure. It called on the Bank of England to redesign the high cost of the infrastructure we have today so that it is tenable for banks to provide free access to cash. The review also highlighted the role that the FCA can play in ensuring that the cost of handling cash is kept on a par with digital.
The pace of technological change in the past 60 years has been extraordinary, and it is important in any area of our lives where technology has transformed the questions of who can exercise power over us and how, that as a society we keep under anxious review the question of whether we have struck the right balance between enabling commercial success and ensuring public benefit. The GMB submission to the Government’s call for evidence highlights the importance of getting the regulation right. As the GMB says, there is
“an urgent and compelling need for regulation to ensure the sustainability of the ATM network.”
We have the Payment Systems Regulator, of course, but there is a wider strategic question about the relationship between the work that it does and the availability of cash. The GMB’s view is that
“a single regulator with overall statutory responsibility”
would be the preferred outcome, and it recommends the FCA for that role. The GMB also notes, however, that it would need proper support from Government to ensure it can perform its functions effectively, given the scale of the challenge. Will the Minister set out the Government’s current thinking on how the system will be regulated in future and how we might bring costs down?
There should be a focus on ensuring alternative access to cash. We have seen a number of pilots recently across the country—I particularly note the work of LINK and PayPoint—but can the Minister tell us whether any efforts are being made to promote pilots and to look at new, innovative solutions around the issue of access to cash?
At the heart of this issue is a transition to digital forms of payment, and no one must be left behind by this transition. Of course, one of the most significant factors is the level of deprivation in an area. We must ensure that deprived communities are not left behind, so can the Minister outline what more the Government intend to communicate throughout the transition? How will they support communities in all parts of our country through this process?
It is quite right that we focus on the impact on individuals, but we must not forget the security implications of an unmanaged transition to a cashless society. The Minister will doubtless be aware of the example of Sweden, a country that is much closer to becoming cashless, and where concerns have been raised about the risk of cyber-attacks or foreign interference in a totally digital system. Consumer privacy is clearly an issue too, given the traceability of digital transactions and how so much information is stored and used. What consideration has the Minister made of these matters, and will he address the potential vulnerabilities of a cashless society in legislation?
I want to close by saying that we all recognise that an unmanaged drift to a cashless society would do significant harm to millions of people right across our country. Once infrastructure has gone or communities have been harmed, rebuilding is very hard. I urge the Minister not to delay work on this important issue and to work with all of us across the House to get the response to this issue right.
It is a delight to see you in the Chair, Ms Ali. I am sure all colleagues will join me in taking my hat off to the genius of improvisation and quick thinking that allowed our colleagues, my hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) and the hon. Member for Makerfield (Yvonne Fovargue), to take the Chair—the vital element. Thank you, Ms Ali, for coming in at the end and allowing us all to take our positions in the Chamber.
This has been a very good debate—very thoughtful, very constructive, very well informed and on a very important topic—and I thank everyone who has made contributions to it. I am sure everyone present will join me in thanking in particular my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) for securing the debate, and also for his excellent and very thoughtful speech. He picked up on themes that he and many other hon. Members have been pressing over the previous years and months. His knowledge of and engagement in the issue of cash access and the use of cash are well known, and I thank him and everyone else for their contributions.
As colleagues will be aware, I am not the Economic Secretary to the Treasury. He, tragically, is unavoidably detained with the trivial matter of the Financial Services Bill—he sends his apologies and thanks. It has been mentioned by several colleagues in this debate that he has been very accessible to them in discussing these issues; his style is a very open and friendly one. We try to do that in the Treasury and he has been an exemplar. I am sure that colleagues will continue to engage with him. I am afraid that, compared to his grandmastery and immense skill, I am very much a novice chess player in this area.
It is clear that digital payments are, as colleagues have mentioned, playing more and more of a role in the lives of people across the country and in the activities of business. In many ways, this is to be profoundly welcomed; it allows for faster, cheaper payments and for easier management of household and business finances—those are the forces that in large part have powered the change hitherto.
The statistics are clear: in 2009, some 58% of payments were made using cash; just a decade later in 2019, it was 23%. That astonishing rate of change has now been accelerated by covid-19, as colleagues have said.
It is important to say that cash has not, by any means, had its day; it is still the second most popular form of payment in this country. According to figures published last year, a reported 2.1 million people mainly use cash for everyday payments, many of whom may be vulnerable, elderly or on low incomes. However, the pandemic has clearly had a marked impact on cash usage. We recognise that and, as I think colleagues have noticed, the Government have not been slow to press forward on the issue. That, of course, creates the impetus and energy that they have shown in bringing attention to these issues in the debate.
I reassure colleagues that the Treasury has been working very closely with regulators and industry to try to ensure that people have access to essential banking services, and to cash in particular. As colleagues will be aware, the Joint Authorities Cash Strategy group only launched in May 2019, but it is very much engaged in facilitating co-ordination and seeking to ensure comprehensive oversight of the UK’s cash infrastructure. If I may, I will talk a little more about the wider picture, then I will come to specific comments and questions that have been raised by colleagues in the debate.
The JACS group is chaired by the Treasury, and brings together the Payment Systems Regulator, the Financial Conduct Authority and the Bank of England. The group has continued to try to coordinate efforts throughout the pandemic and, as Members will be aware, it published an update on the actions of its members in July 2020. Also in the summer, the FCA and the PSR published a statement setting out their approach to addressing issues in relation to access to cash, including local-level areas that have lost access to cash. In September, the FCA introduced new guidance for banks, building societies and credit unions when they are considering closing branches or ATMs.
I think it fair to say that throughout the pandemic, the regulators on the one side and the industry on the other have taken steps to support customers who are reliant on cash. Those have included more proactive communications, cash deliveries to people’s homes, and issuing carer cards to trusted third parties. As a result, the vast majority of people have continued to have access to cash during the pandemic. That, of course, does not address those who may have been struggling, whose position has been highlighted by many of the individual stories told in the debate.
There is the question not merely of cash access, but of cash acceptance, as my hon. Friend the Member for Blackpool North and Cleveleys highlighted. The one is as essential as the other. Of course, to help to control the virus, businesses and individuals have been encouraged to follow the latest Government advice, which involves a range of measures to protect personal health, but also to minimise contact in transactions. However, it does remain the choice of an individual retailor whether to accept a particular form of payment, be that cash or card. What is interesting is how different groups, including the FCA, the PSR and the Bank of England, as I have mentioned, are joining forces to improve data collection and, therefore, gain a better understanding.
My hon. Friend the Member for Blackpool North and Cleveleys raised the question of mandation. The Government do not believe that mandating cash acceptance is the answer, but exploring means to incentivise the acceptance of cash is high on the agenda and was a key issue raised in the call for evidence. If protecting access to cash is a complex issue, requiring a long-term and collaborative effort, it is no less important that that work continues across industry regulators and the Government.
The ATM network has been mentioned by colleagues. LINK, which is the largest network of ATMs, has taken action to ensure that remote and deprived areas continue to have access to free-to-use machines. The Government are working to bring legislation to protect access to cash to ensure that the nation’s cash infrastructure is sustainable over the longer-term, as the hon. Lady for Houghton and Sunderland South (Bridget Phillipson) highlighted, and as was prefigured in the March 2020 Budget.
As I said in my contribution, the Association of Convenience Stores has put forward ideas for helping the ATM system. I realise this is not the Minister’s responsibility to be honest, but has the Department had the opportunity to talk to those people to see how we could work together?
I thank the hon. Member very much. I do not know whether the Department has had the opportunity to talk to the Association of Convenience Stores specifically, but I do know that the issue is very much on the agenda—it is certainly on the agenda of the Economic Secretary. It is important to realise, and to remind everyone, that the call for evidence on access to cash only closed last week. The timeliness of this debate rams home that point, and rightly so, but it is merely a week. It says more than I could for the high esteem in which colleagues across the House must hold the Government, if they think we can make a decision without having published a response and having only closed the call for evidence last week.
Nevertheless, the call for evidence is an important aspect. It set out the Government’s view that cash has the potential to continue to play an important role—and cashback within the cash infrastructure—and also asked for views on how that can be achieved. We will publish a summary of responses to the call for evidence and set out steps alongside that in due course. As colleagues will know, the call for evidence asked for views on key considerations associated with cash access, including deposit and withdrawal facilities, cash acceptance and regulatory oversight of the system.
The call for evidence also set out the Government’s views on the aims of legislation: that it should be proportionate, flexible, cost-effective, efficient and sustainable. The Government’s view, and we should be perfectly clear about this, is that legislation will need to ensure that business and people can have access to cash withdrawal and depositing facilities within a reasonable travel distance, as is needed in their day to day lives. I remind colleagues of that central point.
The Government absolutely recognise—I am not going to comment on the shape of what is to come, because I do not think that would be appropriate—the concern about free access to cash. As the hon. Lady will know, a lot of work has been done on trying to preserve inclusivity in the face of markets and pandemic-induced change that may be prejudicing that access.
I really do not have much time, and I want to respond to the comments and to give my hon. Friend the Member for Blackpool North and Cleveleys the chance to wind up, so let me press on with a couple of key things.
It is worth mentioning that the industry is already taking action to support cashback. Mastercard and Visa have already announced incentives, and of course we have the community access to cash pilots.
The set of authorities that govern this area has been raised. It is important to say that the Government’s view is that the FCA may well be best positioned to take on the function of co-ordinating in an overall responsible way, while we also intend for the PSR and the Bank of England to continue their existing functions. As colleagues will know, the FCA already has a statutory objective to secure an appropriate degree of protection for consumers and existing regulatory relationships with industry.
My hon. Friend asked about wholesale cash distribution. As I think he knows, there was a previous consultation paper by the Bank of England on the future of the wholesale cash distribution model, which set out a high-level road map. A lot of work is being done between the Treasury and the Bank to address those issues.
The hon. Member for Makerfield will be aware that there are existing policies within the LINK ATM network, in particular, to protect the distribution of free cash through ATMs. The Treasury is supporting the Bank of England in trying to enable a sustainable model—sustainability is important—to permit effective wholesale cash distribution.
I ought to sit down now. I thank colleagues very much indeed for their interesting and constructive contributions to the debate.
I thank the Backbench Business Committee for enabling what I thought was an excellent debate. We are at our best in this place when we find consensus and agreement in the search for common solutions to common problems, so I consider the debate quite a success, unlike many other debates that I have sat through.
I particularly thank the hon. Members for Makerfield (Yvonne Fovargue) and for Luton North (Sarah Owen) and the shadow Minister, the hon. Member for Houghton and Sunderland South (Bridget Phillipson), for raising the interplay between free-to-use and pay-to-use ATMs in deprived areas. That is a particular problem in my constituency, where the poorest areas are nearest the town centre, so geographical proximity actually does not help constituents living there to access free-to-use ATMs.
My constituency is also just 8 miles by 2 miles, so hearing from Members for much larger rural areas in Scotland was particularly helpful in understanding the broader picture of access to cash. I say to the hon. Member for North Ayrshire and Arran (Patricia Gibson) that I am too young to even know what a postal order used to look like, let alone what it now looks like. I am grateful that the hon. Member for Strangford (Jim Shannon) chose to grace us with his presence; it may be because Strangford has no track record of coal mining that he could draw on to speak on that issue in the main Chamber. His points on the high street were well made.
I am grateful to the Minister for his response. I may have to write to the Economic Secretary to the Treasury on the tabling of regulations to enable the cashback pilots to continue, which is an urgent matter that the Government need to address. They have weeks to do that. It cannot wait for a Bill, or even the consideration of a consultation. I love Government consultations. As a Minister, I would take them home over the Christmas holidays and read them over the turkey, and then come back and rewrite what was going on, so I hope the Minister will request that the Economic Secretary, in this time of lockdown Christmas, locks himself away with all the consultation responses, which I know will be of very high quality.
I once again thank all Members who participated in what has been an excellent debate. I am sure that it will not be the last time that we come back to this issue. Thank you, Ms Ali.
Question put and agreed to.
That this House has considered access to and acceptance of cash during the covid-19 outbreak.
Nurseries and Early Years Settings
[Relevant documents: First Report of the Petitions Committee, The impact of Covid-19 on maternity and parental leave, HC 526; and the Government response, HC 770.]
I remind hon. Members that there have been some changes to normal practice to support the new call list system and to ensure that social distancing is respected. Hon. Members should sanitise their microphones using the cleansing materials provided before they use them, and dispose of those materials when they leave the room. Hon. Members are also asked to respect the one-way system around the room, so please exit by the door on the left. Apologies if hon. Members are already familiar with this, but for those who are not, we need to do it. Please speak only from the horseshoe. I do not think we have too many hon. Members today, but otherwise people would need to wait. I remind hon. Members to arrive at the start of the debate. I know one hon. Member may need to pull out; please let me know if that is the case.
I beg to move,
That this House has considered the future of nurseries and early years settings.
I thank the Backbench Business Committee for granting this debate, which is a coming together of the all-party parliamentary group for childcare and early education, which I chair and which fights for the private, voluntary and independent sector—PVI—and the APPG on nursery schools, nursery and reception classes, which does good work campaigning for the maintained nursery sector. We will hear shortly from one of its vice-chairs, my right hon. Friend the Member for Chipping Barnet (Theresa Villiers). The hon. Member for Birmingham, Erdington (Jack Dromey) cannot take part today but is also very much involved in that group and was a co-sponsor of the debate.
The two parts of the sector are distinct, but they share the same grave concern about what the future holds. As a constituency MP, I am fortunate to represent both. There is a mature but, it must be said, struggling PVI sector with providers such as Kings Worthy, St Paul’s, Colden Common, and Compton and Shawford to name a few. There are many others. I thank them all for making me properly aware of the sector and its challenges in the first place, alongside my brilliant wife, who is a qualified at level 3 practitioner, so I hear it very clearly. I also have Lanterns, a maintained nursery school, in my patch; I thank its headteacher, Lynsay Falkingham, for her persistent and focused contact with me.
I will start with some positives. We all welcome the fact that the Government committed to an increase in early years education investment in last week’s spending review. That is another example of the Government recognising the crucial role that early education has in improving future attainment and economic success for the wider economy. As one of my constituency providers put it in an email to me this morning:
“I hope that in your debate, you are able to put across to the House the importance of sound Early Years Care and Education. The future of our country, our leaders, our doctors, engineers, teachers, key workers…rests in the hands of Early Years teachers and practitioners.”
I shall do my best.
I think I speak for many when I say that our childcare providers have really been the fourth emergency service during the pandemic, caring for the carers and helping the helpers. That has been so important to keep the show on the road, and it shows how important it is that we support the sector going forward. As the National Day Nurseries Association says in its excellent recent report:
“A plan for jobs needs a plan for childcare.”
To stick with the good news, it is very good that the Government are implementing our manifesto promise to provide 30 hours of funded childcare each week for parents of three and four-year-olds, which should increase the availability of affordable early education provision. Just because that is the right policy, however, it is not without unintended consequence.
I really appreciate that the Chancellor recently met me and representatives from the APPG for childcare and early education in Downing Street to discuss making childcare more accessible and affordable across the PVI sector. We did that because we cannot duck the fact that there remains a serious underfunding issue that has, unfortunately, been exacerbated by the covid-19 pandemic.
I have previously described to the House that the sector is experiencing a form of market failure—I stand by that—but that could also be a social failure if we get this wrong. In reality, the financial implications have often meant closures in the most disadvantaged areas, as providers have been forced to cross-subsidise their income—often unsuccessfully—with parental fees. The sector has struggled to make ends meet for years, and many providers feel that they have reach the end of the road as we reach the end of 2020.
By September last year—well before the pandemic hit—there had been a 153% increase in nursery closures since the 30 hours’ free childcare policy was introduced. In essence, we have delivered one part of sustainability for the future, but we now need to finish the job by increasing funding for settings to a sustainable level. Many of the providers that I speak to discuss market failure with me. It is little wonder when 25% of providers across the country could face permanent closure within the year. Recent research found that 72% of maintained nursery schools expect to end the year in deficit, raising the risk of further closures in the maintained sector, too.
The whole sector faces a real challenge, not only because of the effects of the pandemic but, more importantly, because of an unsustainable position at the heart of the sector’s funding, which we have to rectify. The issue affects every Member of the House—it is good to see such turnout on a cold and wet Thursday afternoon—because the impact across our country will be stark if we get it wrong. I would argue that we need a complete overhaul of the current system to ensure long-term sustainability in the sector and value for taxpayers’ money.
Prior to covid, the funding gap in the early years sector was estimated to be £824 million. At that point, there was already a 37% funding deficit between the hourly costs of delivering a funded childcare place for a two-year-old and the rate paid to providers, and a 20% funding deficit for places for three and four-year-olds. That is not a sustainable long-term position. Those figures are based on pre-covid occupancy rates. Settings are still struggling despite now being allowed to remain open to care for and educate our children. The funding gap has had a cumulative effect as the years have gone by. I passionately believe that addressing that gap would go some way towards reversing that market failure and the pattern of closures that we see all too often.
In short, I would like a funding mechanism to increase funding rates in line with the rising costs of delivering childcare. Statutory wage rises, increases in pension contributions and inflation rates all erode the balance that providers must maintain to remain financially viable. The £66 million increase in early years spending in this financial year, which was announced at the 2019 spending round, was obviously a welcome cash injection. Sadly, many settings saw it as a real-terms funding cut once inflation rates and the minimum wage rise in April had been taken into account, and I have heard that over and over again. Financial constraints also mean that nursery owners are largely unable to offer their staff long-term career progression and incentives for upskilling and gaining qualifications. We heard very powerfully about this at a recent meeting of our APPG.
Of course, covid has had a particularly savage impact on the sector, with increased costs and decreased revenues for many settings. There has been a decline in occupancy rates and child places, as well as increased costs to make the settings that are open safe through the personal protective equipment and additional cleaning that is obviously necessary. With just a quarter of providers saying that they expect to make a profit between now and March 2021, we have to take action to protect them for the future.
Last week’s spending review included a pledge from the Chancellor of £44 million of additional spending on early education, on top of the money confirmed in 2019. This is good news, of course: those vital funds will increase the hourly rate paid to providers for the Government’s free hours offer, and are also a step towards sustainability for the sector. However, the underlying problems with structural funding and distribution by local authorities remain acute, and will remain so unless they are properly addressed. An independent, meaningful review into the current system for childcare and early years funding will give us the chance to address the underlying, systemic problems with the early years national funding formula, to ensure some long-term sustainability.
Four years after the introduction of the early years national funding formula I mentioned, the maintained nursery sector is still waiting for stop-gap funding to be replaced with a long-term formula that addresses the historical discrepancies and funds all nursery schools viably. The announcement of £60 million in supplementary funding for maintained nursery schools in 2021-22 is hugely welcome, but there are some crucial next steps. First, funding should become a permanent part of the early years funding settlement, not a year-by-year add-on. Being in such uncertain terrain is adding huge stress to the people who run these settings. Secondly, this funding should be distributed on an equitable basis across the country, not on the basis of historical precedent, as is presently the case.
It is crucial that future funding arrangements for maintained nursery schools adequately provide for them to meet their statutory obligations as schools, which they are: for example, funding for additional costs such as the well-deserved teachers’ pay award. While that extra £60 million in funding is welcome, it is clear that here, too, a long-term sustainable financial solution must be found for the sector as a whole.
For all providers, the early years national funding formula can be—if we are being polite—something of a minefield. Requirements and entitlement distributions differ greatly across different national authorities, which creates a complex funding context for providers operating in one region, let alone several. It is complex, bureaucratic and incoherent, and we are often told that it makes a tough job even harder. The current system must work better for settings and parents, but also for taxpayers—our constituents.
Cash for funded entitlement places relies on local authorities estimating demand, and then on them making corrections to this rough draft partway through the financial and academic years. This has created an unhelpful culture of large contingency funds and underspends of taxpayers’ money that is neither providing the childcare provision it is meant to, nor supporting the settings it is meant for. Millions of pounds intended to deliver funded childcare places is often either redirected into other parts of local authority education budgets, or held in reserve to cover the inconsistencies that emerge throughout the year as they try to flatten things out.
A freedom of information request to all English local authorities found that three quarters of councils had underspent their early years allocation, which amounts to more than £65 million failing to reach providers for eligible children. It showed that contingency budgets of up to £32 million were being held to allow for funding corrections this year. This is taxpayers’ money, and we have to do better. Urgent reform to safeguard the future of nurseries and early years settings across the PVI and maintained sectors is desperately needed, for all the reasons I have set out. That will ensure better value for money for the taxpayer, maintain this vital early education—particularly for disadvantaged children, who need it most—and protect the jobs of 360,000 people who work in the sector, the vast majority of whom are women, while also enhancing their career development prospects.
For me, this is an issue of social justice. I am very pleased that Ministers are working with us to do all that they can. I know the Minister here today will take on board the concerns I have highlighted. We have shown we can work together to protect health throughout the pandemic. It is time we worked together to protect the long-term future of our education system. That needs to start with early education, so let us get it right from the very start.
I congratulate the hon. Member for Winchester (Steve Brine) on securing this debate and on the powerful and effective speech that he made. I am delighted to see you in the Chair, Ms Ali.
We have an early years crisis. Ofsted reports that there were 14,000 fewer childcare providers last March than in March 2015, because of the market failure that the hon. Member for Winchester described. We all recognise that the pandemic has made things much worse. Provider numbers fell by another 500 in just three months this year. It is a fragile sector. Striking research that the Department commissioned from NatCen and Frontier Economics, published in October, stated that 45% of open group-based providers and 55% of open childminders
“reported that they believe it will be financially sustainable to continue for another year or longer”.
In other words, more than half of group-based providers expect to close within a year.
Even maintaining current provision will be a big challenge, and policy announcements so far are nowhere near enough. Like the hon. Member for Winchester, I welcomed the additional funding for maintained nurseries in the spending review, and I was pleased that the Minister said she will soon announce a long-term settlement for maintained nurseries. I hope that we might hear something about that this afternoon. Last year’s Frontier Economics report on maintained nurseries pointed out that they do a great job in supporting children with special educational needs, as the hon. Member for Winchester reminded us, and supporting parents and families as well.
The Minister for School Standards, the right hon. Member for Bognor Regis and Littlehampton (Nick Gibb), visited Sheringham Nursery in my constituency in October last year. It works brilliantly with disadvantaged children—for example, supporting their parents to teach them when they are not at nursery. I pay tribute to the head, Dr Julian Grenier, for all his work and the work of his team, which has a really big, positive impact in the local community.
Maintained nurseries have more children than average with special educational needs and disabilities. Sheringham has 40 out of a roll of 200. It runs the Newham early years hub, supporting 100 private nurseries and childminders to improve education quality and inclusion, and increasing workforce standards and workforce numbers. It also runs the East London Research School along with a primary and a secondary school to improve the quality and impact of professional development. Those are all valuable and positive contributions.
Funding for maintained nurseries must recognise the greater contribution that they make. I am particularly keen to hear from the Minister about the longer-term funding settlement that she is planning.
It is a pleasure to serve under your chairmanship for the first time, Ms Ali. I add my congratulations to my neighbour, my hon. Friend the Member for Winchester (Steve Brine), on securing this important debate this afternoon.
Hampshire is reasonably well represented here this afternoon, but I do not want colleagues to think that that is because there is a particular problem in Hampshire with early years provision. I can assure everybody that there is not. Indeed, we have some of the highest quality early years provision in the entire country.
Over the last eight months or so, providers have been keen to emphasise to me the challenges that they have faced during the pandemic, and the challenges that they have risen to: making their premises covid-secure and ensuring that they are open for the children of key workers. In the regular Zoom calls that I have had with providers, they have been keen to emphasise the significant financial impact on the sector.
I was struck by the comments that I heard from one provider, who said that each and every month, with the number of reduced places that he could provide allowing for social distancing, he would be running his premises at a loss of £1,000 per month, which is simply unsustainable. When faced with those sorts of economics, providers take very difficult decisions and decide to no longer open their doors, which causes a reduction in the overall spaces available.
I do not intend to do a march around every childcare provider in my constituency this afternoon, but it is fair to say that they are very varied. As constituency Members of Parliament and, in many instances, as parents, we want to make sure that there is variety, whether it be the small village pre-school of the type I attended back in the 1970s or the larger more formal childcare settings, the individual childminders, those attached to schools or the maintained sector. It is absolutely right that there is variety, so that there is choice for parents and so that those facilities can be conveniently located.
I want to pay particular tribute to Lou Simmons of Abbotswood Day Nursery, who has provided me not only with the facts and figures about her business and the challenge it faces, but also a commentary on the wider sector. As she pointed out to me, the costs faced by her setting will not be identical to every setting, precisely because there is such a variety; but they are probably not atypical.
The stark reality is that with staff costs, pension costs, increases in utility costs and personal protective equipment costs all going up, the funding for childcare has not kept pace with the pressures faced. The £4.55 per funded hour per child over the age of three does not meet her operating costs of £6.80, and they have no choice but to make a charge for consumables, which parents do not necessarily understand, having listened very clearly to the Government’s mantra that it is 30 free hours per week. She will still run at a loss for every hour, every child. I know that my hon. Friend the Minister, who is working hard on this, is going to talk about the £44 million early years injection, but that is simply not enough to begin to cover the 75p per child per hour average loss made by providers such as Lou.
There is a stark reality to this. Just like the village pre-schools that have already closed, we will see the loss of childcare provision at a time when we know that women need to be able to access quality childcare to make sure that they do not lose out further in the employment market. Statistics provided by Mumsnet earlier this week, from a survey it conducted post pandemic, show that a significant proportion of mothers who use childcare—70%—were emphasising that they were struggling to balance the requirements of work and childcare at home.
These businesses, as we have heard, are run by women, employing women and providing opportunities for other women to go out to work. As my hon. Friend the Member for Winchester said, there is a social cost, which my hon. Friend Minister needs to step up and address.
The first few years of life have a crucial impact on a person’s prospects for happiness, success and opportunity in adulthood, so providing the best learning opportunities in the early years is one of the most effective long-term means to tackle serious social problems, such as antisocial behaviour, drug abuse and crime. Early-years education can truly be an engine for social mobility, and I welcome the commitment and investment in this crucial sector by successive Conservative Governments since 2010.
I particularly want to speak up today for the maintained nursery schools, of which I have three in my constituency —St Margaret’s, Hampden Way and Brookhill, which are grouped together in the Barnet Early Years Alliance. I pay tribute to the outstanding work that they do.
As we have heard today, maintained nursery schools have been kept afloat since the introduction of the national funding formula by transitional supplementary funding. In providing that money, the Government have recognised the additional requirements placed on these schools and the fact that they reflect additional costs, but the allocation of supplementary funding is based on historic discrepancies, reflecting school budgets as they happened to be in 2016. That has left Barnet schools and schools in other areas without any supplementary funding at all and they are in serious financial difficulties as a result.
I welcome the extra £60 million in the spending review. I thank the Minister and her Treasury colleagues for listening to representations from me, my hon. Friend the Member for Finchley and Golders Green (Mike Freer), many in this room and, of course, the two all-party parliamentary groups, but we must reform the way the money is allocated to deliver a fairer distribution based on need, rather than historical accident.
Schools in Barnet and other boroughs in the same position such as Harrow and Camden simply cannot hold out much longer. The situation is becoming desperate. The whole sector, of course, has been waiting for over three years for the long-term settlement promised by the Government. For us in Barnet, that is three years without even the supplementary funding that others have received.
I urge the Minister today to make a commitment, right here and right now, to reform the allocation of supplementary funding and bring forward proposals for consultation to do that as soon as possible. I urge her also to secure the long-term funding settlement that the Department for Education promised back in 2017 but has still not been able to deliver. That is a funding settlement that reflects the level of resource needed to run a maintained nursery school—so, more than the hand-to-mouth levels of supplementary funding that the sector has had to survive on for the past few years.
There are dedicated professionals in maintained nursery schools throughout the country who are ready and waiting for that new system leader role, centres of excellence and specialists in SEND provision. They are enthusiastic about the challenge, so let us seize the opportunity to save those schools and empower them to continue their inspirational work, providing a brighter and better future for the children in their care.
It is a pleasure to serve under your chairship, Ms Ali, and I thank the hon. Member for Winchester (Steve Brine) for bringing this important debate to Westminster Hall. I would love to spend my time talking about the long-term future of nursery provision, because we have all agreed that a child’s start in life is vital, but covid-19 means that we have to deal with the immediate crisis facing nursery schools if we are to have any nursery provision in the future.
Nurseries and nursery workers have been absolute champions throughout the crisis, having stayed open throughout the pandemic to care for the children of key workers—and what thanks have they got for it? It is difficult, at times, to hear members of the Government get to their feet, thank nurseries and say how important the workers are, but not reimburse them for their covid costs—personal protective equipment and adjustments to buildings and schools. All that has come out of their existing, dwindling budgets.
On the issue of budgets, I want to raise the local situation in Luton, where Flying Start children’s centres sadly face closure. Over the summer, our council was backed into a corner by the Government and forced to find savings of £22 million after passenger numbers at Luton airport, one of our biggest revenue raisers, collapsed because of the pandemic. Along with my hon. Friend the Member for Luton South (Rachel Hopkins), I have pleaded with the Government to listen, spelling out what even more cuts would mean to the people of Luton—even more difficult decisions forced on the council by the Government from Westminster, including cuts to children’s services.
I am here to plead with the Minister: meet us and work with us, and give Luton Borough Council the resources it needs to save Flying Start, which are vital for children, parents, families and our town. Nearly 2,000 local people signed a petition to save Flying Start over the summer and 500 parents have joined the Facebook group that is organising to save the centres. If the Government do not act, there will be a devastating impact on families and young people in the community who rely on the services—the pregnancy club, antenatal education, feeding classes, breastfeeding café, baby massage, baby talk, stay and play, messy play, and sing and sign. All those courses will be gone.
Flying Start provides a support network for parents—particularly mothers—many of whom do not have access to other local support or guidance. We have seen throughout the pandemic how important it is that new parents should be supported after the birth of a baby. I know that from personal experience. In particular, some new mums suffer from isolation, depression, anxiety or domestic violence. We need to make sure that they have access to support in the children’s centres.
After 10 years of austerity and cuts to such vital services, we know what we are losing when those services go. We have seen it play out already. Inequalities grow further. Child poverty in Luton will rise. The support that people depend on will be pulled away. People in Luton have grown used to that indifference, and that is incredibly sad. The Government promised the country, and people in Luton, that they would do whatever it takes to get us through the pandemic; but, with cuts like these handed down from Westminster, we are making Luton pay the price for their broken promise. In finding alternative sources of money, as we did with th/e airport to fill the gaps left over the last years, people in Luton and our council did everything asked of us. All we ask is that the Government keep their promise.
Whether it is cuts such as those in Luton, the loss of more than 3,000 health visitors nationally or billions cut from public health budgets and children’s services, the Government really have a blind spot when it comes to early years. I hope they listen to examples such as what is happening to constituents in Luton, give us the resources we need to save those services and act to support parents and families.
I thank my hon. Friend the Member for Winchester (Steve Brine) for securing this debate, and I thank the Minister for all she has done to campaign for better opportunities for early childhood education and intervention, and for understanding how great an impact that has on the overall levelling-up agenda.
Children in low-income households tend to experience poor home learning environments; a substantial gap in academic attainment between the poorest and richest children is clear by the time they begin school. The 2010 review by Frank Field, a former Member of this House, on poverty and life chances found that 55% of children in the bottom 20% of attainment in school at the age of seven will remain at the bottom until the age of 16. However, if a parent shows a sustained interest in a child’s early education, their chances of living in poverty as an adult decrease by 25 percentage points.
Early intervention is key to reducing poverty and creating the levelling-up agenda in the long term. Estimates of savings to the public purse as a result of better early years intervention during the first 1,000 days of a child’s life predict that the Government could save approximately £15 billion annually.
A recent report published by King’s College London found that young people who had secure attachments in early childhood had lower levels of antisocial behaviour than those with insecure attachment. The study found that young people securely attached to their mother cost the public purse an average of £6,743, and those who were insecurely attached cost more than £10,000. It is an interesting study.
Family and parental challenges have presented themselves through covid. A Centre for Social Justice report found that parents, especially fathers, face a wide range of challenges with regard to family units, especially during pregnancy and the early years. Six in 10 fathers told the CSJ that they had no conversations at all with midwives about their role. For health visitors, it was approaching half—44% of all fathers told the CSJ that they received little or no advice from them about their role as a father. More than four in 10—41%—of fathers who have a nearby children’s centre have never been invited to or attended any children’s centre activity, despite a legal requirement for children’s centres to engage with fathers as a hard-to-reach group.
Children’s centres and family hubs are vital in tackling the issue of attainment through early intervention. Family hubs are local one-stop shops offering families with children and young people aged zero to 19 early help to overcome difficulties and build stronger relationships. Children’s centres do the same thing in many of our communities, including my constituency of Beaconsfield. Such provision is typically co-located with superb early years help and support. The Ivers Family Centre is in my constituency, and many local residents, including one of our councillors, Wendy Mallen, campaigned tirelessly to save it. It is vital for helping children close the attainment gap and make sure they have every opportunity to succeed in life.
The purpose of family hubs is to co-locate and co-ordinate all family services available in a community and provide a visible and welcoming access point for any parent—mother and father—to appropriate support services or information about family-related matters. The CSJ set out in its 2014 report why family hubs and children’s centres are so important. They strengthen families regardless of their structure, with a focus on children’s development and parental relationships. They prevent family breakdown through relationship support at key points and support families in difficulty with conflict resolution and support for separated families. That could save the state millions of pounds in the long term, because if there is early intervention not only in the child’s life, but in the lives of the parents to give them support, it could make all the difference.
As we come out of covid, I hope the Minister will consider this type of funding, so that we can help those who have suffered the most during lockdown and we can help get everyone in the country back on track.
It is very good to see you in the Chair, Mr Hollobone. I congratulate my hon. Friend the Member for Winchester (Steve Brine) on securing this important debate.
I acknowledge the important work of nurseries and early years settings in my constituency; they have been core social infrastructure in the area. They are at the heart of child development, but also support parents in their work and ease family budgets. I particularly mention a maintained nursery school in Alton, in my constituency, called Bushy Leaze, which does high value work with children with special needs, supporting parents, doing outreach in the community and partnering local schools.
I also acknowledge the commitment of the Government to early years education and childcare, with no fewer than five extensions to early years and childcare entitlements since 2010: the 15 hours’, then 30 hours’ tax-free childcare; the 85% reimbursement under universal credit; and, crucially for this debate, the offer of 15 hours for two-year-olds.
Finances in this sector are difficult—they were hard even before the pandemic, and they have become worse. Like others, I welcome the £44 million. I know that the Department does regular analysis of cost structures in this sector, but that clearly still remains difficult to manage in some cases. I hope the Minister will keep that under review, make sure that the process is transparent, and, as time goes on, peg that to cost increases, particularly when it comes to the national living wage.
In the longer term, there is more that we can do to ease cost pressures on the sector, particularly with trying to spread out the demand on the offers for three and four-year-olds, when there are more children in the summer term than in the autumn term, but there have to be staff for the whole year.
Maintained nurseries are more costly, partly because they do more. Like others, I welcome the continuation of the supplemental funding, but the sector really needs long-term visibility and security in its funding. I welcome the fact that the Minister has said that there will be more to say on that soon. I hope it is possible to tie that in with a wider look at the sector and how all parts of it fit together.
I do not have the time to give most of my speech, in the circumstances. Others have said how important early years education is. It is fundamental for social mobility and for dealing with some of the most entrenched disadvantages in our society.
We have seen an increased prevalence of children presenting with high needs. That is because of a combination of greater diagnosis and awareness, and perhaps some greater underlying prevalence as well. Whatever the reason, we know that the earlier we can help and support those children and their families, the better for them and, later on, the more it will ease the pressure on the school system.
In that wider look at how the sector works and how it all fits together, ideally there would be a geographically distributed network of maintained nursery schools with a defined set of core services, one of which would be to support the private, voluntary and independent sector nurseries in the area. There is also more opportunity to use primary school settings. A couple of years ago, we put in place a capital fund to allow more of that, but there is far more potential. It is important that those nurseries include some year-round provision as well.
We need a people plan, because this is all about the wonderful people who work in our nurseries. I welcome the fact that in the T-levels programme, early years and childcare is one of the first T-Levels to come on stream.
There are one or two other very important people in a child’s life: mum and dad. The home situation may be becoming more complex in the current time, partly because of the developments in electronics and so on, but we know that about a fifth of the difference in the development of cognitive ability is to do with parental engagement. It is very difficult for public policy to start getting involved in that arena, but nursery schools and others working in early years can play an important part in supporting parents with the support they are looking for.
I hope the Government will continue with and grow the Hungry Little Minds campaign, which uses ambient opportunities for people on the bus or train, eating their breakfast cereal or about to go to bed, to help to promote early literacy. The BBC has an important role to play, too.
If the erstwhile right hon. Member for Birkenhead, Lord Field, was still in this House, he would remind us of the time he was talking to some 15-year-olds at a secondary school in Birkenhead. They said there were two things they really wanted to learn more about at school—how to make lifelong friendships and how to be good parents. Everybody has a huge part to play. We need to work out how the social infrastructure that we have been talking about can best support all this important work.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Winchester (Steve Brine) on securing the debate.
When we and the Government talk about childcare provision, it is usually in the context of enabling parents to go to work, and secondarily as a development tool in getting children ready for school. We say less about the critical impact of the early years education system on reducing inequality. That point was powerfully made by Dr Laura Jana when she presented to the all-party parliamentary group on women and work a week or so ago. She found that the primary determinants of a person’s life outcomes as an adult were linked to whether they completed school, formed a loving relationship, held down secure employment and avoided the criminal justice system.
All the childcare providers in my constituency would agree with that, and would say that, to deliver that, they need high-quality, qualified staff. It has struck me in my nearly one year as an MP how difficult they have found it to deliver that. I have done some quite granular work, which time will not allow me to elaborate on. In essence, even when taking into account the money that they are allocated through the free hours programme and the top-up that they receive from West Berkshire Council, those providers struggle to meet an appropriate wage rate for qualified staff, taking into account national minimum wage obligations, a desire to provide good resources, and inflationary pressures. The point was illustrated by one nursery’s saying that a qualified member of staff retired and it could only afford to replace them with a zero hours contract.
The other huge driver on the finances of nurseries, and the reason why they entered the covid crisis in such a serious deficit position, is the lack of certainty—not knowing, term by term, what funds would be available. I regret to say that I speak on behalf of nurseries such as Ladybirds in Newbury, a PVI nursery that is literally on the brink. If it closes the doors—I sincerely hope that it will not—it will follow another three that have de-registered in the past six months. It tells me that it has been hit hard by the covid crisis, particularly by parents withdrawing children unexpectedly, and that projected profits for the year have turned into a loss of somewhere around £12,000. Hungerford Nursery School and Victoria Park Nursery School, two maintained nurseries, report a decline in income of £35,000 and £57,000 respectively. Taken together with the extra cost of making their premises covid-secure, the implications for their future are serious.
What are the solutions? Every MP always requests more money. I am so grateful to the Minister for the work that she has done with the Treasury in getting more money in the spending review. However, I looked into the funding system—the tax-free entitlement, the 15 free hours, the 30 free hours, the tax credits and universal credits—and it is fair to say that different thresholds and entitlements have added up to a fragmented and piecemeal system. Some form of streamlining would be the best way of getting the money to staff.
I will make one other point, which I make in my capacity as chair of the all-party parliamentary group on women and work. We are on the brink of a bloodbath in terms of female employment. We know what is happening in hospitality and retail, and we know that those jobs are predominantly occupied by women. If childcare providers go out of business, there will be such an incentive for women to remain at home, looking after the kids, not finding new work. The Chancellor’s guiding principle has been to avoid long-term structural unemployment, but without a childcare solution we risk that.
It is a pleasure to serve under your chairship, Mr Hollobone. I start by thanking the hard-working early years staff in Luton and across the country for the dedicated support that they have provided to children and their families throughout the pandemic.
In Luton, across my constituency and that of my hon. Friend the Member for Luton North (Sarah Owen), there are six maintained nursery schools, which work together to provide comprehensive nursery education and care to our local community. Gill Blowers Nursery School, Grasmere Nursery School and Pastures Way Nursery in Luton North, as well as Chapel Street Nursery School, Rothesay Nursery School and Hart Hill Nursery School in Luton South, have stepped up to the challenges posed over the last year, despite the overarching financial uncertainty in the early years sector.
When I visited Hart Hill maintained nursery school and met the fantastic headteacher, Mrs Thompson, and her staff team, I saw at first hand the brilliant work that they do, and heard about how they have remained open throughout the pandemic to continue providing education and care to children from some of the most deprived areas of Luton. They have also supplied key resources and food to families.
Maintained nursery schools offer a bespoke package of education and care by using skilled staff and research-focused routines, environments and ethos, and by working in conjunction with external health and SEND professionals. A bespoke approach enables them to focus on children’s needs and wellbeing by understanding their responses and behaviour and then adapting provision to provide a safe, responsive space. The maintained nurseries in Luton have resourced provision for children who have significant special educational needs and severe medical or health needs. Last year, they successfully completed 53 education, health and care plans for children who have gone on to transition into specialised primary schools. The maintained nursery schools have ensured that between them they have resources to support 96 children with severe or complex needs, many of whom have been transferred from private early years settings. Their dedication and commitment to Luton ensures that our most vulnerable children have the care that they need and deserve.
Despite all the essential support that maintained nurseries provide our communities, the Government chose not to introduce a long-term funding plan in the recent spending review, about which we have already heard a lot. I am aware that there was the one-year settlement in the summer, but short-term funding plugs will not safeguard the future of maintained nurseries. Yearly funding does not provide sufficient certainty for maintained nurseries to plan ahead by employing staff and allocating resources, or for parents, who worry that the services on which they rely may not exist in a year’s time.
The Department for Education’s own statistics show that the percentage of maintained nursery schools in deficit has risen from 3.5% in 2009-10 to 17.7% in 2018-19. Unlike schools, many maintained nurseries have not received funding to cover additional covid costs, and are ineligible for the covid catch-up fund. Luton Borough Council consulted with DFE representatives on whether increased costs would be reimbursed, and the DFE indicated that they would be. However, all applications for costs reimbursement by maintained nurseries in Luton have been rejected, as they have been deemed ineligible. Will the Minister meet me and my hon. Friend the Member for Luton North to further discuss how Luton’s maintained nurseries can get crucial additional funding to cover those costs?
If maintained nurseries close, the cost of looking after vulnerable children will fall on other services, which have suffered the economic impact of austerity and the pandemic. I urge the Government to introduce a long-term funding settlement as soon as possible.
Thank you, Mr Hollobone. It is always a pleasure to make a contribution in Westminster Hall, but especially on such an important issue. I congratulate the hon. Member for Winchester (Steve Brine) on setting the scene, as he so often does in these debates. I was involved in many of the debates in which he was Minister. Today, he is asking the questions and making constituency-based requests, and I am very happy to support him and others. I put on the record my thanks to the Library for the briefing on this topic. We do not often say so, but the Library briefing for this debate was quite good. Its opening statement says:
“The Institute for Fiscal Studies (IFS) has estimated, for example, that ‘a quarter of private nurseries might have been operating at a significant deficit’ during the national lockdown, compared to 11% before the pandemic. With regards to the impact of lower attendance, the IFS has estimated that ‘for every 5 percentage point drop in fee income between 5% and 25% compared with pre-crisis levels, an additional 3–4 percentage points of providers are likely to face a significant deficit.’”
Over the years, my constituency has seen large growth in nursery provision, based on the high employment opportunities and the need for nursery provision—it was a growth market. Since the coronavirus outbreak in March, however, there has been a real sea change, and nursery care and childcare providers have contacted me regularly. I understand the severe difficulties for a sector that is essential for the proper functioning of the working economy. I was reminded of the essential nature of childcare during lockdown when inundated with requests for help to allow people to go to work. I repeat the valid point raised by the right hon. Member for East Hampshire (Damian Hinds) about the problem of taking away grandparents’ ability to mind children, as has been the norm for generations, by forcing them to work into their late 60s. There is a lack of childcare that was once a given. The opportunity for aunts, uncles, siblings or grandparents to help out is not happening. Life is changing.
Nursery providers need investment to deal with the high level of provision that is expected of them. If they are to provide wraparound childcare, they need transportation to and from school, workers who are equipped to deal with the needs presented, and to be able to pay them a living wage. Sometimes people in nursing provision and childcare do not get the living wage, but they should and must. That is not possible with the funding that they receive.
Covid-19 has simply exacerbated and accelerated the issue that needs to be resolved for the future of nurseries. Nurseries, which are absolutely essential, will be a casualty not of coronavirus but of not being recognised as a vital component in the cogs of education. An Early Years Alliance statement points to the fact that only a quarter of providers surveyed said that they expected to make a profit between now and March 2021. Some 51% said that they would need emergency funding to stay open for the next six months. Two-thirds or 65% said that the Government had not done enough to support providers during the covid-19 pandemic. The survey found that one in six early years providers could close by Christmas 2020 without additional funding. On behalf of others, we must make the plea to the Government to step up. If nurseries were to close due to financial restrictions and problems, there would be an impact on people’s ability to work.
I will finish with some of the good things. The Duchess of Cambridge highlighted the essential nature of early years intervention and the impact of the first five years of life. She referred to five big insights, which included a visit to a farm in my constituency, which is why I wanted to mention it; we are pleased to have royalty in Strangford any time. That leaves no doubt as to the value of good nursery provision. It is time for the Government to stand with the Duchess of Cambridge, to fund the sector properly and to make the changes to keep businesses open.
Early years intervention by trained professionals makes a difference to individual children and, as Duchess Catherine has said, makes a difference across generations in our community. Let us show today that we in this House are prepared to support the nursery sector for our future generations.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Winchester (Steve Brine) on securing this important debate. Nursery and early years providers are vital, not just to allow parents to work, but to support the development of the children in their care. We saw how vital they were in allowing our key workers—nurses, doctors, supermarket staff, police officers and many others—to keep doing their vital jobs during the lockdown. More than ever before, they were literally a necessity, as the Government advised against informal childcare arrangements with at-risk grandparents. Without them, many people would not have been able to carry on going to work as the nation needed them to.
For many providers it was an incredibly stressful time financially, because although we needed them to stay open to help key workers they lost huge chunks of their income, and their costs increased due to things such as using more agency staff and extra cleaning measures. It is welcome that the Government continued to pay for Government-funded hours, but that still left shortfalls for many. Nurseries in my area, such as Little Angels, which I visited a few months ago, really struggled. I am pleased to say that it has survived, but others locally and across the country have not.
On the importance of early years settings, it is helpful to remind hon. Members of the 2019 Education Committee report, which found that early years education for children below the age of four had a positive impact on the life chances of disadvantaged children. Maintained nursery schools in particular are extremely successful in ensuring excellent outcomes for disadvantaged children.
I was lucky to recently visit the grant-maintained Westminster Nursery School—appropriately named—in the heart of Crewe. As a maintained nursery, its catchment area includes very significant deprivation and the children who come to it often require significant levels of additional support. The headteacher, Elizabeth Hulse, her staff team and the chair, Donna Reed, have worked incredibly hard to keep the doors open and manage and minimise the risks of covid. I put on record my thanks to them. When I visited them in October, however, they still did not know what their funding would be. That uncertainty does not make it easy for any business or organisation to plan.
Thankfully, Ministers have now confirmed that supplementary funding, worth up to £23 million, for maintained nursery schools will be continued for the summer term of 2021 to enable local authorities to support them. That will provide maintained nursery schools, such as Westminster Nursery School, with some reassurance about funding for the 2021 academic year. However, although it is very welcome, it does not take us past the 2021 academic year and does not address all the financial shortfalls that nurseries experience, and there is still no long-term funding solution. Those nurseries need to be given security and stability for the years ahead.
Currently, the local authority, Cheshire East, provides additional funding to the nursery to which I have been referring, but there are no guarantees about that and there is not an agreed approach for deciding what funding should be made available. We need to develop an agreed framework, so that the funding for maintained nursery schools can be standardised and so that the funding formula is up to scratch for the whole sector. The criteria used to allocate the funding should reflect the actual levels of need locally and the challenges that different nurseries face, so that they can deliver the best possible outcomes for their children.
I want to see maintained nurseries such as Westminster Nursery School, private providers such as Little Angels, school-based providers and the entire sector prosper and, hopefully, do more. Their success is our success. For the most disadvantaged in our society, they are just about managing to be a vital stepping-stone, when I want to see them become a fully fledged escalator of opportunity. I ask my hon. Friend the Minister to listen very carefully to the representations made today, and to help build that brighter future for a very important sector for so many young people in this country.
It is a pleasure to serve under your chairmanship, Mr Hollobone, and I reiterate the congratulations to my hon. Friend the Member for Winchester (Steve Brine) on bringing this important topic to Westminster Hall this afternoon.
I declare an interest, as a father of two young children who were at nursery throughout the previous lockdown. I would like to pay a personal tribute, and one on behalf of many other mums and dads in my constituency, to the early years teams at Hillingdon and Harrow Councils, and particularly to Hillingdon, which not only kept my children’s nursery open but ensured that other mums and dads, whose children’s nurseries closed their doors during the lockdown, were able to access childcare as key workers during that period.
The research clearly demonstrates that the money that we spend on a child during childhood gains the most value when it is spent in the early years, but that is not where most of that funding is distributed. When we look at the way in which we fund different parts of a child’s journey through life, we see that most of the money goes into secondary education and relatively less is spent early on.
I would like to focus my brief contribution today on three aspects of this challenge that it is important to get right if we are to bring about sustained change. The first aspect is about looking at the market as it is. Many hon. Members have made the powerful point that without effective early years provision, our economy is held back. The Government should be proud of the work that has been done with tax-free childcare—an enormously successful policy, appreciated by many working parents—but also the funded hours. However, as we go into a debate that is very much focused on funding gaps in the early years, we also need sometimes to challenge the behaviour of some providers.
It has caused great concern in the sector in my constituency that some nursery providers made much of the fact that they were closing their doors, taking furlough money for the staff who were placed on furlough during that period, taking the full entitlement of payment from the local authority for the funded hours, telling parents that unless they paid the full fees, there would be no place for their child when the nursery eventually reopened, and quite proudly telling other nursery providers that that meant that when those providers went out of business, they would be able to take over their premises and behave in a predatory commercial way afterwards. Therefore, although much good work has been done in the sector, I think that we also need to be prepared sometimes to challenge the behaviour of some providers, whose actions have not reflected the wider move of trying to get behind communities, parents and key workers at this difficult time.
My second point, which builds on what my hon. Friend the Member for Winchester said, is about the complexity of the sector. For the early years we have children’s centres, which are not childcare venues but which are a provider of key services for that time of life. We have nurseries; we have nursery schools. We have, of course, childminders, who are a significant part of many children’s journey through the early years. All of them, in my view, need to be seen as part of that bigger picture of the support around a child and their family. We know that, when we look at attachment, when we look at intergenerational relationships, when we look at a child’s start in life, all those things need to be taken into account. Although it is right that we are hearing the voices of providers of settings such as nurseries, it is also important to recognise that childminders are a crucial part of the picture, and they too need the skills, the ability and the capacity to support children and be part of the market response.
The final point, and the most important one, is the need for our country to have a longer term plan for the early years. A lot of the political debate has been focused on funding. Those with long memories will recall the neighbourhood nurseries initiative, which was started in 2004 and axed in 2007, to much national angst. There has been a pattern of frequent changes in the Government’s response.
We can see the numbers of children coming through the system. We know when there is a baby boom that we need to plan ahead, and we know that when the demographics go the other way we may need to reduce capacity in the system. A number of hon. Members have mentioned the need for effective workforce planning. I invite Ministers, building on work that I know is already done, to set out what that long-term plan is beginning to look like, so the children of this country, particularly in the early years, have some certainty over the medium to long term.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Winchester (Steve Brine) on securing what has been a really interesting debate with some expert colleagues. It is a pleasure to follow my hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds).
First, I begin by paying tribute to some excellent nursery schools in my constituency. Wycombe does not correspond with the Buckinghamshire stereotype, and Micklefield Pre-School and Bowerdean and Mapledean Nursery School serve areas with some real difficulties. They make an enormous contribution to our community, and have done especially during this difficult year. Micklefield Pre-School supports children from disadvantaged backgrounds, and many of its families are key worker families. Bowerdean and Mapledean Nursery School works closely with families to help children academically and socially in a happy and supportive environment. Both schools are very proud to be crucial parts of our community and we are very proud of them.
Some 247 of my constituents in Wycombe signed the relevant petition to give UK nurseries emergency funding. My staff have spoken with local managers and it is a very real concern; I know the Minister will be aware of that.
As I listened to the previous speakers, I was reminded that the first thing I did when I got into politics was not in connection to Brexit—I know hon. Members will be surprised to hear that—but was in fact that I got involved with the Centre for Social Justice, which had at the time done a joint paper with the Smith Institute on early years. Although I got involved to do a voluntary consulting engagement on how their policies might be implemented, I remember being very struck by that paper, which showed the crucial importance to children’s development and lifelong prospects of love and care in their early years.
As a Conservative, I would like lower taxes, but I have realised in the course of my time here that if we want lower taxes in the future, we had better invest in early years today. I think many hon. Friends and perhaps Opposition Members—we do not know—may have realised that, too. We need to invest for the very long term if we are to properly serve our society.
Finally, I want to pick up on a point made by my hon. Friend the Member for Newbury (Laura Farris) about how hard this crisis has hit women. She made the point much more articulately than I can. She is absolutely right and has my full support. I am not going to lecture the Minister, but I am very clear that, when we have a very difficult Parliament on spending, the Minister is going to need all our support in saying that early years education has to be a priority for funding, much as many of us would like to balance the books.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for Winchester (Steve Brine), the right hon. Member for Chipping Barnet (Theresa Villiers) and my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) for securing this important debate and for being officers of the all-party parliamentary group for childcare and early education. I was proud to be the first chair of the APPG when it started three years ago, and I have just about forgiven the hon. Member for Winchester for upstaging me at every opportunity as the new chair, because the APPG has gone from strength to strength. It has played a vital role in the pandemic and I thank its members for all the work they have done.
There have been some really important contributions in the debate today from all sides. It has been a very sophisticated debate, which is not always the case in politics. Not only did I learn a lot, but I was reminded how important the early years sector is for our country, for our economy, and for women—a point that was made by the hon. Member for Wycombe (Mr Baker) and others. I will highlight some of the contributions that will stay with me.
My right hon. Friend the Member for East Ham (Stephen Timms) spoke powerfully about how fragile the sector is. I think everyone recognises that it has been very fragile since long before this pandemic hit. I have first-hand knowledge of that, both from having small children of my own and because of all of the work I have done in my constituency with early years providers. He also spoke passionately about how the group-based providers are at threat of closure. That has certainly been my experience as well, and we need to take some dramatic action if we want to stop that threat of closure. I pay tribute to Sheringham Nursery School, which is in my right hon. Friend’s patch, and the work it does to help families who have children with special educational needs. I know Sheringham well, and my family friends have benefited greatly from it, so I join him in paying tribute to it. I understand how anxious its staff are feeling about what is happening during the pandemic.
My hon. Friend the Member for Luton North (Sarah Owen), who told me that she had to leave before the end of the debate, spoke passionately about her constituency, and about the role of early years providers in this pandemic and their exclusion from covid funding. That is one of the things I will be picking up on in this debate, because I feel very strongly that those providers have been left behind during the pandemic. She spoke about the baby groups, which were a lifeline for both of us. We both have first-hand experience of them. Their significance is often overlooked, but they are important for those who have a small child and have not been in that situation before. I see some Members nodding; such groups were probably important for them as well.
My hon. Friend the Member for Luton South (Rachel Hopkins) talked about maintained nurseries and Hart Hill Nursery School in her constituency. She highlighted not just the educational benefits of those nurseries, but the health benefits—I have seen that at first hand—and the safe environment they provide for all our young children. The hon. Member for Wycombe spoke about lower taxes if we invest in education. That is probably not the first thing I would go to, but investment in early education is something I passionately believe in, and I believe that Members who have spoken today have made some very powerful cases for how important that investment is.
My hon. Friend also talked about the necessity of long-term planning for maintained nurseries and the long-term funding settlement, both of which I agree with. I know that the Minister’s door is open to me when it comes to discussing policies, which I really appreciate. I hope she also meets with my hon. Friends the Members for Luton North and for Luton South. I think we can agree that they have made a powerful case for their area today, and I hope the Minister will find some time to engage with them and listen to them about what is going on in their area.
One of the things I wanted to talk about is the lack of support for early years providers and all the things they have missed out on due to not being schools. Back in March, as everyone knows, childcare providers were asked to stay open for vulnerable children and the children of key workers. They were assured that they would be able to access the furlough scheme in full, even when they received local authority funding. But just three days before the scheme opened, that position was reversed, forcing providers to tear up their plans and suffer huge losses. Ever since then, early years providers have been overlooked for support, and I wanted to highlight just some of the struggles they have had to put up with during this pandemic.
For a start, early years providers have never been able to claim any of the funding for the additional costs of making their settings covid-secure that schools have been able to claim, which strikes me as ridiculous considering that when we go into a nursery, we see small children running around everywhere. I am not quite sure why they did not qualify for that.
On that point about nursery schools not receiving additional funding for covid security, for the very reason that little ones do not know how to socially distance, Park Hill Nursery School has had to divide up its classrooms. It has created a new classroom in its library area to maintain smaller groups in order to deal with that, which puts added pressure on staffing.
I absolutely agree with my hon. Friend, and I have seen exactly what she is describing at first hand in my son’s nursery.
I am also worried that nurseries with rateable values of over £15,000 were not allowed to access the larger covid grants for retail hospitality or leisure businesses. I hope the Minister will look into that. The Chancellor agreed to give nurseries business rates relief only after intense lobbying from all sides, but, sadly, that support is due to come to an end in April next year, and maintained nursery schools, which have been mentioned repeatedly in this debate, are not able to access it. Many part-time or recently started childminders have been excluded from help through the self-employment income support scheme, and the early years providers did not qualify for the £1 billion covid catch-up funding. Last week, they were excluded from the covid workforce fund to help with the cost of staff absences, despite huge staff pressures.
In essence, throughout this crisis, early years providers have been asked to take on the responsibilities of schools but the liabilities of businesses, and with nowhere near the same level of financial support that has been given to other businesses. Of course I welcome the £44 million increase in new childcare funding in the spending review, but I do not feel it is enough to plug the gap, which stood at £662 million last year. It will only come in April, by which time many providers will certainly have closed. A chain of three nurseries in Essex I spoke to recently spent £6.10 per hour providing a Government-funded childcare place, yet only got £4.32 per hour from the Government to do so, so the 6p per hour increase to funding in the spending review is a drop in the ocean.
I want to work constructively with the Government because the early years sector is important. I also give credit where it is due. One positive step was the Government’s commitment to funding providers at pre-covid occupancy levels, both when they were forced to closed to most children from March to June, and in the autumn term when it was clear that childcare demand would be suppressed by fear of covid, furlough, job losses and working from home. That prediction was correct: occupancy in early years settings is currently just above 60% of normal term-time levels. However, although there is no reason to think demand will not continue to be low for some time, the Government are planning to go back to funding providers based on current occupancy from January. I realise it may sound like a technical point, but that will be devastating for over a quarter of providers, according to a recent survey by the Early Years Alliance.
One could argue that that made sense when the Chancellor was planning to withdraw the furlough scheme and get everyone back to work from October, but it does not make sense to extend the furlough and impose lockdown and severe restrictions while pretending that everything is back to normal for childcare, just because the Government do not want to foot the bill. I ask the Minster to take heed of this. It is hard to estimate the overall impact on the sector, but to take the example of the small nursery chain in Essex I mentioned, the owner estimates that the chain would have lost £12,000 of income this autumn term if funding was based on the current, reduced occupancy, and expects the shortfall to be much bigger in the spring term when funding is set to be calculated as the Government intend.
Mass closure of childcare settings would be devastating for over 300,00 people working in early years, the majority of them women, which is a point already made by hon. Members. Childcare workers are paid badly anyway—I am sure people are aware of that—with one in eight receiving less than £5 an hour. We should be working to tackle low pay and improve career progression in the sector. We have duty to make sure we do not bring about the demise of these jobs by slashing funding.
To remind everyone, this debate is about the future of nurseries and early years settings. The reality is that without better support, and a new approach, thousands of them may not have a future at all. Most hon. Members have made that point today. Survey after survey shows that the early years sector is on the brink of collapse. One in six providers expect to close by Christmas, rising to one in four in the most deprived areas. Recent research from the Department for Education shows around half of all nurseries, pre-schools and childminders were unlikely to be sustainable for more than a year. These are shocking statistics, and I hope the Minister will take account of this. There has been a net loss of 14,000 childcare providers in the last five years as a result of the chronic underfunding of early years entitlements. We could lose at least that many again within this year if fears are not allayed, and action is not taken immediately. I ask the Minister to consider how devastating this would be for working families who rely on childcare, and the young children whose life chances are shaped by the power of early education—that point has been made over and over again—not to mention the impact on our economy and recovery if working parents are forced to stay at home. The brilliant early years workforce will suffer large-scale redundancies.
It is a technical point, rather than a political one, but does the hon. Lady agree that one of the ways that we could address this challenge is by taking the funding cycle through which early years receives its resources out of the same funding cycle where it sits with schools, as there is always a powerful incentive for schools forums to ensure that resources are underspent, in order that they may be redistributed to other causes in the local area? Instead, we should have a much more flexible, local and sustainable means of directing the same money, so that these issues can be addressed.
I agree with the hon. Member that we should have a flexible funding settlement, but I also think that we need to change our approach and attitude to early years settings, because we often see them as looking after children but not quite providing education. It is as much a cultural and attitudinal change as it is a funding change, so I somewhat agree with the hon. Member. We now have an opportunity to look at the childcare sector in this country as a whole, because the pandemic has shone such a bright light on the very big failures in the childcare system due to the lack of funding and the rules around early years settings, and also because they do not qualify for funding in the same way that schools do. I agree with him—that is what I am trying to say, in a very long-winded way.
I will end with a plea to the Government: please do not ignore the cries for help from a sector as important as early years. I urge the Minister, who I said has an open-door policy when it comes to discussions and constructive criticism, to rethink the plan to slash early entitlement funding from January—that is very soon—to give the early years sector the targeted support that it so badly needs, and to commit to working across the House to give our fantastic nurseries, pre-schools and childminders a sustainable future. I really feel that early years providers are an essential part of the social and economic fabric of our country. Therefore, to coin a phrase, let us build back better from the pandemic, rather than let this vital infrastructure come tumbling down when we need it most.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Winchester (Steve Brine) on securing this really important debate, and I thank all colleagues for taking part; it shows how much we care about the early years.
I love the early years. When my children were little, I gave my time as a volunteer to help run our local pre-school. The days were always busy. I admit that they were sometimes quite tiring, but they were always deeply fulfilling and packed with joy. I have huge admiration for people who work in the early years sector and dedicate their time, skills and love to helping to provide high-quality early years education and childcare. They do an excellent job in helping our youngest children to learn and grow, and families across the country rely on them. I thank them all.
We should be so proud of our early years providers. Some 96% of early education settings are now rated good or outstanding by Ofsted—an increase from 74% back in 2012. A child’s early years are absolutely crucial for their development, and we are doing more than any previous Government have done to ensure that as many families as possible can access high-quality, affordable childcare. That has made a difference for children. The latest early years foundation stage profile results show that the proportion of all children reaching a good level of development is really improving. Back in 2013, only 52% of five-year-olds, or about one in two, had a good level of development. The figure is now 72%—nearly three out of four children. Since 2013, the attainment gap at age five has also narrowed, so disadvantaged children are catching up with those from better-off backgrounds.
That is partly due to the increased and unprecedented investment that the Government have put into early years childcare. This year, we are planning an unprecedented investment of £3.6 billion in free childcare places. That includes the universal 15 hours of childcare for all three and four-year-olds, regardless of whether their parents are working. Take-up is high: 91% of three-year-olds and 94% of four-year-olds back in January of this year. That investment also includes the 15 hours of free childcare for the most disadvantaged two-year-olds. That gives them a great start in life and helps to close the attainment gap. More than 1 million disadvantaged two-year-olds have benefited from it since the programme began in 2013.
More recently, an extra 15 hours for working parents with three and four-year-olds was introduced in 2017 by the Conservative Government. An estimated 345,700 children took up those 30 hours places in 2020. Funding for those places provided an average of 56% of income for group or school-based early years settings last year.
During the pandemic, the Government have acted to support nurseries and provide security to them and childcare. At the peak of the pandemic, early years settings did an amazing job by remaining open for the children of critical workers and for vulnerable children. Many hon. Members mentioned how that made a difference to their own personal lives, as well as to their constituents. I thank those early years settings.
We prioritised childcare settings for reopening on 1 June, and we have supported early years providers by continuing to pay local authorities for the free childcare places at pre-covid levels since March, even if providers had to close due to the pandemic. Providers were eligible for the coronavirus job retention scheme for the proportion of the business that comes from private income. Childminders could also use the self-employment income support scheme, and many settings have benefited from business rate holidays and business loans. We froze Ofsted fees for 2020-21, and early years staff have been prioritised for coronavirus tests throughout this period when they have booked them through the online portal. In addition, since 17 September, if a staff member or a child has tested positive for coronavirus, the settings have been able to access the dedicated advice service provided by the DFE.
We know that at the beginning of the summer term, attendance levels were much lower than they were before covid, and providers were of course concerned about sustainability going into the autumn term. On 20 July, we announced that we would continue to fund childcare at the pre-coronavirus level through to the end of the term. That has given nurseries and childminders an extra term of secure income, regardless of whether or not children are attending. Currently, at least 80% of early years settings are open, and attendance has been consistently increasing during the autumn term. We estimate that, last week, 826,000 children attended an early years setting.[Official Report, 8 December 2020, Vol. 685, c. 8MC.]
The arrangements for the spring term funding are really important, and I am very sorry that we have not been able to set out this position sooner. I know that we must finalise it quickly because, after all, it is just for next term. I assure the House that I am pressing everyone very hard to do so. Understandably, my colleagues at Her Majesty’s Treasury have been very focused on the spending review, but I am pleased that during it they also gave great focus to early years, and the position was announced by my right hon. Friend the Chancellor.
As I said earlier, early years settings will continue to benefit from a planned £3.6 billion of funding for this financial year, but for the next financial year colleagues should understand that there will be a demographic change, and as a result of falling birth rates there will be fewer children in the early years age group. Therefore, the total early years entitlement spend in 2021-22 may be less than in 2020-21. However, for 2021-22 the Chancellor has announced a further £44 million, which means that local authorities will be able to increase hourly rates paid to childcare providers for the Government’s free childcare offers. That will pay for a rate increase that is higher than the cost that nurseries may face from the uplift to the national living wage in April. I wanted to put that important fact on the record. Further details and information on how the money will be distributed will be made available as soon as possible.
We understand that increased levels of attendance in early years settings does not necessarily mean that parental demand for childcare has yet returned to the levels seen before the pandemic. Providers have told us that they have seen a reduction in the number of additional hours that parents pay for. This month we will support providers and local authorities to help improve sustainability in their own local markets. Two national webinars will be delivered to the sector by our partner, Hempsall’s, which will promote strategies for improving provider sustainability, sharing good market practice across early years providers and building confidence in local authorities to have business support conversations with providers in their local markets. We are also considering making reactive expert support available to local authorities to address any immediate sufficiency issues.
Many right hon. and hon. Members have spoken about maintained nursery schools. I know that my right hon. Friend the Member for Chipping Barnet (Theresa Villiers) is keen to understand the plans for future funding for maintained nursery schools. There are 389 such schools across the country—I have two in my constituency. They do an excellent job, but they have extra costs, such as carrying a headteacher and more qualified teachers in the governing body. That is why the Government have provided £60 million in supplementary funding this year, and the Chancellor announced in the spending review that that money is secured for the coming financial year. The Government’s commitment to the long-term funding of maintained nursery schools is unchanged. We continue to consider what is required to ensure a clear long-term picture of funding for all maintained nursery schools. We will say more about that soon
I note the request from the hon. Member for Luton South (Rachel Hopkins) for a meeting about children’s services. She need only write to me to get a meeting. I have written to the hon. Member for Luton North (Sarah Owen) about maintained nursery schools; I am sure that she was pleased about the extra money. DFE is supporting Luton with a specialist adviser at this time, and I will happily facilitate a meeting to update them.
We are in frequent contact with local authorities and early years sector organisations, through regular meetings and working groups. I would like to say a big thank you to the organisations that represent the views of the sector, including NDNA, PACEY and the Early Years Alliance. They work continually with us, hand in hand, on these matters.
My hon. Friend the Member for Wycombe (Mr Baker) spoke wisely about the need for strong support and strong supportive voices for the early years sector. He is spot on. I thank him for agreeing that he will be with me all the way.
Supporting families and children is at the heart of all that the Government do, especially at this challenging time. Ensuring access to childcare to educate children and enable parents and carers to work is crucial to providing support for children. I am deeply honoured to be responsible for this extremely important part of the Government’s agenda, and I will always champion early years.
In summary, we have heard some committed speeches about the maintained sector and the PVI sector. The fragile sector comment was very well made by the right hon. Member for East Ham (Stephen Timms). My neighbour, my right hon. Friend the Member for Romsey and Southampton North (Caroline Nokes), talked about the high-quality provision in her constituency and across Hampshire. Across the whole country, the Minister reminded us of the Ofsted figures, and that is all true.
My right hon. Friend the Member for Chipping Barnet (Theresa Villiers) called for the long-term settlement, echoing what I had said in my opening remarks. I was struck by what my other neighbour, my right hon. Friend the Member for East Hampshire (Damian Hinds) and former Secretary of State, said about social infrastructure and the need for a people plan. That is absolutely spot on. I was struck by the comment made by my hon. Friend the Member for Newbury (Laura Farris), who said that we are on the brink of a bloodbath in terms of female employment. My hon. Friend the Member for Wycombe (Mr Baker) was absolutely right to say that early years is about the building blocks of a successful society and economy.
We have heard speeches that cover every aspect of the sector, from the 389 maintained nurseries to the 20,000 or so in the PVI sector, and then there are childminders and our children’s centres. My message is that we need to see the sector as a whole. All providers across the sector look after SEND children. All understand that a plan for jobs needs a plan for childcare. The consistent theme has been that we have to close the gap between what it costs to provide the childcare and what providers receive to provide it. Unless we close that gap, we will continue to have this discussion.
Motion lapsed, and sitting adjourned without Question put (Standing Order No. 10(14)).